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It’s The Money, Stupid!

The moral of the recent turmoil at JC Penney seems to be It is far wiser, effective, and profitable to create with your customers instead of foisting your ideas upon them.

 

I consider it one of my more endearing features that I remain fascinated by the question “why?”

At least that’s true in a business sense.  On a personal level when I am asked to explain the “Whys” of my behavior, it’s usually followed by a “What” (i.e. “Why did you do that? What could you possibly have been thinking?”).

But I digress.

If I were to address the core “Why” of market research, I would say it’s about the money.  More specifically, it’s how to make and save money via better informed business decisions.

Of course, you don’t have to invest in MR, you can go with your gut and boldly stake out your own direction.

One man who chose to skip MR is Ron Johnson, the former CEO of JCP (soon to be JC Penney again).  Just two years ago, Mr. Johnson arrived with much fanfare after his spectacular success creating the Apple retail experience.   Mr. Johnson and some key stockholders took it upon themselves to re-invent the JC Penney experience.   They boldly rolled out this strategy on a national level.

This is what CNBC had to say after Mr. Johnson was fired:

Instead of focusing on what the JC Penney customer wanted, however, Johnson seemed to be intent on teaching the JC Penney customer what it should want. The sales that had been the hallmark of the JC Penney shopping experience were replaced with “everyday low prices.” The idea was that customers would be better off without the confusing strategy of constantly changing prices.

Clearly, the coupon-clipping JC Penney customer did not appreciate this lesson.

In the case of JCP it was not a bad idea to try and shift customer thinking, but it was a poorly informed strategy. Did JCP at least test the strategy in some of their stores or markets, or survey their core customers (data is power) to determine how it would translate nationally…no, they didn’t.  You can’t demand your core customers to change their relationship with you just because you have changed your strategy, or expect an entirely new group of customers to materialize and take their place.  The “fair and square” shoppers JCP wanted to attract never stepped up, while the traditional JC Penney shoppers could no longer experience the thrill of scoring a great coupon or deal.

It’s good to be an industry trailblazer…except JCP neglected to get buy-in from their customers who then chose not to ‘buy in’ JCP stores.  A hard lesson learned, one from which they may not recover.

In contrast, Apple could afford to be arrogant; they had an amazing visionary calling the shots.  And I would argue that Steve Jobs was one of the smartest, most intuitive ethnographers who ever lived.   Folks with relentless passion and curiosity are always observing and realizing what’s possible.

The moral of our story is that it is far wiser, effective, and profitable to create with your customers instead of foisting your ideas upon them.

Perhaps a few spectacular fails along the lines of JCP will prove a boon for the market research industry.  It’s all good to make bold transformational decisions, but at the end of the day, money talks.

And MR is very, very good at helping firms make money.

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9 Responses to “It’s The Money, Stupid!”

  1. Michael Lowenstein says:

    May 1st, 2013 at 10:33 am

    Kevin -

    Your observations are spot-on. I’d add to this set of Napolelonic moves the parallel failure to debrief, or include, front line store staff and field management, who would have added their own perspectives on the foolhardiness of this repositioning: http://www.customerthink.com/blog/employee_ambassadorship_and_advocacy_living_the_promise_of_wow_customer_value_delivery_part_i and http://www.customerthink.com/article/linking_employee_behavior_to_customer_loyalty_advocacy

  2. Steve Needel says:

    May 1st, 2013 at 10:40 am

    Nicely done, Kevin! I’ve always thought that the Apple folk, rightly or wrongly, were quite arrogant. But their core users didn’t mind – they shared and reveled in the arrogance and superiority (I’m thinking the waiters at The Palm in NY or Durgin Park in Boston, for example). Clearly, that didn’t play with the Penney crowd and you’re right – a little research, a little controlled and contained experimentation, and life might have been different.

  3. Marlowe McClasky says:

    May 1st, 2013 at 11:36 am

    JCP also should have looked into past history. Sears tried the same strategy in 1990.. Closed stores for a day. They abadoned it in less than a year. See the link:
    http://articles.latimes.com/1990-01-12/business/fi-331_1_everyday-low-pricing

  4. James Partner says:

    May 1st, 2013 at 12:00 pm

    LOVE IT!
    You’re so on-target… but so many companies today count on social media and “big data” to understand their consumer. Wrong. Engage your consumer… LISTEN to them. Then make informed decisions. Research is an investment, not an expense.

    And, as far as Apple goes… if someone else executes the research on behalf of a client, is that still research? Are those insights not helpful to the client? Try complaining about your IPhone… the Apple store will GLADLY give you another… after transferring your information to a new phone. You go on your way… delighted that you got something for nothing. Meanwhile, Apple just got the treasure trove that is your USAGE of their product. No, Jobs didn’t use research. Wrong!

    Thanks for starting the JCP… er, sorry… JC Penney’s conversation.

  5. Brian Arnold says:

    May 1st, 2013 at 12:08 pm

    Kevin, I wanted to address this as well but you beat me to the punch. That move by JCP is incredible. But you also need to blame the board of directors. If I was in the room when the strategy was revealed, my hand would have gone up with the question “How do our customers feel about that?”…and to Michael’s point you also need to get feedback from other JCP stakeholders at the store level/field. This reminds me of the same arrogance, but to a lesser degree, that took place when some branding/design idiot changed the look of the Tropicana orange juice package without consumer feedback/understanding the equities associated with the brand and package design. And on top of that he still got additional business from the company. The world is nuts!

  6. Kevin Lonnie says:

    May 1st, 2013 at 4:00 pm

    Michael/Steve/Marlowe/James/Brian,

    Appreciate the comments and your respective POV’s. Personally, I find it insulting to our industry when our input is neither requested nor welcome. And as conduits to your customers, when you ignore us, you’re essentially ignoring the base.

    Here’s hoping that the arrogance of JCP proves beneficial to MR!

  7. Frankie Johnson says:

    May 1st, 2013 at 7:01 pm

    Good points, Kevin. I also remember the Sears failure that Marlowe cited. I was privy to some of the thinking leading up to the decision to go with “everyday low pricing”. Unlike JCP, Sears did a lot of research before going this way. Shoppers were very positive towards the concept of simplification. However, when it comes to promotions, unilateral disarmament doesn’t work. Competitors stepped in and ate Sears alive. Ironically the guys in the field who did not believe the research were right on this one. So this is a case of research not leading to the best decision.
    I don’t think of Apple as a merchandiser. It has one brand and a very simple retail model. JCP is home to a huge array of brands and products. Ron Johnson had no experience as a true merchant. BTW, before being fired, he came in top in terms of the ratio of CEO pay to average store employee – 1,795 to 1. JC Penney must be turning in his grave!

  8. Ellen says:

    May 6th, 2013 at 1:40 pm

    Did the JCP folks notice that they are primarily a brick & mortar operation whose customers aren’t highly represented in affluent markets? Perhaps a shift toward a stronger online presence might have made a difference with new and younger customers (ad targets). The impression given was that the didn’t value the current customer base and thought they could attract a new type of customer who would purchase more on a more frequent basis. The early info I read was that they were after Target, who is masterful with analytics and brand refresh. Target keys off of ” up and comers” who are setting up households and having babies. Target also locates in very specific markets that have uptrending, not mid-markets (unless they serve a large area) and they aren’t afraid to close or move stores. That said, it would have worked if they had geared up in wedding and kitchen items. Apple succeeded because Steve Jobs was a very astute listener who had laser focus and understood the possibilities within a very succinct line of products. He designed for people like himself, early adopters and people who were very creative and wanted to push the envelope on functionality. That’s very different from buying towels and jeans.

  9. Turnkey Intelligence – Don’t Ignore Your Customers! says:

    November 11th, 2013 at 11:03 am

    […] Read Kevin Lonnie’s full article, “It’s The Money, Stupid!”, here. […]

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