JC Penney: Tripping Over Dollars to Pick up Dimes?

AUTHOR:

Chris Stone


JC Penney seems to be in trouble.  Despite its best efforts, the nationwide department store’s stock price has taken a precipitous plunge over the course of 2012, only stabilizing recently. In February, its stock was at $43.18, its highest price since early-2008. Since then, the price has tumbled to $19.06 in July and settled in the mid-20s in August.

During this period, the retail giant has tried several tactics to boost sales and its stock price – with limited success so far.  In January the retailer attempted to use a three-tier pricing strategy to bring in more customers. Now, CEO Ron Johnson is backpedaling on that strategy and switching to a more conventional two-tier strategy aimed at simplifying the buying process for shoppers.

Aside from its pricing strategies and newly branded-specialty-shops-within-a-store scheme, the company has also been usingsomeof its advertising dollars to target the LGBT market. JC Penney chose prominent comedian and talk show host Ellen DeGeneres as its pitch woman, a move criticized by the Christian advocacy group One Million Moms.

Here, the company could have chosen worse. DeGeneres’ brand of humor is clean, cheery and politically tame – making her a likeable choice when compared to other lesbian activist options.  JC Penney defended its choice and continued to raise the controversy bar by running pictures in its catalogue of homosexual couples ahead of Mother’s and Father’s Day.

These moves were likely calculated to boost sales among the LGBT market segment. JC Penney must have assumed the reward would outweigh the cost of any potential backlash by those in their natural consumer base who find the promotion of LGBT political goals to be in conflict with their values and worldview.

But now that the company’s stock is in trouble, it may be time to revisit that decision. And rather than the moral argument, the focus should be on whether the advertising money could have been spent better elsewhere.

As brands like JC Penney battle for market share and increasingly turn to niche groups to expand their penetration, the LGBT segment has emerged in recent years as a group to engage. But could a company that sells a lot of merchandise to folks in America’s heartland – itself based in Texas – have picked an even better, more naturally aligned, target group to increase sales?

Our research shows that Faith Driven Consumers spend $2 trillion annually – significantly more than not only the LGBT community but also other routinely targeted niche groups like Asian- and African-Americans, Muslims and the similarly-sized Hispanic market.

Given the natural, core audience affinity between Faith Driven Consumers and JC Penney, one wonders if perhaps this brand has tripped over dollars to pick up dimes – and missed out on a great opportunity to integrate with an untapped audience that is actively looking for compatible brands to do business with.

Since the chief responsibility of a CEO is to increase corporate profits and shareholder value, the question arises:  Is it possible to simultaneously engage two seemingly irreconcilable niche groups without alienating one group over the other?

And perhaps more importantly, can true diversity exist in corporate America without Faith Driven Consumers included in the rainbow?

 



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