Sometimes the truth hurts – By @Joebee731
By Joe Colquhoun
Sometimes the truth hurts
Ron Johnson the poor guy, it was all going so well for him. This is the story of how the former Apple superstar turned chief executive officer for JC Penny was fired after only 16 months of employment. Single handedly causing one of America’s greatest companies to have “the worst quarter in retail history”.
It was 2011 and he’d just finished helping Allen Moyer redesign the now famous floor-layout for the Apple store, transforming it from some dull IT looking shop into an adults playground filled with gadgets and like-minded hipsters. He’d fundamentally changed the way shop floors can ‘feel’ and people really were going there to just ‘hang out’.
Remember going into the Apple store and dicking around as a teenager on photo-booth? That’s cause Ron Johnson made it ‘cool’ to be there in the first place, earning him the reputation for making companies a lot of money and even more for himself. Over the two years following Apple’s retail store debut, they achieved a record level of growth exceeding a billion dollars in annual sales.
When Ron left in late 2011, he was hot shit. Big names wanted Mr Johnson to work for them, they’d seen how successful his efforts in rebranding Apple had been and understandably wanted in on the action. Bill Ackman got there first, he was a powerful board member for JC Penny and he had a big problem.
Most of the loyal customers at JC Penny’s were getting older. They were working class men and women who had less money to spend than they used to, relying more on discounts and coupons to make their weekly purchases (coupon clippers). The brand had become “stodgy” and in order for the company to continue growing they needed a new crowd and a complete brand overhaul. Ron was the guy, or so Bill thought.
In order to succeed, Ron needed to bring the young, hip and more importantly rich crowd into JC Penny to improve sales and boost profits. Effectively, he wanted the same people buying Apple laptops to cross the road and walk into this new and improved retail store. Using similar strategies that he’d learnt at Apple, he aggressively pushed for a fair and truthful rebranding of the store.
He did away with the sales system entirely. Historically full price items were marked up and then put on ‘sale’ to entice buyers. The true value of the item remained the same as the discounted price. To put it simply, it was a pretty shady practice. Furthermore, he eliminated the $44.99 pricing, rounding to whole numbers to show to the consumer that his company was trying to be as honest as possible. They weren’t about luring customers into deals anymore. The old system focused on making things cheaper for those with less money and more expensive for those who can afford to pay to buy immediately. Not anymore.
Despite Ron’s good intentions his big plan tanked hard. The whole thing was an exceptional failure and sales plummeted accordingly. The loyal customers left with coupons in hand and the new, young generation never showed up. Ron blamed it on his customers, he couldn’t understand how they didn’t appreciate the new pricing strategy in it’s glaring honesty. In reality the customers were left feeling alienated, the thrill of getting a good deal was lost even when the deal never existed in the first place.
He started with the idea of what he wanted to achieve rather than focusing on the existing customers and their shopping behaviours, however irrational they seemed. He expected them to want what he wanted from a store and a pricing structure – clean lines and ‘honest’ pricing. But, as it turned out, they wanted neither. What they wanted was to feel special and extraordinary, customers identified their very character on their ability to get the best discounts and once that was gone, they had no reason to stay.