The Millionaire Next Door: a J.C. Penney FanPosted on April 30th, 2013
During the past two years J.C. Penney has implemented a dramatic change in its marketing strategy. It called for greatly reducing the number of coupon/special on sale pricing and related promotional methods. Its old method was replaced with the so-called stable, every day price point method. And, according to The Wall Street Journal, this new strategy called for an abrupt reduction in the design and marketing for Penney's private label offerings. Historically, however, one half of the company's sales came from its private label merchandise. And often these offerings have received high praise from consumer experts.
When these changes began to unfold, I thought back to my first J.C. Penney experience. During my early days of teaching, I was invited to attend J.C. Penney's week long "consumer trends conference" at its headquarters. Each day I had lunch with one of its senior executives, including its chairman. During a conversation with the senior vice president for human resources, I learned something from him that has stuck in my head every since. He asked me what brand of shirt I was wearing. I replied that it was a Hathaway shirt. He pointed to his shirt and said, "J.C. Penney's Stafford." He explained that the Stafford shirt was comparable to my name brand shirt in every way, fiber content, durability, 7 buttons, etc. - all of this at a significantly lower price. I took his advice and bought several of the shirts when I returned home. I was not disappointed.
A significant number of the arch type millionaire next doors patronize Penney's. In fact, as I discussed in Stop Acting Rich, fully 36% of millionaires who live in homes valued at under $400,000 are apparel patrons of J.C. Penney. In The Millionaire Next Door, "about 30.4% of the respondents who are millionaires hold J.C. Penney credit cards. Penney's private-brand Stafford executive suits were recently given top scores for durability, cut, and fit by a leading consumer publication." Also in The Millionaire Next Door I quoted from an article published in The Wall Street Journal:
J. C. Penney . . . now subjects garments to tough tests for color matching, fabric shrinkage, filling . . . . When it comes to quality control Penney's is more demanding than any of the department stores.
Among the 944 millionaires profiled in Stop Acting Rich, those who became millionaires with the smallest number of income dollars were more than 3 times as likely than those big income producers to say that their most recently purchased suit was a J.C. Penney private label one. Note that Joseph A. Bank and Sears were also popular brands.
What was my first reaction after reading about these changes in strategy and about the new chairman Penney's had hired from Apple to lead this campaign? The chairman was previously in charge of Apple's retail operation. But Apple and Penney's are as different as an apple and underwear! And if you have followed the recent news reports about Penney's, you know that what I call the "Apple" oriented strategy was a miserable failure. Ah but there is hope. Penney's just replaced "Mr. Apple" with its former CEO, Myron Ullman. From what I know about the value, value, value orientation of the millionaire next door types I'll bet my drawerful of J.C. Penney Stafford undershirts that the company will once again prosper!
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