MKTG208 Case Study: J.C. Penney's Pricing Strategy Analysis

This case study analyzes J.C. Penney's 'Fair and Square' pricing strategy implemented by Ron Johnson, examining its shift from traditional discounts and coupons to a flat pricing model. The analysis explores the application of pricing and product theories, the introduction of product categories, and the initial positive and subsequent negative impacts on the company's performance. The study highlights the strategy's failure and suggests remedies, including a gradual implementation, market research, and retention of popular offers. It emphasizes the importance of understanding customer psychology in pricing strategies and providing a detailed overview of the changes, their effects, and potential improvements.

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J.C. Penney’s “Fair and Square” Pricing Strategy
Case Analysis
When Ron Johnson took over the leadership of J.C. Penney, he brought radical changes.
Among these changes was the introduction of the ‘fair and square’ pricing policy. According to
this policy, the company was to change its pricing strategies from the use of the weekly
discounts and coupons to what, in Ron’s view, would be free and square.
The ‘fair and square’ strategy was based on the marketing theories of price and product.
Instead of relying on the existing strategies, Ron decided to do away with them. He chose to stop
the use of discounts and coupons as well as the pricing games that the clients had been used to.
So, what he did was to bring a new strategy in which the clients would no longer receive
discounts, but get to enjoy the benefits of reduced prices, no-games, and flat pricing (Chakravarti
and Manoj 49). The emphasis that Ron laid on prices shows that he was keen on applying the
theory of pricing. As an experienced corporate manager, Ron knew that the use of prices would
help in attracting many clients and hence increasing the company’s sales volume and
profitability. The new changes also incorporated the use of product theory which mainly focuses
on the quality of the commodities that are availed to the clients (Humphrey and James 4). For the
company to appeal to the clients, Ron decided to change the branding of the products by

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differentiating them into categories each sold at different prices. For example, he introduced a
special category of products designed by famous designers in the market.
Remedies
Although Ron was initially pleased because of the short-term benefits he attained, the sad
truth is that his ‘fair and square’ strategy was a big failure. The company ended up making huge
losses because of the inefficiencies of the strategy that made it less attractive and appealing to the
company’s clients. Therefore, to remedy the situation, Ron ought to have taken certain measures.
First, Ron ought to have gradually introduced the new policies. Although change was a
necessary thing, the company would not have ambushed the clients with it. Instead, what Ron
would have done was to conduct a rigorous marketing research by collecting data to get the
opinion of the stakeholders especially the clients (Simon and Martin 77). If this happened, the
change would not have been resisted the way it happened. Besides, Ron would not have done
away with all the offers that the clients had been accustomed to. Instead, he would have retained
some of them that had become popular with many customers such as the giving of discounts
(Selcuk and Bilal 5597). Lastly, the company would have reduced its prices to ensure that are
actually fair. If this was done, the company would have managed to manipulate the psychology
of its customers and endear them with the company.

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Works Cited
Chakravarti, Amitav, and Manoj Thomas. "Pricing disaster at JC Penney." Why People (Don’t)
BUY. Palgrave Macmillan, London, 2015. 45-62.
Humphrey, Patricia, and James Harbin. "JC Penney: A lesson in marketing strategy." Allied
Academies International Conference. International Academy for Case Studies.
Proceedings. Vol. 22. No. 1. Jordan Whitney Enterprises, Inc, 2015.
Selcuk, Cemil, and Bilal Gokpinar. "Fixed vs. flexible pricing in a competitive market."
Management Science 64.12 (2018): 5584-5598.
Simon, Hermann, and Martin Fassnacht. "Price Strategy." Price Management. Springer, Cham,
2019. 29-84.