What Sports Can Learn From J.C. Penney

What can sports learn from one of the largest retailers in the country? We believe the current J.C. Penney challenges can be quite instructive.

 

Let’s start with initiating a major change in go-to-market strategy. We’re not talking about a shift here, but a major abandonment of their current strategy. First was a change in pricing strategy, wanting to completely eliminate the traditional retailer “high-low” approach by offering Everyday Low Prices (EDLP). Second was the planned re-invention of the in-store experience by creating a local main street, where small store-within-a-stores would be designed to offer a more intimate customer experience.

 

Of these two components, the one that has created the most customer upheaval has been the pricing change. J.C. Penney’s current problems are nicely summarized in this recent Forbes article, J.C. Penney’s Comeback Is A Farce So Far, And It Could Get Worse. So where has J.C. Penney failed?

 

One only need look at supermarket retailing to understand that a solo or unsupported EDLP pricing strategy does not work. Even WalMart uses circular ads to drive traffic through additional price promotions. Retailers like Ahold’s Giant (Carlisle) have enhanced their EDLP programs by adopting a dual pricing strategy. This is a combination of EDLP pricing, plus aggressive price and bundles promotions. Through data analysis and strict category management, they have been able to stabilize overall pricing and still drive foot traffic by exciting shoppers. By creating a stable of “bundled” promotions, which offers shoppers better value than buying those same items individually, Giant has benefited by generating more revenue per shopping trip, and more margin dollars.

 

Giant and WalMart have tapped into a key psychological sales tactic called “framing”. This is where some initial price is set as a benchmark, and then various pricing tactics are used to show value against the benchmark.

 

So what can Sports franchises learn from this? Our takeaway is that sales and margin dollar success lies in a flexible, complimentary pricing strategy. One that combines price discounting/promotions and bundled packages. Sports has historically used price discounting alone to move inventory. They have missed opportunities to provide greater value for the fan while driving higher revenue per customer and margin dollars through creative bundling.

 

IMS’s own STADIS© Advanced Promotions and Data Integration Platform provides the technology foundation to create unique, exciting and relevant promotions for fans. Create bundles that focus on item-level, progressive, time or location based parameters. Engage with fans in real-time based on their in-event purchase behavior.

 

Contact us to find out how STADIS© Advanced Promotions can help you.

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