The Brand Man Speaks

JC Penney CEO Ron Johnson, who twice tried to revamp the retailer, is out.

It was no surprise to read the headline posted above earlier today, (I have written several blog posts about why JC Penney was making serious brand mistakes). After several failed attempts to revamp mid-market retailer JC Penney, it was painfully obvious that the company's board needed to cut the blood letting as soon as possible. Business was down 25% last year.

What went wrong? Johnson, a notable former Apple exec, was picked to bring retail savvy from the technology company to a tired old department store brand. The problem is trying to up-market a lower end retailer whose sales were driven by price (and big sales/discounts/coupons) has historically not worked (for anybody). WalMart tried this approach a few years ago trying to out up-market Target and it also failed miserably.

Although re-branding an entity can be done, the approach used for JC Penney that tried to eliminate its brand essence and its positioning as a price point retailer was failed from the get go. Penney's customer is price driven all the way and not interested in complicated pricing strategies (there were numerous strategies used that easily confused the regular consumer) as introduced under Johnson in an attempt to get people off sales and coupons.

Its ad campaigns looked like Target knock-offs as did the catalogues and newspaper free-standing brochures they produced.

Unless the brand had something in its bag of tricks that would re-birth JC Penney without alienating and confusing its core buyers, any new strategy that made customers sense that prices were going up and that the store was moving more towards being Macys or a boutique operation was doomed to fail.

I actually think the board waited too long to make this decision and should have cut the cord after one season since the reasoning behind the pricing strategy was flawed from the beginning and trying to make JC Penney the "Apple" of department store retailing was never going to work.

Watching out for you everyday.

Eli

 

JC Penney fires President as result of brand restructuring failure

JC Penney's has fired its 8 month old President, formerly from Target, after the re-branding effort for the middle market department store failed.

Why is anybody surprised?

I wrote in this blog shortly after Penney's launched its new pricing policy along with a Target copycat style brand ad campaign that it was not going to work. The President who was fired got a signing bonus of $1.2 Million. Are you kidding me? Any well-trained and experienced brand marketer could have saved Penney's a ton of money by telling them their "new" strategy would fail miserably and why. I must also note that the CEO Ross Johnson who came from Apple is equally at fault but makes his brand division Pres the fall guy.

The bottom line is you can't take an old old brand that has been middle to lower market for years with price being its key benefit (and no real brand positioning that I could detect) and try to give it a brand makeover that mimicks one already around (Target) and creates a overly complex pricing scheme that is supposed to make understanding what things cost easy but does just the opposite. It was also supposed to move the needle away from just a pricing positioning to a lifestyle one, but the lifestyle approach and the pricing posture collided on day one in my opinion.

Let's see how long Johnson remains. Apple's retail experience was built from scratch the way they wanted it. That's the cred that Johnson brought to Penney's. The problem is Penney's retail concept has been floundering around for years and changing it can't be done quickly and by assuming you just forget the past and start with something completely new.

This surely will become a great B school case study in the near future how NOT to rebrand a major retailer. The real question now is will JC Penney's survive or die a slow death?

Watching out for you everyday.

Eli

 

Martha Stewart partners with J. C. Penney to expand brand and help shore up weak sales at retailer

Martha Stewart proves if your brand is targeted right and the core brand essence is compelling enough it can appeal to a broad spectrum of Americans across socio-economic levels.

Stewart is partnering this time with J. C. Penney for the development of mini Martha Stewart boutiques inside the lagging retailer's stores nationwide. Penney has taken nearly a 17% stake in Martha Stewart's public company. For Penney's CEO Ron Johnson sees this co-branded venture as a way to increase the retailers exposure and importance as he tries to get the company back on its feet. Penney's is doing poorly relative to Macys and other traditional department store entities. Johnson recently took over the helm of Penney's after notable tentures at both Target and Apple where he developed the wildly successful Apple retail concept.

Stewart will provide new exclusive products for her shop in shop concept that will not directly compete with her current products sold at Macys, Home Depot and PetSmart. Staffers will be exclusive to Stewart's mini stores to ensure the brand message stays on target.

Although Stewart's empire has taken a big hit in the past few years because it is so advertising dependant (her magazine is a big part of her empire), her alliances continue to prove she has staying power and remains one of the iconic brands of the past several decades especially given her stint away from the business for illegal stock transactions followed by jail time.

Watching out for you everyday.

Eli

Why the Print Version of Newspapers needs to exist: Even tech wizard Steve Jobs was a fan. [Second in a series]

Steve Jobs loved newspapers. He was obsessed with how consumers should and would consume news. But he was convinced the printed newspaper would be dead by 2011.

In a recent Wall St Journal article by Gordon Crovitz, Jobs was noted as someone who felt the printed newspaper was once an important tool but felt that the newsprint version of news lost its way, failed to take consumers on a journey (something all great brands must do) and was easily replaced by new media versions of information dissemination. The issue was one of print quality as Jobs was known for being obsessed with excellence especially when it came to the quality of printer matter, especially for his ads. If the ads in print form weren’t glossy and beautiful he wouldn’t use the medium.

 Although Jobs said newspapers would be obsolete by this year, he was to a great extent challenging the newspaper industry, according to Crovitz. Although Jobs is no longer with us, he leaves an important assignment for the news business.  Our lives have changed but newspapers have failed to evolve with us. What the newspaper industry has forgotten is the internet is just a new distribution tool, not a new brand, and the industry needs to better understand the relevance of the print form to consumers better than it does today, ( For example you can be reading the news with a newspaper on a plane without interruption when the flight attendant says TURN OFF ALL electronic devices when preparing to take-off and/or land. A case of print being more convenient than electronic!)

I contend there is something very special about holding and reading a newspaper (or a magazine for that matter). It is a combination of a vehicle of information mixed with the cultural experience of reading through the pages. One thing the glitzy online versions of news (as exampled on the iPad) lack is the tactile sense of going through the news and ads where the eye may pick up on stories (or ads) adjacent to ones you plan to read but would not have done so directly without the adjacency. Personally, I find the online version of news can create a sensory overload and finding the stories you want to read can be challenging in its own right and those you might have not known you want to read are not discovered. Some graphic versions of news online is so glitzy it is actually too hard to read.

Jobs said the quality of the newsprint was a problem. I realize it is expensive to make newspapers look like glossy online presentations of information. However, the lesson, if there is one to be learned, is that the print medium has important value in our culture and the newspaper industry has to figure out how to improve the quality of this distribution channel as well as remind people how meaningful this channel of information dissemination really is.

Watching out for you everyday.

Eli

PS HOT NEWS: Just read that the Newspaper Association of America is launching a new ad campaign that extols the virtue of newspapers with the slogan, "Smart is the new sexy". Now only if the print medium is made a bit more sexy they have a story to tell!

Why Netflix is failing: CEO Hastings doesn't understand branding

In an interview with the New York Times (appearing in the magazine section today), Netflix CEO Reed Hastings proved why Netflix is failing. As is common with most CEOs, he (admittedly) fails to understand what makes a brand in the first place and what makes one successful in the long term.

In the interview, Hastings says describing the major screw up that Neflix has encountered, "I think it was just a mistake in underestimating the depth of emotional attachment to Netflix". You think? Companies try (mostly unsuccessfully) to build emotional attachments with consumers. It's called brand loyalty and a very key ingredient to long term success. Not understanding this concept is a fundamental admission that one does not know how to market a product something CEOs arrogantly won't readily admit since they mostly think branding is an expense not a revenue builder.

Hastings also puts himself in a comparative role to Steve Jobs (hardly) and Jeff Bezos of Amazon saying his mistakes are all short term and CEOs understand the measurement of success is long term. However, and a big however, Jobs and Bezos understood and understand (respectively) how to build great brand loyalty and nuture it. Jobs was the master at it because he had a vision and took consumers on a "journey" which all great brands do. Hastings was on the right track, but missed an important station stop and went way off track to the point he may not be able to get his business back in gear.

I for one would like to see him resign and hire a more marketing savvy CEO to take the reigns and get the brand somewhat back on track by creating a new "journey" for consumers. It is going to take some great creativity and some concessions (to the brands most loyal consumers). Unfortunately, Hastings says he will not resign.

Watching out for you everyday.

Eli

Apple iPhone4s...ugh. Some nice upgrades but overall a let down and disappointment for many brand loyalists

Apple failed today to excite brand loyalists with its humdrum launch of another iPhone, the iPhone 4S, not the iP5 most had been hoping for. It adds some cool features that are certainly upgrades and notable improvements, however, I believe it won't be enough for the rush of customers that came with the initial launch and that of the iPhone 4. I for one after reading the details on a notable tech blog updated live during the news conference, no longer feel any rush to get the new phone. First of all it will look exactly the same, so the "look what I just got" factor is zip.

Apple's stock dropped rapidly today as well as a result of broad disappointment. Whether it's the loss of Steve Jobs or the lack of excitement from the brand AND new management together, I sense most tech reporters thought the news was a yawn vs. what they had expected and hoped for.

Is this a sign that Apple has lost its midas touch? Maybe all goods things need to come to an end sooner or later or at least become more "normal" and "average" like most products made by American companies.

Watching out for everyday

Eli

Apple ready to introduce iPhone 5: Analysts weary it won't be sexy enough to stimulate strong sales. Why they are wrong

Apple is getting ready under new CEO Cook to launch its iPhone 5 (Can't we just now call it "i5"?). The planned introduction to the media is October 5th.

One of the most interesting things I have been reading about the latest introduction is not about the improvements and upgrades coming with this new version, but the insistence voiced by many business analysts that this version will not be exciting and sexy enough to generate huge sales. The thought is that you can only update and redesign such a small package so much before you get to the point where it is impossible to make noticeable changes meaningful to consumers to upgrade from older phones.

What I believe is missing in this conversation is the fact that Apple brand loyalists (the kind of brand loyalists other companies would die for) have another driver in their pockets. Owning the latest Apple device has become a badge of honor to many (of us---yes including me). Half the excitement is having the next new Apple iPhone shortly after it is launched. Apple loyalists are opinion leaders and first adopter types (in marketing speak). They crave new toys and greatly need to be first in line.

Normally this isn't a huge number of people as concerns most consumer products. With Apple it is different. Different in a way that no other company I know has been able to duplicate. Large numbers of people will still wait in line or curry favor to get a new iPhone within hours or days of the release. It has become almost a right of passage to wait in line to get a new one and Apple has carefully orchestrated this phenomena because they truly understand their customer down to the fact that they do not actively talk to consumers about what they want next in a new generation iPhone.

This brand has built a relationship with consumers that is about the journey and brand loyalists believe in the mantra that Apple knows best and will bring them features and benefits and excitement they haven't even thought about. This is a key strategy that separates Apple brand fanatics from other brand loyalists who take a greater stake in communicating their demands to a given company. (This is not to say that many Apple consumers do not share their feelings, believe me they do, however, they are more likely to be ok with Apple decisions than they are with decisions made by other consumer products companies).

The Apple brand still tops the list of best companies in the past few decades and it remains at the top because it truly leads and innovates and excites like no other company.

Watching out for you everyday

Eli