Earlier this week, J.C. Penney decided to bring Ron Johnson’s reign as CEO to an end after only 17 months on the job. This certainly wasn’t surprising based on their 2012 results – revenue down $4.3B, loss of nearly $1B, and a 50% drop in stock price.
In all of the coverage of his downfall, one quote caught my attention from Bill Ackman, accomplished hedge fund manager who helped recruit Mr. Johnson in 2011. Ackman called Johnson’s tenure a “disaster” at a Reuters conference last week and went on to say that “one of the big mistakes was perhaps too much change too quickly without adequate testing on what the impact would be.”
Therein lies the lesson for all of us; one that even an accomplished retail marketer like Mr. Johnson had to learn the hard way. Always test!
Within his first three months, Mr. Johnson changed merchandising strategies, re-designed stores to feature mini-stores and boutiques, and, most dramatically, radically changed their pricing strategy by ending “sales” and adopting an everyday low price message. Gone were many of the brands along with the weekly promotions and sales his customers had relied on for decades.
He did all of these things … at once.
While I can appreciate Mr. Johnson’s desire for swift and dramatic change, seventeen months later some store sales are in a free fall and J.C. Penney has no idea which changes were responsible for the decline, or which ones may have had a small positive impact.
Had he pursued a deliberate test plan with pilot stores, test and control markets, and well-defined KPIs and measures of success, he may still be CEO.
These days, given all of the data and resources that are available to marketers, there simply is no excuse for not testing. His online competitors know this and are always testing offers, design, messages, and recommendations. Granted, it’s easier to do this online where the costs are low and learnings are immediate, but retail testing methods are well-established and have been proven over decades.
A scientifically designed and well-executed testing plan would have helped J.C Penney understand the incremental impact of each strategic change, so they could quickly scale up the winners and shut down the losers. It may not have reversed their sales decline, but it would have certainly reduced it. Most importantly, J.C. Penney would have clear measurements and data to understand what they should do next. Instead, they’re going to confuse their customers and further weaken their brand as they try and undo the damage that’s been done.
While marketers sometimes grow impatient with tests, their value should never be overlooked. As analytics drives business today, J.C. Penney provides a cautionary tale: avoid testing at your own risk!