Case Synopsis, Uses, Discussion Questions, and Answers
3. To understand what effect, if any, a change in J C Penney’s pricing strategy would have on
its overall positioning and segmenting efforts.
4. To develop analytic and decision-making skills and apply them to JC Penney’s uncertain
position.
The objectives listed above serve to underscore a number of core retailing concepts that affect a
retailer’s strategic plans and marketplace effectiveness. Specifically, students need to examine how
an environmental analysis of both internal and external factors can influence a retailer’s strategic
substantially lower promotional costs associated with EDLP. Conversely, students need to explain
why this strategy initially did not connect with Penney’s existing customer base.
Additionally, students need to recognize that Penney’s pricing structure changes reflected a
significant repositioning effort. They should be able to identify which niche Penney was attempting
to create in consumers’ minds and which target market Penney was now pursuing. Regarding the
Case Synopsis, Uses, Discussion Questions, and Answers
The instructor can choose to assign the case to groups of four to five students to discuss the
questions listed below and ask the groups to present their answers. The questions provide a broad
overview for discussion of the case in class. Although it is unlikely that all student groups will be
able to identify every issue/solution to every question, each group should be able to identify the
fundamental issues associated with each question.
1. What environmental factors contributed to JCP”s “Fair and Square” launch?
Several factors—both internal and external— served as catalysts for the “Fair and Square”
launch.
The mid-market department store sector that JCP competes in is saturated. Major
competitors include Kohl’s, Target, and Macy’s. Penney’s sales slid more that 13% from
2007 to 2011. During the same time period, Kohl’s revenues jumped close to 14% while
Target’s revenues jumped more than 17%. Penney’s marketplace position was clearly
weakening.
2. What were some alternative pricing strategies that Johnson might have considered
besides “Fair and Square”?
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63
With Penney’s business model failing and profits falling, Johnson clearly needed to act. He
correctly identified that JCP’s hi-low pricing strategy was expensive and hurting margins.
2. Another option might have been to engage in more second– and third-price-
discrimination strategies. Although Johnson’s new EDLP strategy did contain some
elements of second-degree price discrimination with its “value” and “best” pricing
practices, these efforts fell flat with consumers. A combination of some sales being run
with the help of markdown optimization software combined with third-degree price
3. Why did “Fair and Square” fail to initially connect with JCP customers?
The sales figures from the first six months of 2012 paint a vivid picture “Fair and Square’s”
initial failure with JCP’s customers. JCP’s customers had previously seen heavy discounting
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64
4. What steps can JCP take to increase the chances of success for “Fair and Square”?
Dramatically altering JCP’s value proposition is a risky move, and one that failed to promise
the desired results upon its introduction. Is “Fair and Square” salvageable?
JCP needs to drive sales and traffic. How can it manipulate its retail mix to accomplish this?
At the most fundamental level, JCP must decide what its retail strategy is going to be, and in
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65
Additionally, JCP would need to update its private-label branding to connect with a younger
fashion-forward target market. Penney’s stable of existing private label brands (St. John’s
Bay, Worthington) were long-associated with JCP’s previous target market. In order for its
private label merchandising strategy to be consistent with its repositioning efforts, JCP
would need to rebrand its private label lines. Conversely, JCP could place a greater emphasis
on upscale national brands (e.g., Sephora) in its merchandising mix. In 2012, JCP attempted
this by announcing it had reached an agreement with Martha Stewart to sell some of her
branded merchandise; however, Macy’s challenged this agreement in court, and it stalled.
Either of these branding strategies would require a significant commitment of resources.
Summary
After students have had a chance to discuss the above questions for a sufficient length of
Case Synopsis, Uses, Discussion Questions, and Answers
66
CASE 25 – How Much for a Good Smell?
Synopsis: Upscale gift store needs to set a price for potpourri. The case takes students through
several seasons at Courtney’s gift shop. The focus is on one particular item, a best seller
for the store in recent holiday seasons. The case focuses on determining an appropriate
markup for the item, given its popularity with customers and the wholesale price from
the vendor.
Use:
Chapter 14 Generate discussion of the issues that need to be considered in pricing an item
including what demand will be at various price levels.
Discussion Questions
1. What prices caused Courtney’s charge?
$9.95—the same price as last year even though the cost has gone up.
2. Which price would result in the highest profit?
Price/unit
Cost/unit
GM/unit
Unit sales
Profit
$9.95
$5.50
$4.45
750
$3337.50
400
Price/unit
GM/unit
Unit sales
Profit
$5.50
$7.00
300
$2100.00
300
600
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67
3. What other factors should Courtney’s consider?
Some other factors Courtney needs to consider in estimating demand are:
4. What price would you charge, and how many units would you order?
This question makes students recognize the interrelationship between pricing and demand. It
also illustrates why stores tend to buy more merchandise than they think will be sold and then
Case Synopsis, Uses, Discussion Questions, and Answers
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CASE 26 – Promoting a Sale
Synopsis: A hypothetical department store needs to develop an advertising plan to promote a
three-day consumer electronics products sale.
Use:
Chapter 15 Illustrates factors that need to be considered in developing a communications program.
Discussion Questions
1. Knowing that the company wants a mixed-media ad campaign to support this event,
prepare an ad plan for the general merchandise manager that costs no more than
$40,000.
The firm could use a mix of direct mail (flyers), TV advertising, Radio advertising and
Newspaper advertising.
Case Synopsis, Uses, Discussion Questions, and Answers
2. Work out the daily scheduling of all advertising.
Saturday
Direct mail flyer arrives
Sunday
Monday
Tuesday
Wednesday
Thursday
Friday
TV advertising
Newspaper ad
TV advertising
Newspaper ad
TV advertising
3. Work out the dollars to be devoted to each medium.
Direct mail to charge customers
$10,000
24 TV spots
TV ad production
2 half pages
4. Justify your plan.
The direct mail, four-color flyer to 80,000 charge card customers appears to be very cost
effective based on information in the case. If 3 percent of the 80,000 customers respond by
going to the store and half of the customers visiting the store buy a $300 consumer electronic
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70
CASE 27 – Google Adwords Case
Discussion Questions
– Using examples, explain how different sections of the home page serve different audiences.
– What other audiences would you suggest David Jones serve via its website? Why?
Given the dynamic nature of websites, instructors should review the David Jones website for
audiences and sections. Probable audiences and sections include:
• Consumers, with sections for products, specials, store locations, store hours, contact
information, gift registries, wine club, email newsletter registration, and online shopping.
three separate AdWords advertisement. Each advertisement should include and justify
the:
– copy [For example, do you have a ‘call to action’, does your advertisement mention a specific
benefit?]
– keywords, keyword phrases and negative keywords [Use the Keyword Tool to help select
specific keywords.]
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71
TEACHING OBJECTIVES
After completing the case study, students should be able to
• Discuss how search advertising works and its benefits to retailers.
• Discuss the different audiences for retailer websites, i.e., who would be interested in viewing
a particular webpage.
• Using examples, explain the following terms: keyword matches, click-through-rate, cost per
click, landing page and geographical targeting.
Case Synopsis, Uses, Discussion Questions, and Answers
CASE 28 – Enterprise Builds on People
Synopsis: Enterprise is the largest and the most profitable U.S. car rental business. Enterprise’s
primary target customer segment is the in-town renter. Its human resource strategy is
key to its success. The case describes the human resources strategy at Enterprise.
Use:
Chapter 5 Describes the retail market strategy, including positioning, target market and operations
of a rental car business.
Chapter 16 Illuminates some fundamental aspects of store management at a service business.
Chapter 18 Highlights some factors essential for providing superior customer service.
Discussion Questions
1. What are the pros and cons of Enterprise’s human resource strategy?
Some clear advantages of Enterprise’s human resource strategy are that is oriented towards
strong on-the-job training and has clearly defined performance goals. Since the firm is oriented
towards customer service through interactions with customers, the strategy of hiring college
2. Would you want to work for Enterprise? Why or Why not?
The answer to this question would vary with students’ aspirations and interests. For those with
lackluster college academic performance but with high levels of extra-curricular activities, a job
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73
3. How does its human resource strategy complement the quality of customer service
delivered by its representatives?
Enterprise ensures the quality of customer service by tying-in measures of customer service to
the evaluation of a managers’ performance. The performance measurement indicators
themselves were formed with inputs from managers. Managers are motivated to improve the
Case Synopsis, Uses, Discussion Questions, and Answers
74
CASE 29 – Diamond in the Rough
Synopsis: The president of Diamonds Furriers is evaluating her store’s sales force compensation
strategy. A family business in the Nashville for 40 years, Furriers has a long history of
excellent merchandise, customer service and customer loyalty. The relationship between
this customer loyalty and sales force compensation is the focus of this case.
Use:
Chapter 16 Generate a discussion of the pros and cons of different methods of compensating
salespeople.
Discussion Questions
1. What are the advantages and disadvantages of the various alternatives Ruth Diamond is
considering?
100% salary
Salary +
Commission
Annual
bonus
Motivate salespeople to make
sales
–
++
+
Provide customer service
++
–
+
Administrative cost
++
–
There are advantages and disadvantages to each of the compensation methods that Ruth
Diamond is considering. The present system, 100 percent salary, does not put pressure on the
salespeople to make sales and thus enables them to spend more time developing long-term
customer relations, performing nonselling activities such as setting up displays and making sure
the selling area is neat, and providing services to customers. However, Ruth Diamond is
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75
2. Do you have any other suggestions for improving store sales?
Ruth Diamond can consider altering other elements of the retail mix to increase sales such as
the merchandise assortment, location, pricing, and services offered to customers.
3. What would you recommend? Why?
The advantages and disadvantages of the plans above should be the basis for answering this
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CASE 30 – A Stockout at Discmart: Will Substitution Lead to Salvation?
Synopsis: Discmart is a discount retailer similar to Kmart and Walmart. On a recent Sunday
morning, an irate customer in the store was complaining about how the store was out of
stock of an advertised special on the morning of the first day of the sale.
Use:
Chapter 16 Examines issues in store management, including stockouts.
Chapter 18 Illustrates how customers evaluate a retailer’s service, what obstacles hinder retailers in
providing good service, and how retailers can improve their customer service.
Discussion Questions
1. Why did this service breakdown occur?
Generally speaking, the service breakdown occurred because Discmart was out of stock of an
2. How was this service gap related to the other gaps (standards, knowledge, delivery, and
communications) described in the Gaps Model in Chapter 19?
This service gap, like all service gaps, is a combination of all of the gaps that comprise the GAPS
Model which are described below: