Archive for Strategy

Strategy – JC Penney. Will It Work?

January 31, 2012 / Jon Wardle / No comments

In case you haven’t noticed … JC Penney has a new direction. Ron Johnson the new CEO has taken charge and is breathing air to a tired brand.  What is Ron Johnson’s background?  Prior to his appointment at JCP, he has deep roots in retail at both Target and the Apple Store.

Most shoppers view JC Penney as a “also ran.” When you compare their offering to their peers, Macy’s and Kohl’s, the product is similar, but seems inferior because the retail space, in my opinion, outdated.

JC Penney is rolling out two significant programs:

  1. Fair and Square Every Day Pricing
  2. Stores within a Store.  (Think Martha Stewart boutique)

Fair and Square Every Day Pricing.  Johnson has determined that the large majority of its sales are sold at deep discounts.  (Over 50% off.)  The new pricing structure is:

  1. Every Day – Fair Prices
  2. Month Long Value – Themed Items and Products
  3. Best Prices – Clearance

We’ll have to wait and see if the pricing structure works.  This probably works, in time, with their second initiative

The second program is the concept stores.  They are going to roll out stores within a store.  The first one they’ve announced in Martha Stewart.  Others will be named, but will be similar, I would assume to what they already do with Sephora.  Their concept stores are supposed to roll out about 2 per month, until their are 80 to 100 branded concepts in each JC Penney.

There have been a slew of articles about JC Penney’s approach. I am sure there was a very healthy debate in the executive offices and Board Room, as well.

I think the approach has generated significant publicity for a brand that is tired and worn out. In a competitive retail environment, would there be a reason to talk about JC Penney? Probably not.

Two that I like and recommend, should you have an interest:

Rafi Mohammed – Harvard Business Review – Understanding JC Penney’s Risky New Pricing Strategy

AP Interview with CEO Ron Johnson

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Most Trusted Brands 2011: What Coke learned about globalisation and branding – The Economic Times

September 27, 2011 / Jon Wardle / No comments

In this article about “Trusted Brands,” Most Trusted Brands 2011: What Coke learned about globalization and branding, Pankaj Ghemawat opines several great points that apply to any business that has mass market appeal:

  1. There are limits to a one-size fits all approach
  2. Products must be adapted to local, cultural and historical traditions
  3. Each market is unique

When I was building homes, our team would often take the path of least resistance and use a “winning” design and try and built the same plan in every new neighborhood.  However, that approach did not really address the fact that markets and consumers are unique.

We found that although it works in one community, it might not work in another.

This is why market research, analysis and patience is needed when growth is pursued.



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Strategy – NetFlix: Will it Work? PART 2

September 15, 2011 / Jon Wardle / No comments

Interesting update from NetFlix over the weekend. NetFlix’s CEO posted a blog post and video saying he was “sorry” and announced splitting of DVD only (Qwikster) and Internet Streaming only (NetFlix) services.

Netflix Splits DVD-Streaming Business, Rebrands With Qwikster, Adds Video Games | Fast Company.

In my previous post on September 2, 2011, (Strategy – Netflix: Will It Work?) I wondered what would happen with NetFlix’ existing customer base.

Netflix just reported adjustments to their subscriber base. And the the stock market has been very cool to those downward revisions. Netflix announced a 27% reduction in DVD only subscribers, but only a 2% reduction in streaming only customers.

NetFlix did state in their press release: “We remain convinced that the splitting of our services was the right long-term choice.” Perhaps the strategy will work longterm. However, for those in business that rely on a recurring customer base, the cost to acquire new customers and fight bad PR is always much higher than keeping existing customers happy.

I wonder if NetFlix ever considered a split pricing strategy:

  1. Legacy Customers.  Keep the same pricing, or slowly increase pricing so that the pain isn’t so abrupt.
  2. New Customers or Returning Customers.  Subject to a new pricing structure

This is what many of the phone companies do.

But I’m convinced that the loss of subscribers will continue to dog them in the short term.

Category: Customer Service, Strategy / Tags: , ,

Strategy – NetFlix: Will it Work?

September 2, 2011 / Jon Wardle / 3 comments

Much has already been made of NetFlix’s decision to change their pricing model.  But for those keeping score at home … NetFlix just increased the price to both receive DVDs by mail and to stream content over the internet.  Yes, the monthly fee will be only $6 per month.  But why would you want to pay for the fee?

Some things to consider:

  1. RedBox
  2. Hulu
  3. Amazon
  4. NetFlix Loses Starz

There are other options in the marketplace.  It really comes down to personal preference and convenience.

However, it is Item No. 4, which I believe will hurt NetFlix in the short term, and perhaps the long-term.  Starz has the “pay-cable” rights of movies from Walt Disney and Sony, which means that Starz controls the content.  Sony had already pulled their streaming content from NetFlix.  But now all of the Disney related movies will also walk from the NetFlix streaming archive when Starz agreement terminates in February 2012.  Other movie distributors, such as HBO, Warner Brothers, Twentieth Century Fox and Universal do not allow streaming of their content.

NetFlix has already signaled that they will pursue independent content

I’m sure the NetFlix PR machine will continue to put on a happy face and spin this as no big deal.  However, just like they underestimated the negative publicity they received from the change in subscription, I believe that this will also be another reason for consumers to expand their entertainment options.

Agree?  Disagree?

(Not that it matters, but I don’t own any stocks of the companies mentioned in this post, and have no intention of owning any in the future.)

Category: Customer Service, Strategy / Tags: , ,

Strategy – A Tale of Two Companies

August 25, 2011 / Jon Wardle / No comments

A couple of big stories hit the press today:

1. Steve Jobs – Retiring (kind of)
2. Buffett invests $5B in Bank of America

But the bigger underlying story for both Jobs and Buffett:  Staying true to what each does best.

Apple develops great products. Steve Jobs is best known for his meticulous involvement in design.  If he doesn’t approve, it doesn’t go to market.  Period.  Although he is resigning as CEO, he continues to be “Chairman of the Board, Director and Apple employee.”  He is completely vested in the company’s future, and will continue to stamp every product with his approval.

Buffett invests where he sees an opportunity. I doubt he has ever said, “Let’s invest in Company X so we can lose all of our money.”  Make no mistake, Berkshire Hathaway is not a nonprofit enterprise.  But when Buffett makes a move, people notice.

Both Buffett and Jobs are true to one thing:  Strategy.

This isn’t intended to mean that each has the midas touch.  Both companies have had failures.  But the failures are the exception not the norm.

I recently read an article by Anthony Tjan about strategy.  He summarized his vision of strategy into 4 parts:

  1. Why do you exist / What is your purpose?
  2. What is your value proposition?
  3. Who are you trying to serve / target?
  4. Who will you know you are winning?

He states that if these steps are followed, you will define your strategic path and future growth.  These may not be the same steps Apple and Berkshire Hathaway follow.  But they each have a very clear strategy, which has facilitated their growth.

Regardless of which industry or interest you might have, if you create your own strategy, just like these companies have done, you will begin to see noticeable improvements.

What other companies have great strategy?

 

Category: Strategy / Tags: , , , , ,

Groupon Doomed by Too Much of A Good Thing

August 17, 2011 / Jon Wardle / No comments

Rob Wheeler posted on the HBR Blog an interesting article entitled Groupon Doomed by Too Much of a Good Thing.

The meat of the article focused on Groupon’s use of an accounting practice to mask the company’s lack of profitability.  They aren’t making money.  They are losing a lot of money.  Rob made the following observation:

“… unlike the very few successful companies that scaled before they were profitable (think Facebook or Amazon), Groupon’s business model does not benefit from significant network effects.  The company’s product is not more valuable to users as more people adopt the platform. If anything, the fact that Groupon is witnessing decreasing revenue per merchant and fewer Groupon purchases per subscriber in its maturing markets suggests that growth may actually decrease Groupon’s value to its customers.”

There will be a lot of interest when Groupon finally issues their IPO.  Will it be a wise investment post-IPO?

I thought the more important part of the article focused on business profitability.  He quoted Clayton Christensen, Harvard Business Professor, who opined that businesses need to focus on profits before trying to become big.  Also, he mentioned that “managers need to be impatient for profit, but patient for growth.  Further, he offered the following strategy for profitability and growth:

  1. “When a business is impatient for profit, managers are forced to validate their assumptions and demonstrate that customers are fundamentally willing to pay an acceptable price for the company’s offering.
  2. Expecting a business to be profitable quickly forces it to keep its fixed costs low. Because a business’s cost structure determines which customers it finds profitable, keeping these fixed costs low preserves strategic options for the company when it is choosing which customers to target.
  3. Reaching profitability quickly ensures that when outside financing dries up, the venture can succeed on its own.”

The takeaway:  ”Be impatient for profit and patient for growth.”  These are simple, but important concepts to remember.

Category: Strategy / Tags: , , , , , , ,
 
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