JC Penney’s Crusade Against Coupons

We love to have them, but will we shop without them?

Finally, a major retailer is acknowledging what any coupon-clipping, promotional-code-downloading sale shopper already knows: Very little department store merchandise actually sells at full price. At JCPenney, it was a scant 2 percent.

Enter new CEO Ron Johnson, a retail visionary who worked for Target and Apple. He recruited another Target rock star, Michael Francis, to join him in the reinvention of JCPenney. They’re planning a much-needed update of the stores with more big-name brands such as Martha Stewart. But the first and most significant change—touted by Ellen DeGeneres in a series of funny TV commercials—is the elimination of coupons and constant promotions. In February, JCPenney permanently cut prices across the board by as much as 40 percent. There’s no need to wait for a sale, the strategy goes, when you know merchandise is priced “fair and square” every day.

How refreshing. And deflating. Sure, we complain about the barrage of coupons, confusing offers, and fluctuating prices. Yet there’s a certain sense of satisfaction in seeing that “percentage off” on a receipt. Pricing experts agree.

“My initial thought is, we actually do like the coupons and sales,” says Mark Bergen, marketing professor at the University of Minnesota’s Carlson School of Management. “We are trained to see deals. It helps us feel good about what we purchased.”

JCPenney isn’t eliminating discounts altogether, just simplifying. There will be “best price” days every first and third Friday (payday for many) and monthly specials. “They’re reshaping the discounts to be more effective,” Bergen says. “Now there’s a reason to go every two weeks.”

Bergen notes that even a couple of cents can influence a buying decision. A price ending in 99 conveys value. JCPenney has chosen round numbers for its new everyday prices—jeans are $20; a top is $15. “Prices ending in 00 are clarifying,” Bergen says. “It’s a way to differentiate merchandise, create a perceived value—which is what Target is really good at.”

Of course, Target has the cachet—the Tar-jhay nickname is no accident—to dictate prices. JCPenney is no Jacques Penné. Yet. The poppy new JCP branding campaign—courtesy of Peterson Milla Hooks, a Minneapolis agency that has also produced Target ads—is a leap in the right direction. Now the stores themselves need to catch up.

“Leaders change the discussion in pricing. JCPenney is not the leader,” says Mary Van Note, co-owner of Ginger, a Minneapolis branding firm. “But Kohl’s, Macy’s, Target, Walmart—they’re absolutely paying attention. They would love to get off the promotion trip. JCPenney is taking a risk, and that gets people thinking about them as a player.”

For the media blitz to pay off, shoppers will have to stop equating discounts with good deals. That doesn’t seem likely any time soon.