Research Could Have Spared J. C. Penney
We’re all for ditching research when you have strong intuitions about your business and have no pressing questions that need to be answered. But too many business leaders are now following in the footsteps of Steve Jobs who was notorious for believing that consumers can’t tell you what they want. Aggressively ignoring market research has become a strange point of pride for some.
Did Ron Johnson, formerly of Apple and now formerly of J.C. Penney, do any research before running his new company into the ground? It’s doubtful. Even a super simple research effort like watching people enter stores from parking lots (“Look, they’re all clutching coupons!”) might have given him some insight about how his new strategy would fare. In fact he didn’t even have to do research. He could have asked his managers to review research published over the last twenty years to help him understand how consumers respond to various pricing strategies.
Here is an excellent resource that should have been his starting point: Consumer Insights: Findings from Behavioral Research. It is published by the Marketing Science Institute and summarizes practical findings from academic market research. It has an entire section on pricing with five chapters:
- Perceptions of Price Deals
- Biases in Processing Price Information
- Effects of the Internet on Consumer Price Sensitivity
- Effects of Transaction Structure on Price Perceptions & Consumption
- Perceptions of Price Fairness
These five chapters provide a quick overview of what is known when it comes to pricing and how consumers respond, based on hundreds of research studies. Each is short and to the point (just two or three pages!). Each outlines insights, the evidence base, and managerial implications.
Shucks, Mr. Johnson could have hired Versta Research and we would have happily synthesized these findings and presented them in one afternoon. We would have wrapped up our presentation by acknowledging the limitations of market research, but suggesting that while his intuition about transforming JCP may be right, we ought to ask his customers ahead of time how they might respond.
Why? Because high quality research, both qualitative (such as focus groups) and quantitative (such as surveys) certainly can provide deep insights into how customers and audiences think, perceive, react, and respond to products, services, and opportunities. Almost certainly JCP’s customers would have told us that they would take their coupons and cash elsewhere.