Penny’s Virtual Lane

JC Penney uses the Web to enhance customers’ brick-and-mortar experience THIRTYSOMETHING Julie Chaffee is a fashion addict. “The truth is, I really just love clothes,” the former model says. Though she frequents boutiques, one of her favorite stores for essentials, JC Penney, has just sent her a birthday card. The card not only wishes her many happen returns, but also thanks her for being a “Privilege” customer (yes, she buys a lot). Inside the card is a certificate good for $15 off on any purchase over $50.

JC Penney has certainly seen its up and downs and hopes personalized offers like these will help it thrive in the new economy. New CEO Allen Questrom, lured from upscale New York retailer Barneys, has taken the reins of this organization and is steering it in a direction that he believes will accomplish this. For starters, he has revitalized the company’s focus on customers, adopting many techniques from the one-to-one arsenal. The company is working to integrate clicks, bricks and catalogs to deliver a consistent, focused, integrated message and approach across all customer contact points – no small challenge for a company this size. From JCPenney.com (with sales consistently in the top 10 of e-tailing), to 1,100 retail stores, 2,000 catalog centers, plus Eckerd drugstores and related Web sites and call centers, the company has loads of touch points.

LIVE AND IN ACTION Integrating this portfolio from a customer perspective sounds great – imagine the retailing clout of a seamlessly integrated organization of this size. To see it in action, visit the company’s new Stone Briar Center flagship retail outlet, right across the street from corporate headquarters in Frisco, TX, and you’ll find wider aisles and less clutter. An enhanced customer experience, says spokesperson Stephanie Brown, “is the objective for all retail stores in the chain.”

At Stone Briar you’ll also find complete integration with JC Penney’s catalog and online operations. “If they can’t find what they want in the store,” says Brown, “there’s a catalog counter.” Alternatively, there are 10 or more kiosks throughout the store where customers can look at the still wider selections on JCPenney.com. (The Web site, like the catalog, has greater depth and breadth than any individual retail location.) So in essence, the retail outlets promote the catalog and Web businesses, and vice versa.

“Whether you buy it from the catalog or from the Internet, you can return or exchange it at any retail or catalog center,” Brown notes. Another great feature of the kiosks, she says, is that “one member of the family can relax or check their e-mail while others continue shopping. We want to improve the entire experience.”

As part of a larger e-business initiative at Stone Briar, you’ll also see prototypically streamlined business processes: less inventory on-site, more rapid replenishment. No, the customer can’t see this, but it does translate into lower costs, lower prices and – the company hopes – higher volumes and margins. Again, this is the model for the company at large.

The retailer is actively trying to strengthen its relationships with people like Julie Chaffee online and off. JC Penney’s Rita Flynn was customer loyalty manager, but her likely new title, reflective of her more clearly defined focus, is “customer relationship cultivator.” The subtle change, she explains, “shows that we’re pursuing closer ties with our customers.”

THE PRIVILEGE OF MEMBERSHIP Flynn’s group is making improvements to JC Penney’s Privilege program, creating, for example, a menu of upgraded services for “best” customers. Individual Privilege members, says Flynn, will be able to sign up for the services they “find most valuable and relevant to their lives and needs and reasons for coming to JC Penney.”

What’s on the menu itself? Right now JC Penney won’t say, but as Flynn explains, “We are developing the list of services in focus groups, and then validating our conclusions with quantitative surveys and control groups.”

Additionally, a revamp of the Privilege section on JCPenney.com is in the works, with an upgraded feature- and promotion-rich version slated to be launched in the near future.

IDEAL CUSTOMERS The fundamental criteria for becoming a Privilege member in the first place is also being re-evaluated. Presently, the company looks at total purchases through all of JC Penney’s channels: the Web site, retail stores, catalog centers and even Eckerd drugstores. Broadly speaking, it is the top 10% of these customers who are offered Privilege membership. But in the near future, says Flynn, the company intends to consider other criteria indicative of an ideal customer. Why not simply offer Privilege benefits to a wider swath of customers? “Then it’s no longer a privilege,” she notes, “and there’s no motivation to do more business with us.”

FOCUSED APPEALS As for personalized communications with customers, the company is increasingly mining what it knows to create focused appeals. Evaluating past purchases – the company can track these through its own in-store information or via several major credit cards – JC Penney can tell if a customer is a buyer of national or store brands. Promotions, via direct mail or e-mail, become more personalized, says Brown. “We can make relevant offers to specific customers – offers that we believe will prove attractive and will demonstrate that we understand their needs.”

JC Penney believes these initiatives will help it become a model new economy retailer.

How successful are its efforts to date? Consider the effect of the birthday card on Chaffee. “I was surprised and impressed,” she says. “I’ve gotten discount coupons before, and I’ve been invited to sales in advance of the general public. But the fact they acknowledged my birthday – that’s more important to me than anything else. I definitely feel more loyal.”

How will this affect her immediate behavior? “Well, I’m going to go shopping, and it won’t be for any necessities. This is a gift – something for me – so I’ll probably pick out something nonessential, something a bit reckless.”

Reckless spending perhaps, but the program that prompted it is anything but.