JCPenney killed coupons and 'fair and square' pricing — and sales fell 25%

In 2012, JCPenney hired Ron Johnson, the retail executive who had built Apple's iconic store network, as CEO. Johnson's first move was radical: eliminate all coupons, sales and promotions, and replace them with 'fair and square' everyday low pricing. No more fake markdowns, no more coupon clutter.

The logic was sound in theory — customers say they hate artificial pricing games. But JCPenney's customers did not just tolerate the games; they loved them. The thrill of the coupon, the satisfaction of the 'deal,' was the reason they shopped at JCPenney. Without the games, they had no reason to visit.

Sales fell 25% in Johnson's first year. Same-store traffic collapsed. Johnson was fired after 17 months, and JCPenney spent years trying to recover the customers it had alienated. The case illustrated the danger of applying a premium-brand strategy (Apple's clean pricing) to a value-brand customer base that shops for the deal, not the product.

Replaced coupons and sales with 'fair and square' everyday pricing, but customers who loved the deal stopped shopping, and sales fell 25%.

JCPenney's customers shopped for the thrill of the deal, not the product — eliminating deals eliminated the reason to visit.

Johnson applied Apple's premium pricing strategy to a value-oriented customer base.

The change was implemented abruptly, without testing or a transition period.

Sales fell 25%, and Johnson was fired after 17 months.

Customers say they want simplicity, but they shop for the deal. JCPenney's customers bought the feeling of getting a deal. Remove the game, remove the reason.

Johnson was fired in April 2013. JCPenney restored coupons and promotions but never fully recovered its customer base. The company filed for bankruptcy in 2020. The case is taught as the definitive example of misreading your customer's motivation.