Q:

How does J.C. Penney establish its prices?

A:

Quick Answer

As of 2015, J.C. Penney establishes its prices based on the strategy of price anchoring, in which a company sets prices higher than it expects customers to pay and then entices them with discounts. J.C. Penney uses both sales and coupons to attract customers.

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Full Answer

J.C. Penney has not always used price anchoring as a pricing strategy. In 2012, the company began a strategy in which it dropped initial prices significantly, to a level at which customers were likely to pay but discounts were rare. However, this strategy proved unsuccessful, as the J.C. Penney customer base prefers to use coupons and sales as guidelines for when to shop. Business decreased until J.C. Penney restored the price anchoring strategy in 2013.

J.C. Penney has trouble retaining customers in general, and this problem has resulted in an enhancement of their price anchoring strategy since its general reintroduction. The company has raised initial prices even higher than before and offers deeper discounts. Many of the prices have seen jumps of between 10 percent and 30 percent, but the changes are even greater for jewelry prices, which in some cases have more than doubled. J.C. Penney tends to concentrate these initial price increases around gift-buying holidays.

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