J.C. Penney will not survive for very long because of the following 3 reasons. First, a retailer cannot lose as many customers as they have and expect to win them back anytime soon. It takes four times as long to get a customer back as it does to lose them and four times as many marketing dollars. Second, a solid e-commerce strategy has never been developed and the company is so far behind that any effort in that direction is futile. And last, the number of unprofitable real estate far outnumbers the profitable stores, which only gets worse every day.

When J.C. Penney released their first quarter earnings last week, the stock priced seemed to increase slightly with investors reacting to any positive news. But looking at the whole picture of what J.C. Penney has become, it is hard to see anything good.

The retailer stated

“For the first quarter of fiscal year 2013, J.C. Penney anticipates total sales of approximately $2.635 billion, a decrease of approximately 16.4% from $3.152 billion in the same period last year, and a comparable-store sales decrease of approximately 16.6% for the quarter compared to the same period last year. The sales decline in the first quarter is partially attributable to construction activities in connection with the transformation of the home departments in 505 stores. The company noted that results for the quarter also reflect its prior pricing and marketing strategies, which are being changed under new leadership.”

What J.C. Penney is not talking about is the real number of lost customers which some estimates put as high as 1.5 million customers. That is one of two true measures of how bad things are. The second is the 35% loss in e-commerce sales since last year. Customers online and offline are clearly dissatisfied and the perception of J.C. Penney is negative.

I have founded both brick and mortar and e-commerce retail over my career and can tell you with certainty that losing customers at that rate is leads to a death spiral.

J.C. Penney’s has over 1,000 stores in the U.S. with a large amount of them unprofitable. The double digit loss of sales they have experienced over the last year has only compounded this problem. Closing stores is inevitable, which is going to lead to more lost customers and more store closings. Ultimately, the company will close or be sold because there is no real reason customers should come back to J.C. Penney. There is no core competency that they possess that their competitors do not.

I think Ron Johnson was more of a lucky man than a smart one and absolutely full of himself. Let’s face the facts. He EXECUTED Steve Jobs vision for the Apple stores. He did not come up with the idea. He EXECUTED the Target vision that was already in place. He did not develop the concept. Having the reins of JCP, he tried to run a staid retailer like a startup. The only issue is that in a startup, the customers are new and you can get them to understand and buy into your concept through marketing and execution. Here, he tried to change the customers to his idea of how to run a store. Marketing 101 – develop concepts that appeal to the needs of the customer, never try to change a customer. It doesn’t work.

It is time for management to develop an exit strategy, quickly.

Several years ago I heard a speech I still think about, so it must have been a good one. I thought about it again recently when I had a discussion with someone about “benchmarking” – which is when an organization changes its practices to better mirror those of top performers. As the discussion progressed, I asked them if they had ever heard of “positive deviance.” They hadn’t. So I told them this story.

NH Charitable Foundation and Jerry Sternin.

Five or six years ago when I attended the annual meeting of the New Hampshire Charitable Foundation they had Jerry Sternin, who has since passed away, as a guest speaker. He started his talk that night, as he often did, by saying, “You cannot think your way into a new way of acting, you have to act your way into a new way of thinking.” He then told us how important it was for organizational and community leaders to understand “positive deviance” because it is the best way for groups of people to learn how they can change. It is especially effective when there are problems that people care about and are motivated to improve.

They use the words “positive deviance” to describe the highest performers who excel, stand-out, and deviate most from average performers. The word “deviance” in this case comes from studying standard deviations and looking for the performers who reside in the highest or most “positive” deviance from the norm.

Sternin’s Example – Malnourished Children in Vietnam.

Jerry told us about when he and his wife, Monique, were asked to help Vietnam solve a large and worsening nourishment problem for the village children. The Sternins were affiliated with the Save the Children Fund at the time. Vietnam had tried many different ways to get food distributed to the villages, but the children’s health still declined. They needed help and Jerry thought they could use positive deviance to solve the problem.

Four Ds of Positive Deviance.

He used this Vietnamese story to teach us about using the 4Ds of positive deviance.

1. Define problem. The problem was that more than 60% (I believe) of the village children were malnourished and the percentage was worsening. The political leaders cared about it because these children were the country’s future workforce. The parents cared about it because they wanted healthy children.
2. Determine if positive deviance exists. Sternin started their work at the village level, where he met and engaged village leaders. He assumed there were also several healthy children in the village, so he asked the leaders if they knew who these children were. They did.
3. Discover practices that help the positive deviants excel. Sternin met with the families of the very healthy children. His team discovered that the mothers of these children followed a very different meal preparation process. The norm in these villages was that the moms would go out into the rice patties and harvest rice, boil it, dump the water, and feed the children good portions of rice generally two times a day. However, the moms of the healthy kids also caught shrimp in the rice patties and cooked the shrimp in the water with the rice. They also added sweet potato greens to the same water. The rice absorbed additional vitamins and nutrients during this process. These moms also fed their children several, smaller quantity meals each day.
4. Develop other people’s habits so they can replicate the outcomes of the positive deviants. Sternin and his team taught the village leaders how to teach the families to follow these other practices in meal preparation. The result was a rapid improvement in child nourishment in the selected villages.

Sternin described how positive deviance was being used in several other industries including hospitals, where they were working on reducing the spread of infectious diseases in some hospitals. You can read a more in-depth description in this Fast Company article.

I have been involved with groups of people who have used various forms of this process since and it can be very effective. The key is to clarify the problem, make sure the group of people wants to change, and then guide them to learn how to change. If you find yourself in this kind of leadership situation, I suggest starting with the 4 Ds of positive deviance – you might just find nourishment among the deviants.

Your manufacturing business is poised for growth. You’ve just won that large client your sales team have been working on for years. You’re about to enter new markets that could create unprecedented opportunities. You’ve acquired another business and there are prospective clients you know are a perfect fit. You’ve created a new product that has the potential to put your company on the map.

These typical events in the lifecycle of a growing business signify a crossroads that can take your company from humble to great. The business implications are significant and all those questions of capability – manufacturing and management – are an immediate priority.

It’s at this point that the topic of marketing also tends to enter the conversation and move from the sidelines to the boardroom. And with good reason. Manufacturing businesses all too often employ far too junior marketing for the stage that you are at, or rather the stage you want to be at. Perhaps after many years in the business, the stage you deserve to be at.

Not all marketing is created equal

Is this you: “We have a PA-slash-marketing coordinator whose role it is to produce brochures for the sales team or a banner for the trade show. She also does a bit of Tweeting or Facebooking for our business.”

There’s marketing and then there’s marketing. The marketing above is not going to help you achieve your organisational business plan or win over stakeholders. It’s not going to incite passion in your employees or make your firm one that great talent aspires to work for.

Without doubt there’s always a need for a great tactical person to work with a designer and clean up the company website, the fonts, tidy up the signatures everyone uses in their email, make the brochures look the same and the logo stand out nicely. Yes that’s important. But the marketing I’m talking about, and I know this word is terribly overused, is strategic.

With the Australian dollar so high and the local manufacturing industry facing numerous challenges, it begs the question: Why should companies do business with you? What makes your company truly different from everyone else? What is it about your business that will take you beyond competing on price every time?

Brand new perspectives

Brand has somehow become a bit of a flimsy word and one that many people avoid using. But it’s actually a very good definition for when a business moves beyond what is physically does (we make specialised machinery for other manufacturers) to what owning one means to that buyer (their machinery is the safest and has the longest life of any in the market).

The easy piece is to launch into what should actually be a much later step, and that’s creating all those marketing materials with product specifications, case studies and pens with your company name on them. (And more recently social media, which many manufacturers really have no reason to be doing).

The hard piece is simplifying what is undoubtedly a very technical and complicated process, into a distinctive, clear positioning owned by your business that resonates with all your clients, existing and prospective.

In other words, if you could only use one sentence, tell me why I should invest in your products? It sounds terribly simple, I know, but when you start asking different people in your company to tell me what “that” is, they’re all likely to give me different answers. And when I ask your customers what clinched the deal that made them buy your products over another’s, what would they say?

Questions for you:

• Does your company have a genuine point of difference in the industry and do you reinforce that effectively in your marketing?
• Do you know the real reason your customers buy from you over others?
• Do you know why you may lose tenders?
• Has the perception of your company changed over the years and how?
• Do you compete more often on price and cannot match the cheapest competitors without losing money?
• Is your marketing spend helping achieve the goals you set out for the business?
• Do your staff feel confident in defining exactly what’s better and unique about the business?
• Do you feel your business deserves to be much further ahead than you are today?

These are fundamental questions for any company and are certainly not owned by marketing, but the point is that the most effective marketing needs to always support your business objectives.

If change can truly only be made from the top down, you need to ensure the people you entrust to manage the marketing of your manufacturing business can speak to stakeholders and key customers and articulate what makes you different and why they should purchase from you.

This article first appeared in Manufacturers’ Monthly 13 May 2013

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