I began my morning like I do most, catching up on the latest articles that social media has to offer. One particular title caught my eye, “JC Penney Reintroduces Fake Prices (and Lots of Coupons Too, Of Course) (Source). I have watched the changes to their business model unfold over the past year with great interest and could not help but take a look. One of the most striking things I found quoted in the article is that:
“JC Penney’s failed experiment in fair and square pricing reveals how irrational shoppers can be. Yet as a Science News post explained, Johnson’s pricing system failed to resonate with customers precisely because stores removed the cue that helps shoppers make what they think are logical, value-driven purchasing decisions. “By not showing marked-down prices, Penney’s removed an element that helps shoppers feel rational,” the post noted. “Seeing that marked-down price next to a higher original price provides an important yardstick for gauging whether we should buy something (Source).”
I thought to myself, could this be true. Was JC Penny a victim of their own demise all because they wanted to give customers what they described as the “end of fake pricing?” Do we as the consumer not want “Fair and Square” pricing yet rather have a garment marked up 60% then discounted 40% so we feel as if we got a deal? Most importantly, are other business models doomed to fail because they choose a no “BS” approach to doing business?
In Contemporary Issues in Business Ethics by J. Desjardins and J. McCall they define business ethics as actual customs, attitudes, values and mores that operate within business. They go on to say that it is the idea of what in fact is accepted as ethical or customary in business. In my interpretation of what has transpired with JC Penny it would seem that the idea of inflating prices to offer discounts motivating consumers to buy is a customary business practice and therefore seen as ethical. This is a far contrast from now ousted CEO Ron Johnson’s belief that “Fair and Square” pricing is the way to go.
If the statements in the article ring true, are ethical business owners doomed to fail? I pondered this as I walked back from dropping my daughter at school and resigned to believe that an ethical business model can’t fail all the time. I also began to think if there were other root causes to the failure of JC Penny’s business model. Is the idea that if they increase prices and then add sales to lure unsuspecting consumers in a surface issue to the real challenges in their business strategy?
We have to give the customer what they want but also make sure that they truly get what they need. Sometimes you have walk a different path from most even if that is not considered the status quo. Milton Friedman, an American economist, statistician and writer once wrote. “…in a free society, there is one and only one social responsibility of business – to use its resources to engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception of fraud.” Is there a justification for walking a fine line between right and wrong, as long as it is a customary practice?
There is really no right or wrong answer for this. While the JC Penny story continues to unfold the question will stay in my mind, can you be too ethical to succeed in business? What do you think?