Under Ron Johnson’s tenure as CEO of JCPenney, the company ignored data-driven decision making for a more philosophical approach. Johnson opted for the Apple strategy of what he believed would work, reportedly stating that “We didn’t test at Apple”.  And 17 months later, JCPenney’s stock and customer loyalty has plunged.

You need to understand your customers.

The first thing that went wrong with Johnson’s approach is that he didn’t understand the customer. The Penney’s customer was an older, coupon savvy, frequent shopper who appreciated store stability.  So, it shouldn’t have been a surprise that customers revolted when Johnson decided to literally cut coupons, rebrand the company as new and hip, and rearrange the store’s look.

How predictive analytics could have saved JCPenney.

Instead of discarding customer data, Johnson should have used it to make customer centric predictions. Customer data is a key asset for retailers and predictive analytics is the tool they need to put it in action.  With predictive analytics, JCPenney’s could have predicted customer behaviors in order to upsell, cross-sell and convert infrequent shoppers into allstar spenders. Penney’s could have used predictive analytics to open up new ways to communication and engage their customers in ways that would have delighted them not turned them away. Mobile apps are just one example of a channel that JCPenney’s could have utilized. Based on the knowledge that Penney’s customers are coupon savvy opens a whole new opportunity for mobile app promotions and recommendations that could have enhanced the loyal customer experience while connecting to a younger generation. Combine mobile apps with predictive analytics and JCPenney would have had a strong channel to push through coupons that shoppers would have wanted.

Other retailers need to take note, if you ignore the power of predictive analytics you will not only be disappointing your customers but you’ll be falling behind quicker than you can catch up. Ron Johnson did get one thing right when he said that Penney’s must “embrace the digital future”, if only he knew that predictive analytics was the digital future.

  JCPenney recently released this ad begging customers to come back.