SFR 166: Keep The Thrill Of Buying...

Boom. What's going on everyone, this is Steve Larsen. This is Sales Funnel Radio - and today we are going to talk about JCPenney.

 

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My name is Steve Larsen, and welcome to Sales Funnel Radio.

 

What's up guys.

 

Okay, first off this is probably one of my favorite case studies ever that I've read. This is from a Harvard one that I read, and it's really, really fascinating stuff.

 

First of all, I would not consider myself a clothing connoisseur. But this is a very fascinating case study.

 

I am not gonna be able to say dates or even names correctly, it's the lesson though.

I remember when I read this the first time, I was sitting in a very tiny room, listening to 400 words a minute, reading through and going through…

 

I was like, oh my gosh, this is a great lesson, right. And it completely applies to everything that's going on here. So here's the story…

 

The story goes that the guy who... You know when Apple first started making their Genius Bar in the Apple Stores, right.

 

There was a guy, right, that went through and he started thinking through this amazing Genius Bar and this amazing experience when you walk in and the design of it, the layout, the look of it, right.

 

When you walk into an Apple Store, you know you're in an Apple Store, right?

 

And, again, I can't remember his name, so if anyone remembers, awesome. I don't right now off the top of my head. But the guy, what he did is he went and created this Genius Bar and he created this awesome feel when you walk in there. It's very premium feel when you walk in.

 

The Apple Store was launched, right, very small, and then they started replicating, replicating just, and blast them all over the place when they got the base test correct, right. Well, they started thinking to themselves, so why don't I keep building this out and put this around other areas.

Other department stores started seeing what Apple is doing. It's about this time JCPenney came along and said, Hey what's up guy, do you wanna leave Apple, come on over here and design our stores instead?

 

And so he left designing these Apple Stores, with the Genius Bars and that premium feel when you walk in, he left doing that and what he did instead was he came and he started doing designing and doing very similar for JCPenney.

 

He moved into the JCPenney and he gutted tons and tons of stuff inside of there. Gutted it.

 

He got rid of this and that - the normal shirt racks and the rings, things like that. I mean he got rid of, it literally looked like an Apple Store but with JCPenney clothing inside of it:

 

#1: He completely redesigned the entire feel

 

#2: He got rid of mailers

 

He started saying things like, “Hey look, people know that we mark this up and then when they come in with a coupon they're actually buying it at the normal price it was anyways. Well instead, we know that customers are smart. We know the customers are smart. Why don't we just not do that?

And instead of, right, let's say they get a shirt in, and it's 40 bucks they mark it up to, I don't know, 60, 70 dollars and then send out a coupon that brings it back down to 40 bucks, right.”

That's like the classic Kohl's model; that's why there's always a deal going on, always clearance right now - there's always this going on.

That's how they run all those department stores.

 

So instead of sending mailers - they didn't send anything. He started telling the customers, and his message to the market was, “Look, customers, we know, you know what's going on. We know that you know that these mailers we send out are not really an extra 50% off, or 40% off or 30% off.”

 

What, oh my gosh! Right.

 

All they did was they marked it up like crazy - so then it seems like this huge discount.

 

It's kinda like, my favorite thing, I went and I just grabbed a quick pair of like, swim shorts at Kohl's the other day and they're like, “You saved $97!” when I go and check out.

 

They don't tell you how much you spent, they tell you how much you saved.

 

That's very clever and I'm starting to do that in some of my sales funnels; right on the thank you page, “You saved blank, blank, blank” - instead of you spent this much.

 

Like you still say that, but the message is, “You saved this, this, this.”

And I was looking at them kinda funny. I'm like “I bought a pair of socks and a shirt, you're telling me I saved $147 today?” And I always kinda look at them and smile, and they know and they're like, “Thank you. Congratulations.” But it's the psychology behind what they're doing, right?

 

Anyways, so this guy said, “Hey we're not gonna do that, we're not gonna send out these mailers.” Instead, if a shirt is $20 we're not gonna say it's $19.97 - we’ll just say it's 20 bucks.  We're not gonna mark it up and then give you a coupon. We know you're a smart customer.

 

A very interesting thing happened…

 

Their stock price dropped, it like, I think it was uh, like a full fourth. I mean they lost so much value - it may even have been more that. It dropped a gigantic level in a matter of two months - I mean really really fast.

 

All their foot traffic stopped in the stores, no one showed up anymore…

There was no reason to show up, right?

 

Eventually, they ended up getting rid of the apple guy, getting back their old model. And then suddenly, you know, it's no longer that tight. JCPenney lived and moved on.

 

What's the lesson there? Guys, even if people know…

 

Okay, we do this thing when we do webinars called the stack. The stack in the webinar is beautiful, it's amazing, it's brilliant, it’s incredible. The stack is a way to structure your offers and then present the offers.

 

However, it can feel a little bit weird to the person who's doing it, right? Cause you're like, “First, you get this…” This is totally like an infomercial. This is why they do it, this is called the stack. It's inside an infomercial, right?

 

First, you're gonna get this, and that's valued at this price, but wait, if you act now I'm gonna give you two for the price of one. But wait, if you act now we're actually gonna give you a third for absolutely free, but wait, if you act now we'll give you this, and this, and this, and this, and this - that's a total value of blank

 

And they stack this value up and then do a massive price drop. People know what they're doing, right? You know what they're doing, right?

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