Intro/Outro (00:01):
Welcome to dial P for procurement, the show focused on today’s biggest spin supplier and contract management related business opportunities. Dial P investigates, the nuanced and constantly evolving boundary of the procurement supply chain divide with a broadcast of engaged executives, providers, and thought leaders give us an hour and we’ll provide you with a new perspective on supply chain value. And now it’s time to dial P for procurement.
Kelly Barner (00:31):
Hi there, and thanks for joining me for dial P for procurement. Part of the supply chain. Now family of shows, I’m Kelly Barner, a career procurement practitioner with a love for business news, and most of all good ideas, no matter where they come from. In addition to video interviews and live streams, I’ll join you each Thursday to share my point of view on a current news story that presents an interesting twist for business leaders or a new way of looking at a common challenge. Before I dig into this week’s topic, we’re building out LPs independent following. So no matter where you encountered this podcast, I’d ask you to subscribe and please consider giving us a review. Thank you in advance for being an active part of our listening community. So here’s what I wanna talk to you about this week. What is the role of love in executive leadership?
Kelly Barner (01:21):
The idea for this came by a recent article that I read in the wall street journal. And it’s about the new CEO of JC Penney. The title of the article is JC Penney’s CEO is done chasing you customers. We are loving those who love us. Now, if you follow retail and maybe even if you don’t, you’re probably aware of the, the fact that JC Penney has had a rough few decades. They hit their peak as the top family retailer in the 1980s, but not very long after that, they lost their way. The fact of the matter is they lost touch with their core customers. And by the late 1990s, the brand and the chain were basically passe. So they’ve gone through a whole series of different CEOs trying to fix things, but actually what happened is every single CEO seems to have found a new way to make the situation worse.
Kelly Barner (02:15):
For instance, they decided to end discounts. They thought, okay, our customers are cost conscious. So instead of having these prices and constantly running, we’re just gonna promise every day, low prices or something to that effect. I know that’s the, the Walmart version, but the problem was they didn’t understand the psyche of the customer. The customer was attracted by even the perception of getting a good deal, even if it was a shorter term thing, they also did away with JC Penney’s private label brand St. John’s bay was very popular. Again, this perception that a store brand would be both quality and affordable, that it would present a good deal to their core customers. Now, if those two things seem like obvious mistakes, you’re gonna love the next three things. They did. These weren’t things where they took stuff away. These were things where they made the situation worse by adding things.
Kelly Barner (03:06):
What did they add? Fitness studios, video game lounges, and style classes. Now just sort of stereotyping when you think about sort of the core JC penny, family based cost conscious value oriented customer video game launches, really. So they were already on the rocks and like many other companies that situation plus the rise of e-commerce. And then finally COVID dealt them the final blow in 2020 JC Penney filed for of bankruptcy protection. So they’re doing a little bit better just as we sort of catch up with them, their 20, 22 revenue estimates put them up 10% from where they were in 2021, but they’re still down 16% from where they were in 2019. So even though they’re starting to move in the right direction, they have some ground to make up. Now enter mark Rosen. He’s the main character in the article from the wall street journal.
Kelly Barner (04:06):
He arrives as the new CEO at JC Penney with past experience working at Ernston young Walmart. And Levi’s. So the question we have to ask is whether he will be the CEO that finally may managers to turn this retailer around. Here’s a quote that was from him in the article that really got my brain to start turning. The biggest difference. This time is we are loving those who love us. We need to give them more opportunity to come back and find things they love. So he’s not trying to win over new customers with video game launches. He’s not trying to court younger hip buyers with yoga studios and things. Instead, mark Rosen wants to double down on the people that always wanted to shop at JC Penney and made it as successful as it was budget conscious American families. Now, I do think it’s funny that in the process of this, he says, okay, we’re going back to the people that love us.
Kelly Barner (05:10):
Don’t worry. We’re not looking for those young hip people anymore. Oh, that’s a little borderline. And we’re gonna come back around to that later. Uh, but clearly he’s working hard to get inside the minds of the, that made JC penny. What it was. He understands that it’s not just about affordability. It’s about the way that those customers perceive affordability. So bringing back the idea of discounts. So that’s his strategy, but we still have to pause and think about this word love. He’s not talking about, we need to like them. We need to spec them. We need to create a good consumer experience for them. We don’t need to focus on them or retain them. We need to love them. That’s an intensely personal feeling. And it’s, it’s not something that we often hear coming out of CEO’s mouth. So I start to think how many CEOs actually love their customers.
Kelly Barner (06:03):
I don’t mean like token. Oh, we love you. We’re so glad you shop here. I mean like this really love their customers. This is especially critical in B to C industries, maybe taking that a step further, how many CEOs even understand their customers. So for that, I start to think in terms of numbers. So I went and did a little bit of research and I pulled some numbers. That’ll just give us a sense. These are all averages from specific sources, but let’s compare some demographics about CEOs to sort of a typical per from middle America. So according to the statistic site, Zia, the average CEO is 52 years old and male, the average American on the other hand, based on the most recent us census is between the ages of 30 and 34 and female. Okay. So we’ve got opposite genders and we’ve got about a 20 year age difference.
Kelly Barner (06:57):
That’s significant, but obviously affordability is important to JC Penney. So what about income? The average CEO salary is about $207,000 a year. Now we know there’s a lot of stock options and things that aren’t rolled into that, but let’s just think strictly in terms of what do you get paid a year? How does that compare to what the average American is paid a year $47,000, about a quarter of what the average CEO makes. And the average American has almost $90,000 in debt. Now, if we tie those general averages back to JC Penney, they know from their own research that the average customers salary is between 50,070 5,000. Now I suspect given how close 50,000 is to 47, that that 75 may include some two income households, right? So we’re basically talking about the same demographic of people. And then culturally, the vast majority of CEOs live in either New York city or Los Angeles.
Kelly Barner (08:02):
What percentage of Americans live in those two cities? 3.8%. So most people in the us are not living, not even close living in New York city or LA. So there’s a very different demographics. And we can think about those in terms of numbers, but that doesn’t really feed the love. So when somebody like mark Rosen is thinking about this core customer that he loves and wants to make sure they love his store. He has to go beyond the idea of demographics, personas, and target markets, and really think about people. He has to understand why they come to the store, why they spend, why they return, what makes them happy. Now, I also thought it would be fun. I have some stories of bad CEO, completely lack of love, swipe, left CEO stories. And, and this is where I kind of teased it earlier. Like, don’t worry.
Kelly Barner (09:01):
We don’t want young people. We don’t want hip people CEOs. Oh, you gotta be a little bit careful with that. So here are two stories that you may know of sort of the opposite of CEOs that love their customers. Abercrombie and fit. CEO might Jeffries, uh, said a few years ago that he only wanted his company to market to cool, good looking people. And he said, a lot of people don’t belong in their clothes. Now, given that Abercrombie and fit predominantly markets to high school and college kids, those are really cliquey, bullying oriented is. So when you’re starting to talk about, okay, we only want the cool kids to come shop here. Y it’s definitely not a way to increase your market share in response to that, customers actually started donating unborn Abercrombie clothes to homeless shelters, right? Take that mic Jeffries. Now here’s another example.
Kelly Barner (09:55):
And I feel like this is the quintessential talk about not loving your core consumer kind of a situation. Here’s the company. As soon as I say it, I have a feeling you’re gonna know where I’m going with this Lulu lemon. I’ll give you a second. Their founder chip Wilson said some women’s bodies just don’t actually work for our clothes, which became FA for our selling hundred dollar yoga pants now to make matters worse. Part of how he got himself into this bad situation was that Lululemon, there was a manufacturing error. The material was too thin. It didn’t stretch right. There was something off. And so even size twos when they put on their Lulu lemons, hands were stretching so far, they were becoming a bit translucent, not intending to. They were just displaying a little bit more of what was underneath than most people wanted.
Kelly Barner (10:46):
And so in response to this, he suggested, well, people are trying to cram themselves into pants that they don’t belong in. In other words, you know, women are too heavy for these pan answer, trying to wear. He went so far is to suggest that the material might be thinning because overweight women’s thighs were rubbing together. OMG, right? That’s not love for the customer. Even if you’re ideal customers, maybe size two, not a lot of people in America, right? Fit into that care. Ju people in America are all kinds of shapes and sizes show a little love. Now here’s a contrast. I wanna come back to JC Penney for a minute. There was a story that mark Rosen, you know, he regularly tours, stores all around the country. So a lot of different states and cities and demographic areas, he was in Kansas city, Missouri. When he noticed that the store that he was in was out of stock on shirts and pants that were very commonly worn by people working his weight staff, white shirts, black pants, heavier, more durable material, able to be cleaned an awful lot, able to kind of take a beating and go through the wash and come right back out.
Kelly Barner (11:57):
And he understood. It’s not just that we’re out of black pants and white shirts. He understood, ah, it’s a lot of restaurants in this city. Clearly the weight staff are drawn to JC Penney for the cost and quality of the garments we that fit their dress code. And he instantly changed the policy. The inventory strategy reached into the supply chain and he prioritized these garments so that they would be in stock. He understood. It’s not just this rack is empty. He understood right? Who is among our core constituents. People who work restaurants, that’s really getting it. Now, one of the techniques I’ve read about that CEOs will use to sort of advocate that their team truly understands customers because this does need to go beyond the CEO. Uh, one way of putting it is eating your own dog food, right? And another way of putting it is just playing dog fooding.
Kelly Barner (12:53):
So the idea is eat your own dog food, be your own customer, use your own product, experience your own service. It’s a way to see things in a whole new light. And you may remember a few years ago, there was a show called undercover boss, where they would take the CEO of random companies. And they would stick at various levels in, in the hierarchy. You know, they might be in some kind of a, a regional manager type of position, but more often they were working the bottom of the rung entry level position. Sometimes these people saw managers that were amazing advocates for their teams. Other times they saw managers that were disruptive, abusive bullies, and, and they had an opportunity at the end of each episode to confront the good and the bad. But I think most importantly, they saw how hard people had to work in order to make their organization function.
Kelly Barner (13:52):
A CEO only has something to run. If you have a massive base of employees at the entry level, willing to work hard. And as we’re seeing now with talent shortages, willing to stay in place, when you think about what happens to your company, if you lose the loyalty of those employees, your costs go up, your productivity goes down, you lose efficiency. This was something that, that Henry Ford understood. He wanted to make sure that every single one of his employees in the factory could afford to buy the model T that they worked to produce. It was a novel idea because at the time so much manufacturing was done by relatively low income people. And most manufactured goods were so unbelievably expensive because they were created by a very small demographic that had disposable income. He completely changed that around and created an enormous market share for himself.
Kelly Barner (14:52):
Something tells me that he wouldn’t have been able to realize both the opportunity for let’s face it, his top line, but also his company as a whole and his employee base. If he wasn’t able to see the excitement of the next model T rolling off the line through the guy that tightened the last wheel on the car, maybe that’s not love, but I think it’s a seed that, that starts with that. So part of this love is understanding the people that are your core demographic, even if you are different from them. But part of it is being able to see the difference between the collective and the individual. You have to be able to see, okay, it’s not just, you know, two income households with 2.5 children, probably a dog. Somebody works in restaurants. Somebody works in a factory. No, you have to be able to understand it down.
Kelly Barner (15:45):
And you’re like, you know what? This is, this is restaurant workers. You understand the individuals coming into your store and that’s complicated it because there’s a lot of them and it’s already not easy to be a CEO. Now, as I wrap, I actually saw something else go by on LinkedIn the other day from one of my fellow LinkedIn creator accelerators, Nikki Saunders shared a, a video where she put together this idea and I’ll link to her video from today’s episode page. You that you can hear this in her own words, but here’s what she said. And I thought it was interesting how this connected to the mark Rosen story at JC Penney, she brings an important word into this community, okay? Communities, those are based on love, right? And affiliation and common and understanding. And she talks about the importance of celebrating. Even if your community is just one person other than yourself.
Kelly Barner (16:42):
So here’s what she said in the text that accompanied her video here is how you grow a larger community. Celebrate having just that one person, that one person believed in your vision and is now going to help you mold your community in a way that more people will come in and feel like home. That one person will give you data that you didn’t have before. Don’t get discouraged. That one or a few people joined, subscribed, followed purchase, et cetera. You are attracting quality people that can help you further your brand. Have you celebrated and talked to your people or are you too busy chasing more now? Doesn’t that sound exactly what mark Rosen said, right? He said, we are loving those who love us and giving them what they love about coming into our stores. Sounds to me like Nikki Saunders gets something that many former JC Penney CEOs did not understand, love the one you’re with, even if it really just is one that is a foundation you can build on the more unlike you, your core customer is the more important this becomes. That’s my point of view. Anyway, thank you for listening to this audio episode of dial P for procurement, but please don’t just listen, join the conversation and let me know what you think on this topic or others. I can take it. Let’s work together and figure out the best solution until next time. This is Kelly Barner for dial P for procurement on supply chain. Now have a great rest of your day.
Intro/Outro (18:23):
Thank you for joining us for this episode of dial P for procurement and for being an active, a part of the supply chain. Now community, please check out all of our shows and events@supplychainnow.com. Make sure you follow dial P four procurement on LinkedIn, Twitter, and Facebook to catch all the latest programming details. We’ll see you soon for the next episode of dial P four procurement.
