It was August $2012$ and the release of second$-$quarter earnings was looming for Ron Johnson, the chief executive officer of J$.$C$.$ Penney, one of America$$s first department stores. Johnson, HBS $84,$ had intimated to Wall Street that the retailer$$s second$-$quarter results were likely to miss expectations again, following dismal first$-$quarter results that revealed a $$163$ million loss, same$-$store revenue down by $19\%,$ and the number of customers shopping in J$.$C$.$ Penney stores down by $10\%.$ These results were particularly disheartening given the company$$s radical repositioning of its business model and its brand in February $2012.$

The centerpiece of the repositioning initiative was a switch from J$.$C$.$ Penney$$s existing high$-$low pricing strategy, in which the retailer ran frequent sales to offer customers deep discounts off its higher list prices, to a new strategy the company dubbed $$Fair and Square$$ pricing. Fair and Square was meant to simplify the pricing structure by offering great prices every day, with less frequent promotions. The company touted that its new pricing strategy offered $$no games, no gimmicks$$ and invited consumers to $$do the math$$ to see how it regularly offered them cheaper prices with less hassle. Moving away from high$-$low pricing was a massive shift for J$.$C$.$ Penney. In $2011,$ the year prior to the shift, the retailer spent $$1\mathrm{.}2$ billion to execute $590$ different sales events and promotions$2$ and generated $72\%$ of its $$17\mathrm{.}3$ billion in annual revenue from products sold at steep discounts of more than $50\%$ off the initial list price$\mathrm{.}3$ Wall Street initially supported the company$$s plans for change. Investors, who sent J$.$C$.$ Penney$$s stock soaring up $24\%$ following the announcement of the new pricing plan, viewed it as a way for J$.$C$.$ Penney to escape the ruthless downward spiral of escalating price promotions that gripped America$$s retailers struggling to survive the economic recession.

But by mid$-2012$ Johnson was under enormous pressure to turn things around quickly as the all$-$ important back$-$to$-$school and holiday shopping seasons were imminent. Was Johnson$$s new pricing strategy misguided or was it just a matter of time before customers fully embraced it$?$