Why the Crossed-Out Price Mattered
In 2012, JCPenney tried to replace its familiar cycle of marked-up prices, sales and coupons with simpler, everyday pricing. The strategy, associated with new CEO Ron Johnson, was meant to make the price on the tag the price customers would actually pay—without waiting for a sale or searching for a coupon.
But a sale price does more than lower a bill. A crossed-out price gives shoppers a comparison point: the higher number suggests what an item is “worth,” while the lower one feels like a win. Economists call this reference pricing—judging a price against another price rather than evaluating it in isolation. A shopper who once saw a shirt reduced from a larger tag could now see the same purchase price without the visible proof of a discount.
The Deal Was Part of the Product
Coupons and promotions also gave customers a small task to complete: spot the offer, choose the right time to buy, and feel they had outsmarted the regular price. Removing that ritual changed the shopping experience, not just the arithmetic. Even when a straightforward price was competitive, it could feel less rewarding than a marked-down price.
That distinction helps explain why simpler pricing did not automatically win customers over. Many shoppers were accustomed to using sales as a signal of value, and the new system offered fewer familiar cues that an item was a bargain. The company’s sales fell sharply during the transition, and JCPenney moved back toward promotions and coupons.
The episode shows a tradeoff for retailers: transparent prices can reduce confusion, but promotions can create excitement and make savings easy to see. If customers have learned to measure value by the discount on the tag, removing the discount can make an unchanged purchase price feel like a worse deal—even when the number they pay is no higher.
