To explain how Joseph R. Harris Co. is changing, Stephen Spiro, the new president, draws a little chart.

Price goes up one side - budget, moderate, better.

Fashion goes across the bottom, on a scale from one to four. Four is contemporary, trendy, like Bloomingdales, where Spiro used to work, or like Ann Taylor, the wildly successful specialty chain owned by the same company that owns Harris - Garfinckel, Brooks Brothers, Miller & Rhoades.

"We used to be right here," says Spiro, pointing to where one and two on the fashion scale bisect the budget-to-moderate price range.

"We're going here." A three in fashion, moderate in price.

Spiro's seemingly simple lesson in market positioning is the key to his plan to turn around the one unprofitable link in the retail chain of Garfinckel, Brooks Brothers, et. al.

For the Washington-based merchandising conglomerate as a whole, first-half profits are up 80 percent over last year, yet Harris remains in the red. The parent company does not break out results for each of its divisions, but does say the Harzfeld's specialty stores in Kansas City are "not contributing satisfactorily" to profits and Harris is "not contributing."

Spiro was hired away from Bloomingdales in New York to run Joseph R. Harris about a year ago, at about the same time the last members of the Harris family left the company.

J. Robert Harris Jr., former chairman of the chain founded by his father, remains on the board of Garfinckel, and the family controls about 10 percent of the company's stock, the largest single block.

His sons, J. Robert Harris Ill and Donald Harris, previously were president and executive vice president of the company, which is now run by Sprio; Catherine Meyers, vice president for stores; and Hugh Krause, vice president for finance.

Now that the last members of the family are gone, so is the Joseph R. Harris name. A few days ago, the stores were renamed Harris and Friends.

The "Harris" that remains in Harris and Friends is not a venerable Washington merchant but a mythical male created by a Toronto advertising agency.

A blond man whose face is never shown, the new "Harris" appears in advertisements and store promotional materials surrounded by his "friends" - models symbolizing the customers the company wants.

Women 22 to 45 who buy fashionable clothes at moderate prices are the target audience, explained Meyers.

The grandmothers and preteenw who once also shopped in the Harris stores won't spot themselves in the ads and won't find what they're looking for in the store either.

"We were catering in the same stores to too many different customers," from young juniors to 50-and 60-year-old women, said Spiro. "We had no identity."

As a result, a decision was made to ignore the grandmothers and teenagers and budget customers and "to narrow in on the customers we want," he explained.

The range of merchandise is not as broad as in the past, but for the target customer there is more depth. There are also higher prices as a result of abondoning budget merchandise and moveing into more fashion-oriented - and more expensive - merchandise.

Moderate prices at Harris and Friends means fall blazers in the $65 ato $75 price range compared with $120 to $150 at Ann Taylor, Meyers added.

The new merchandise will be in all of the chain's stores this fall.

Interiors will be changed shortly in the units at Iverson Mall in Maryland and Springfield Mall in Virginia, and a new store opens in mid-September at Lakeforest Mall near the company's Gaithersburg headquarters.

Two Harris stores in the Philadelphia area have been closed, and the two others there are being run with extensive advertising and different merchandising. Plans are to remodel the rest of the 23-unit chain over the next two years, but Spiro acknowledged that some of the present locations may not be right for the new look and could be closed.