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BEST BUY: USING CUSTOMER CENTRICITY TO CONNECT WITH CUSTOMERS

“So much of our business success comes down to understanding consumer behaviour,” explains Joe Brandt, a store service manager at one of Best Buy’s newest stores. “What we do is we try to keep our ear to the railroad tracks. In essence, we listen to the customer to be able to change on a dime when a customer wants us to tailor that experience a certain way and provide certain shopping experiences and certain services.”

“Consumers look at a lot of different things,” Joe added. “They look at brands, shopability of the store, how easy it is to navigate the store, how pleasant the employees are, price, and how we take care of the customer.” Overall there are many factors that “customers look at when they’re making a purchase decision.”

Best Buy is the world’s largest consumer electronics retailer with 1,172 stores, 140,000 employees, and $35.9 billion in revenue. Its U.S. and Canadian market share is almost 20 percent, far ahead of rivals Wal-Mart and Costco.

Best Buy operates superstores which provide a limited number of product categories with great depth within the categories. The retailer sells consumer electronics, home office products, appliances, entertainment software and related services. In addition to its U.S. and Canadian stores, Best Buy has recently opened stores in China and has announced plans to open stores in Puerto Rico, Mexico and Turkey. Best Buy also offers its products online through bestbuy.com, and design and installation services through Geek Squad and Magnolia Audio and Video.

Best Buy began as The Sound of Music, a small specialty audio retailer, in 1966. A tornado severely damaged one of its stores in 1981. Instead of closing the store for repairs, Dick Schulze, the owner, had a tornado sale in which more goods were brought in from its other stores and prices were slashed. The sale was so successful that it was repeated the following two years. “When the tornado hit, we decided to market to the community as a whole, and get electronics out there to everybody. We geared ourselves up to win by understanding what consumers want in technology,” said Joe Brandt. In 1983, The Sound of Music changed its name to Best Buy and opened its first superstore.

The company continued to grow as the consumer electronics category exploded in the 1980s and 1990s. Based on consumer feedback, Best Buy moved away from the traditional sales approach in 1989 by eliminating commissioned sales representatives. This move was embraced by customers, but questioned by some suppliers and Wall Street analysts who thought it would reduce sales and profits. Best Buy’s approach was successful at generating growth in stores and revenues. However, company expenses increased and profits declined. When growth of the consumer electronics market slowed and mass marketers like Wal-Mart, Target, Costco, and Sam’s Club became competitors, Best Buy considered changes to its approach.

Best Buy began to differentiate itself from the mass marketers by offering more services, delivery, and installation. Instead of selling individual products, it concentrated on selling entire systems. The acquisition of the Geek Squad to provide in-store, home and office computer services and Magnolia Audio and Video to provide complete audio and home theater systems reflect these changes. These additions significantly increased profit and insulated the company from discount store competition. Responding to customer needs and competitive changes was an important part of Best Buy’s strategy.

When Dick Schulze stepped down as CEO, his successor, Brad Anderson, began looking for new ideas to continue the company’s growth. He invited Larry Seldon of Columbia University to present his theory of “customer centricity.” Seldon’s theory suggested that some customers account for a disproportionate amount of a firm’s sales and profits. Anderson adapted the theory to try to understand the...
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