Explanation of marketing initiatives for Best Buy Read the case below and answer the following quest

Explanation of marketing initiatives for Best Buy

Read the case below and answer the following questions

1 From what internal and secondary sources did Best Buy
acquire the data that helped it develop its customer centricity initiative?

2 How did Best Buy database marketing to better satisfy its
customers?

3 How are the data gathered by Best Buy useful in customer
relationship marketing?

Case: Best Buy Uncovers Angels in the Market

Best Buy Company, Inc, is retailer of consumer electronics,
home-office products, entertainment software, appliances, and related services
One of the company’s goals is to make life easier and more fun for consumers
To meet that objective, the company’s retail environment focus on educating
customers on the futures and benefits of technology and entertainment products
The Minneapolis- based firm operates more than 1,200 retail stores across the
United states and Canada under the names Best Buy, Futures Shop, GeekSquad, and
Magnolia Audio Video, as well as an outlet store on eBay

Best Buy operates in the highly competitive consumer
electronics retail industry and must compete against other electronics
retailers, specialty home-office retailers, mass merchants, home improvement
superstores, and a growing number of direct-to-consumer alternatives It also
competes against independent dealers, regional chain discount stores, wholesale
clubs, video rental stores, and other specialty retail stores There is also
increasing pressure from online sites, which offer entertainment as downloads,
as well as pay-per- view cable television companies

Best Buy collects data on nearly every transaction made,
rain check issued, and call-center problem resolved for 75 million customers
To discover what its customers want and need, the company developed a database
that incorporated information from 19 customer touch points including point if sale,
and enhanced it with Experian’s INSOURCESM consumer marketing data to develop a
complete picture of its customers T gained further insight by using purchase
histories to study its customer’s current as well as their future needs through
segmentation analysis This allowed Best Buy to develop and identify
new-customer segments, to better understand existing customers, to more
precisely target promotions, and to identify key locations for expansion

Best Buy collects data from its transactions and from mailing
lists; it also has demographic information from local census numbers, surveys
of customers, and targeted focus groups In 2004 it launched a customer loyalty
program called Reward Zone, which today has more than 24 million members from
whom the company hopes to gain valuable insights Best Buy retains Larry
Selden, a professor at Colombia University’s Graduate Schools of Business, as a
consultant Selden argued that losses produced by what he calls
“devil” customers can wipe out profits generated by
“angels” Through its consultation with Selden and its data analysis
with Experian, Best Buy identified its angel and devil customers The angels
were customers who bought high-definition TVs, portable electronics, and newly
released DVDs without waiting fro markdowns or rebates The devils bought
products, applied for their rebates, and then returned the products and bought
them back again at returned-merchandise discounts Best Buy then categorized
its angel customers into these segments:

? The
Small Business customer (“BBfB”): These customers use Best Buy’s
products and services to enhance the profitability of their business

? The
Young Entertainment Enthusiast (“Buzz”): These are active younger men
who want the latest technology and entertainment They are early adopters who
are interested in buying and showing off the latest gadgets

? The
Affluent Professional (“Barry”): These customers wan the best
technology and entertainment experience, and they do not mind spending to get
the best, regardless of the cost They are enthusiasts of action movies and
cameras

? The Busy
Suburban Mom (“Jill”): These customers want to enrich their
children’s lives with technology and entertainment They are busy but willing
to talk about helping their families They are smart and affluent but usually
avoid electronics stores because the products intimidate them
“Jills” are typically the main shopper for the family and will make
purchases based on staff recommendations

? The
Tech-Savvy Family Man (“Ray”): These are family men who want
technology to improve their lives They are practical adopters of technology
and entertainment

Best Buy’s new “customer-centric” operating model
focuses on these five key segments The Company launched the initiative with 67
stores, each of which would analyze the demographics of its local market and
then choose one or two of these groups to be their focus Each store would then
stock merchandise for and include elements designed to appeal to the targeted
segments Executives believe that this model offers customers a richer in-store
experience, including better shopping assistance, and also provides more of the
goods and services that they want It also empowers employees to recognize
unique sets of customers and to build offerings and experiences to meet their
needs In fact, employees receive training in how to differentiate the
customers types and how to help each

To encourage its angel customers, Best Buy sends out
associates with pink umbrellas to escort the Jills to and from their cars on
rainy days Personal Shopping Assistants have been provided to help Jills from
the moment they enter the stores till they leave via the express checkout For
Barrys, there are comfortable couches for watching large TV’s hooked up to
high-end sound systems; even popcorn is included to add to the atmosphere
Magnolia Home Theater specialists provide personalized expert advice For
Buzzes, Best Buy has set up video game areas with leather chairs and game
players hooked to mammoth plasma-screen TVs, and TVs and games just a short
walk from the area

To discourage the undesirable devil customers, Best Buy is
cutting back on promotions and sales tactics that tend to attract them, and it
is also removing many of them from mailing lists The company is also enforcing
a 15 percent restocking fee on returned merchandise to discourage customers who
return items with the intention of repurchasing them at ” open-box”
discounts Best Buy is experimenting with reselling returned merchandise over
the Internet, so the products do not reappear in the store where they were
originally purchased

Best Buy has already converted 85 stores to the new
customer-centered model and plans to convert all of its US Best Buy stores
within three years The 67 stores that underwent conversion in 2005 have
reported of the year in which they operated under the customer centricity
model Compared do an average store sales gain of 19percents at other US
Best Buy stores, this is a considerable gain However, due to onetime
conversion costs and higher expense structure, the selling, general, and
administrative expenses for the converted stores for the same period
Nonetheless, Best Buy believes that the profitability of stores operating under
the customer-centered platform will improve over time, which is similar to its
historical experience with new-store openings

 

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