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Best Buy’s Quest to Master Customer Centricity

BY Marc Millstein

Best Buy is probably the most-frequently cited example of a retailer committed to a true customer-centric strategy for cementing long-term customer loyalty.

By the looks of it, its revenue growth, which jumped more than $10 billion in just the past three years to $35.9 billion in 2006, underscores the on-target success of the company’s strategy. But listen to John Thompson, senior VP and general manager of BestBuy.com and you know that while growth has been enormous and earnings enviable, the job of learning how to cater to today’s customers is far from over and also far from easy.

Nearly all long-held assumptions about customers’ shopping habits can be discarded at worst and must be vigorously updated and revamped at best.

“The store is no longer the first proof point with the consumer,” Thompson said during the opening keynote he delivered at the Technology and Operations Store Summit in Las Vegas in October, hosted by Chain Store Age and Retail Technology Quarterly.

“You must engage consumers before, during and after the sale. Consumers are changing the way they want to integrate with your brand, so you need more of a compass instead of a map,” he noted.

For Best Buy—and one might suggest other retailers that want to be successful in the long run as well—the practice of how a retailer views, interacts and seeks to attract customers is changing from an environment of what might be termed a “standard operating procedure” to one better viewed as one creating and embracing a culture based on “adaptive” operating procedures.

For example, while most retailers focus on product selection, mix and even customer profiles in a rather static manner, Best Buy views the recipe for success as what it terms the “Co-Creation Experience.” It is a continuum of offerings, services, brands, targeted marketing and item mix. All are continually reviewed and changed as needed, and mesh with offering customers exactly what they want.

This means on the purchase side, Best Buy integrates its online sales, in-store kiosks, call centers, subscription services and in-store associate help and sales assistance to result in a customer who has access to the tools he or she wants and then can interact and complete a purchase in whatever manner best fits his or her needs.

It also means offering store pick-up, home delivery, a “Geek Squad” to handle installation, an entrance into online community and social-networking sites and a strong emphasis on creating what could well be called a customized store or online experience on a mass scale.

IS Capability Transformation Objectives

FROM TO
Complex solutionsProject focusedCustom-developed softwareMany partnersMulti-project deliveryMultiple projectsCost-of-entry focusedThe “Hairball”Short-term tactical view Simple, integrated platformsService focused“Vanilla” solutionsFew strategic partnersRelease management and disciplined governanceFocused and nimbleTCO focusedSunset systemsMedium-term, strategic-view driven by Business Operating Blueprint

In striving to master customer centricity—a vision Best Buy knows holds much more potential than it has even come close to achieving—the retailer is relying on several key elements:

Customer insights: Best Buy truly uses information it gathers on customers to better understand shopping behavior and needs on a much more granular level than is typically the case;

Prioritizing resources: Because the store and its associates are better equipped to know who their best customers are, they can also commit the staffing resources needed to help the shoppers who will benefit most from such interaction;

Empowered employees: Best Buy is committed to a rigorous recruitment, selection and performance regimen that in the end results in better employees and in placing associates in the roles that best fit them and the goals of the retailer—driving sales; and

Support functions: Best Buy is now relying on price-optimization tools, tailored market assortments and a widening selection of private brands to set itself apart and create that special bond with its most desired customers.

If anyone doubts the prowess and success of these and other efforts, Thompson noted that Best Buy now sells “one out of every four flat-screen TVs, projection TVs and cameras,” and that the retailer is continuing to expand its growth in North America—while some others, he noted, are going in the opposite direction—and is also opening stores in the Eastern Hemisphere, including China. And, he added, much more expansion is now being planned.

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CompUSA may get a new look

BY CSA STAFF

ADDISON, Tx. After opening a new format store last month, CompUSA may be changing the format of its other stores, depending on customer demand and product interest.

According to reports, the elements found in the prototype store, located in Texas, will be incorporated into other CompUSA locations across the United States.

The nearly 7,700 square-ft. relocation site includes an Apple shop featuring Mac computers, iPods and Apple accessories, and a full-length LCD TV wall.

Additional expansions include extended gaming, which includes an entire wall devoted to the Nintendo Wii, PlayStation3 and Xbox 360 gaming platforms, plus a PC gaming setup to test equipment and play new titles.

While businesses can get their share of support with a specialized services section, all consumers can visit the store’s redesigned IT support area.

“This new store aligns CompUSA’s vision to better serve its three core customers, the technology enthusiast, educated professional and small and medium businesses,” said Gabriela Villalobos, the retailer’s sales and operations evp.

CompUSA announced in April that it would narrow its focus to three core customer groups rather than try to serve a mass audience.

The move was part of a comprehensive restructuring, initiated last February, that included an overhaul of senior management and the closure of half its store base as the privately held chain looked to improve sales and profitability.

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Walgreens withdraws from CVS provider plans

BY CSA STAFF

DEERFIELD, Ill. After many months of talks over low and below-market payment rates by CVS Caremark for four prescription plans, Walgreens has withdrawn as a pharmacy provider from the plans.

Patients affected include members of prescription benefit plans managed by CVS Caremark for ArcelorMittal, Johnson Controls, Progressive Casualty Insurance and Wisconsin Education Association Trust.

Most of the affected members live in Illinois, Indiana, Michigan, Ohio and Wisconsin.

Trent Taylor, president of Walgreens Health Services, the managed care division of Walgreens, released the following statement:

“This is not where we wanted negotiations to lead,” he said. “We’re sorry that our pharmacy patients and CVS Caremark’s clients are caught in the middle, and we’ll do all we can to ensure a smooth transition for our patients to another pharmacy. Meanwhile, we’ll continue to work on resolving this issue with CVS Caremark.

“Leaving a benefits plan is an extraordinary step for us, but it demonstrates how extraordinarily low our payments were from CVS Caremark. We can’t continue accepting reimbursement rates that are drastically below market, while offering patients needed special services such as 24-hour pharmacy access and drive-thru pharmacies.”

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