Best Buy’s Quest to Master Customer Centricity

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.