An Insight

WIDE-RANGE PRODUCTS:BUSINESS ORIENTATION:-

Retailer of consumer electronics, home office products, entertainment software, appliance and related services.

CLICKS-AND-MORTAR business model. 940 retail stores in US and Canada. Operation include Best Buy, Future Shop, Geek Squad, Magnolia Audio Video and outlet store in e-bay.

ACCOLADES:-

Fortune 500, Global 500, Most Admire and Global Most Admired List.

BUSINESS STRATEGY:Customer centric. Efficient enterprise. Win with service. Win with entertainment.

4 WAYS BUSINESS PLANS:FIRST:

Converting more stores to customers centric operating model.

SECOND: THIRD:

Constantly adding new stores for better services.

Expanding and strengthening service such as Geek Squad and home installation.

FOURTH:

Boosting employee retention in order to deliver better customer experience while increasing productivity.

ELECTRONIC RETAILERS (CURCUT CITY)

ELECTRONIC RETAILERS (CURCUT CITY)

DIRECT TO CONSUMER (CRUTCHFIELD, SONY AND J&R)

BEST BUY
DEALERS, WHOLESALE CLUB, RETAILE STORE

MASS MERCHANT (WAL MART AND TARGET) HOME IMPROVEMENT SUPERSTORE (LOWES AND HOME DEPOT)

ONLINE DOWNLOAD AND ON DEMAND CABLE SERVICE

TO OUT DO COMPETITORS BY MEANS OF:1. Working hard to stock more products 2. Offer unique services.

RESULTS:18% 17% 16% 15% 14% 13% 15% 18%

MARKET SHARE

2003

2005

CUSTOMER CENTRIC STRATEGIES:1. DATA GATHERING AND COLLECTION.

To discover what customers really want and need. Establish consumer marketing data that gives an insight to the Company customer purchase pattern to develop customer current and future needs through segmentation analysis. This help to develop and identify new customer segments, better Understanding existing customers, more precisely target promotion and identify key location for expansion.

2. REWARD ZONE.
-

Customer loyalty program grew up to 6 million members. Additional data analysis is gather which give an understanding its customers.

3. ENGAGE WITH EXPERT.

-

Engage with Larry Selden, professor at Columbia Universitys GSB. She classify customers into 2 categories.

2 TYPE OF CUSTOMER:1. DEVILS.

This customer can wipe out company profitability. They bought product, applied for rebate, return the products and then bought them back again as returned merchandise discounts items.

1. ANGEL
-

Customer who bought without waiting for markdown or rebates. 5 type of angel:1. small business customers 2. Young entertainment enthusiasts (BUZZ) 3. Affluent professionals (BARRY) 4. Busy suburban moms (JILL) 5. tech-savvy family men (RAY)

NEW CUSTOMER CENTRIC BUSINESS MODEL:1. FOCUS

Identify 5 key customer segment. Each store allow to stock merchandise according to its customer focus. Enhance customer wide range items and excellent customer relationship.

2. CONVERTED STORES
Sales
10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Converted 8.20% 1.90% Non Converted

NEW CUSTOMER CENTRIC BUSINESS MODEL:2. CONVERTED STORES-PRODUCT MIX PROFIT

Product Mix Profitability
Electronics 39% Home office Entertainment and software Appliance

6% 19%

32%

Improve services through increase Geek Squad agent by 5,000 people. Reward Zone program grew 20% to 7.2millions customers. 36% customers regards excellent performance.

NEW CUSTOMER CENTRIC BUSINESS MODEL:3. CONTINUING INNOVATION.

Provide customers with latest technology. Establish own product such as external hard disk and connecter that allow customer to channel TV programming to their PC.

CHALLENGES OF CHANGE:1. HIGHER CONVERSION COST

Selling, general and administrative expenses are higher that the non conversion store. Operating income for converted store lower than unconverted store.

2. ORGANISATIONAL ISSUES
-

Traditional product focus could not meet changes required by customers. Overestimate capacity and moves to fast for establishment of new business model. Its found that most stores although success implementing changes, but none success in all areas.

3. CONTINUE SUPPORT FOR CONVERSION

-

Encourage staff to work flexible hours at any locations. Increase productivity. Create an incentive system for store employees. Happier employees lead to satisfying customer experiences.

CHALLENGES OF CHANGE:4. SMALL BUSINESS CUSTOMERS

Partnership with Microsoft to make it easy their customers to access the best technology for their business.

FUTURE STRATEGIES:1. FULLY CONVERSION AND NEW STORES

By 2007, all stores will be converted into customer centric models. Additional 90 stores at North America and additional 200 Magnolia Home Theater locations. 900 new Microsoft certified professional will be trained to increase services and as its Geek Squad Agent.

2. ONE STOP SOLUTION

-

Offering digital music subscription, digital cable and VoIP.

3. EXPANSION
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Venture into new international market particularly to China and Canada.

4. PROFITABILIY
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Estimate earn $34 to $35 billion for 2007, that is additional 10%13% in 2006. Revenue growth 3% to 5%

QUESTIONS FOR DISCUSSION

1. Comment on Best Buys customers-centric strategy. Is this a viable approach for breaking out of the commodity status associated with electronics retailing? 2. Buzz, Barry, Jill or Ray. Which Best Buys customer segment do you fall into? Would Best Buys customer centric focus on your segment induce you to shop and buy more often at a Best Buys store?

QUESTIONS FOR DISCUSSION

3. How can Best Buys customer segmentation scheme be leveraged online at BestBuy.com? 4. Do you believe that Best Buys approach to its devil customers is the correct approach? Should the company be more aggressive in dealing with these bad customers.