An Insight

WIDE-RANGE PRODUCTS:- Retailer of consumer electronics, home office products, entertainment software, appliance and related services.

BUSINESS ORIENTATION:- •“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: Constantly adding new stores for better services. THIRD: 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.

BEST BUY

ELECTRONIC RETAILERS (CURCUT

CITY)

ELECTRONIC RETAILERS (CURCUT

CITY)

MASS MERCHANT (WAL MART AND

TARGET)

HOME IMPROVEMENT

SUPERSTORE (LOWE’S AND HOME DEPOT)

DIRECT TO CONSUMER

(CRUTCHFIELD, SONY AND J&R)

DEALERS, WHOLESALE CLUB,

RETAILE STORE

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:-

13%

14%

15%

16%

17%

18%

2003 2005

15%

18%

MARKET SHARE

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 University’s

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

8.20%

1.90% 0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Converted Non Converted

Sales

NEW CUSTOMER CENTRIC BUSINESS MODEL:-

2. CONVERTED STORES-PRODUCT MIX PROFIT - 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.

39%

32%

19%

6%

Product Mix Profitability

Electronics

Home office

Entertainment and software

Appliance

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 - Venture into new international market particularly to China and

Canada.

4. PROFITABILIY - 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 Buy’s 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 Buy’s customer segment do you fall into? Would Best Buy’s customer centric focus on your segment induce you to shop and buy more often at a Best Buy’s store?

QUESTIONS FOR DISCUSSION

3. How can Best Buy’s customer segmentation scheme be leveraged online at BestBuy.com?

4. Do you believe that Best Buy’s approach to its devil customers is the correct approach? Should the company be more aggressive in dealing with these bad customers.