Best Buy Company as a Market Driven Organization

Introduction

Best Buy Company is “a multinational retailer, which provides consumer electronics, home office products, entertainment products, appliances and related services” (“Best Buy Co. Inc.: Company description” par.1). This company carries out its operations through the domestic and international segments. In this paper, the marketing activities of this company are going to be looked at and the extent to which this company is ‘market driven’ is going to be evaluated.

How Best Buy Target their Market and use the Relationship Marketing Strategy

According to Mason, in an economy in which spending by the consumer is low and credit is becoming more and more tight, a large number of retailers are seeking ways to have any customers. When considering its customers, Best Buy Company classifies them as “angels” and “devils” (Mason par.1). In not more than the last ten years, Best Buy did away with the practice of group marketing and paid attention to customer segmentation as well as relationship marketing in order to ensure leveraging the company’s resources on the customers that are considered to be the most important (Mason par.1). It is reported that the “results prove the strategy” (Mason, par.2). As on one hand a large number of electronics retailers have suffered many setbacks, the Best Buy Company has continued to set records. For instance, in the year 2008, during the first quarter, the company topped the expectations of Wall Street. It is reported that this company goes on to steal the market share from its competitors such as Wal-Mart and Circuit City. The company’s success is attributed to “its relationship marketing to further separate them from the mass market retailers” (Mason par.2).

The company made a discovery that out of one and a half million customers who come to their stores each day, a large portion of the profits are received from a small group of customers that are deemed to be very important and such customers, according to them, are referred to as the core customer or the “Angels”. On the other hand, there is a group of customers that are referred to by the company as the “Devils”. This “represent a larger group of customers who are more focused on returns, discounting, browsing and not buying, and eating up associate’s time to get educated, then purchasing elsewhere” (Mason Par.3).

Rather than utilizing the usual approach which involves mass retailing to just drive the customers into the company’s stores, the marketing strategy put in place by Best Buy puts focus on angels. The company engages in the identification and setting up relationships “with the Angels through one-to-one strategies” (Mason par.4). In order to carry out this, the company has engaged in further segmenting of the Angels into five separate groups. These groups include “Jill’s, Barry’s, Buzz’s, Ray’s, and Mr. Storefront” (Mason par.4). Mr. Storefront refers to a small trader; Barry represents a wealthy tech enthusiast; Jill represents an active suburban mother; Ray represents a family man who is conscious about price; and Buzz represents a youthful “gadget fiend” (Mason par.4).

By making use of these segments, Best Buy “fits the ‘format’ of the store to the predominant segment of ‘hot-zips’ in the store’s geography”(Mason par.4). It is reported that, in the recent times, a Fortune article gave illustration of how best the researchers of Best Buy explore the geo-demographic data in order to undertake determination of whether or not a certain location is supposed to be tailored to, for instance, Buzz or Ray. It is reported that close to forty engage in aiming at Barry – “in them you’ll find a separate department of home-theater systems, expert salesmen, and specialists in mobile electronics” (Mason par.4). There is also featuring by the Jill stores of the “personal shopping assistants or PSA” that have the awareness of the way of steering “a homemaker to the right digital camera for her family” (Mason par.4). More over, the Buzz stores contain a wide range of the video games. Best Buy has made a discovery that focusing on a small number of people that matter the most give the impression of being “counter intuitive to the conventional industry practices of just building any kind of cume, but those companies that embrace this practice will find that they will survive the downdrafts better and thrive more when times are good” (Mason par.5).

Best Buy Sales Market share and profit

It is reported that the NPD analyst, Stephen Baker, pointed out that Best Buy “is still the largest non-manufacturer of windows notebooks online and gained 2 percent in share in 2011, and is the largest retailer of Apple notebooks” (Bhasin par.1). It is also noted that this company accounts for “One-in-three dollars” which is spent on the flat-panel televisions and increased the revenue share it received in 2011 (Bhasin par.2). Moreover, in 2011, the company engaged in selling more tablets as compared to any other website or retailer in the market. The company’s share in the smartphone sales increased by fifty percent in 2011 and “it is the single largest non-carrier outlet for smartphone sales” (Bhasin par.4). Moreover, it is reported that Best Buy’s share is high in DSLR as well as in “point-and-shoot cameras” and the company is still gaining the unit share in the headphones as well as in the MP3 players (Bhasin par.4).

It was recently reported that the Best Buy Company’s financial first quarter of 2012 profit fell 26% on restructuring charges while the company engaged in starting to implement the turnaround plan. The company’s “adjusted earning and revenue topped the Wall Street expectations” (“Best Buy profit falls” par.1). The company’s shares jumped up by seven percent, to $19.45 in the premarket trading (“Best Buy profit falls” par.2). It was also reported that the net income reduced to one hundred and fifty eight million dollars or forty six cent per share within the period of the last three months that ended on May 5th, 2012. This figure is down from two hundred and twelve million or fifty three cents, in one year that has passed (“Best Buy profit falls” par.4). It is reported that the company’s revenue increased by two percent to $11.61 billion, “aided by an extra week” ((“Best Buy profit falls” par.5). The tablet sales as well as mobile phones sales increased. It is also pointed out that the “International revenue fell on weakness in China and Europe” ((“Best Buy profit falls” par.5).

Brand Equity and Efficiency

It reported that the Best Buy Company encountered fresh and increased competition sources as well as rapid product commoditization (“Using Innovation to fuel growth” par.1). The company had recognition of the need to come up with a strategy that would help in driving growth and creating linkages to the company’s innovation and brand. It is reported that ‘Prophet’ worked together with this company in identifying the business opportunities as well as brand-building growth opportunities that would, in a simultaneous way, engage in driving the business impact and set up advantageous brand equities. Prophet engaged in undertaking quantitative research which tested the company’s brand equity model, and made use of new categories in mapping extendibility as well as identification of the elements of “core brand equity” (“Using Innovation to fuel growth” par.2).

The research undertook validation of the “brand equity model” and assisted in identifying “key brand value proposition and purchase drivers” (“Using Innovation to fuel growth” par.3). Additional consumer exploration brought in several platforms of high potential growth as well as categories that had the capacity to offer support to the core equities as well as brand promise of the company, and to additionally ensure differentiating of the company from other companies it competes with. In order to take advantage of such opportunities, Prophet set up a 5-year innovation-roadmap in order to assist the company have the realization of the potential growth it has (“Using Innovation to fuel growth” par.3).

The result of this was that the company was able to engage in launching a new category towards the end of 2009; including “Smart Pens, brain games, robots, learning systems, handheld games, and other electronic gadgets” (“Using Innovation to fuel growth” par.4). This has attained much success, and serves to represent a seventeen billion dollar opportunity. This fresh category, whose launching was carried out online and all the stores, “was the first category launch of this scope in several years”(Using Innovation to fuel growth” par.5).

Considering efficiency, it is pointed out that, together with the home energy audits, this company will go on selling “energy efficient appliances, electronics and, for consumers who have electric cars, help set up the electric-car charging stations in a garage” (“Best Buy goes efficient” par.5). This is in line with the moves that have been taken by other major retailers such as Home Depot and Lowes that have provided solar packages as well as services that are energy efficient. However, it is pointed out that “this is the first time a consumer electronics chain has jumped into the market” (“Best Buy goes efficient” par.6). This move indeed is welcome since these companies have an opportunity of its kind to reach a very large number of consumers.

Open system view of the organization

It is reported that the Best Buy Company clearly holds a belief that having strong relationships between “energized employees and satisfied customers power sustained profits and growth” (Anderson, par.4). With no doubt, developing and nurturing such relationships, for instance, enabled the company to realize its goals in the financial year 2007. In addition, it is pointed out that the cautious cultivation of such relationships in the coming years would make it possible for the company to take advantage of what is seen as the world of opportunity (Anderson, par.4). In 2007, the company was able to report the earnings of “$1.4 billion in the 53-week period, an increase of 21 percent compared with earnings of $1.1 billion in fiscal year 2006” (Anderson par.5). The company’s revenue growth was attributed to the addition of two hundred and thirty one stores earlier on, encompassing acquiring of two other businesses, and a “5-percent comparable store sales gain” (Anderson par.5).

It is also reported that the company encourages its employees to engage in the political process, professionally as well as personally according to the set policy and law (Best Buy Co, Inc 1). The U.S as well as Federal laws facilitate regulation of particular political activities of the “U.S-domiciled corporations and its employees and certain laws compel disclosure pertaining to engagement with government entities, officials, candidates, and committees” (Best Buy Co, Inc. 1). Failing to abide by these laws, even if such failing is unintentional and brought in by not having awareness about the law, could bring about a legal violation, “civil and/or criminal penalty, and reputational risk to the company” (Best Buy Co, Inc. 1)

Unique Value to Customer

One of the most significant aspects of modeling is the capability to undertake determination of customer value. The Best Buy insights team has set up a “behaviorally, forward-looking customer lifetime value model that may be the most sophisticated of its kind” (“Best Buy plugs into the power of customer centricity” 3). On top of carrying out the measurement of the “transaction-level” profitability, for instance, “the model factors in a host of customer behaviors would tend to either increase or decrease the value of the relationship post-transaction” (“Best Buy plugs into the power of customer centricity” 3). The questions that come in are: Are the customers intense sales channel users? Are they heavy redeemers of rebates? Are these customers heavy returners? Considering such questions, this company gets not just a clear view of its customers, but insight into the way to change the behavior of the customers as well.

Other than customer value, the company’s insight team considers other such factors as “promotional sensitivity” and this is in regard with identifying which customers are promotion-driven and those that are price sensitive; channel preferences and this is in regard with which customers have a preference to interact in store versus online; and the ability to buy and this is in regard with which clients have disposable income.

By Best Buy having a “customer-centric strategy” in place, the company is engaging in shifting a larger amount of resources away from the channels of mass marketing to the marketing streams that are personalized. The company is as well shifting toward customer-driven incentive programs, away from wide-based promotion and price tactics. The company holds a belief that, “given enough trigger responses and customization, consumers will find their own individual paths through the company’s communication streams” (“Best Buy plugs into the power of customer centricity” 3).

It is also pointed out that the speed at which this company is engaging in iterating its “customer-centric strategy” assists in giving an explanation of the reason the company feels comfortable sharing a lot of details with the public. Moreover, there is “a uniqueness factor” (“Best Buy plugs into the power of customer centricity” 3). According to the company’s management, it is noted that “there is a uniqueness to how our customers experience our brand and there is a uniqueness in the way we look at them” (“Best Buy plugs into the power of customer centricity” 3).

Conclusion

As it has been found out in the discussion, Best Buy is a “market driven” organization to a large extent. It has been able to set up marketing objectives that have enabled it to improve its performance. The company has realized the need to identify the few “most important” customers and focused on them because they contributed substantial revenues to the company. The company has also shifted toward customer-driven incentive programs, away from wide-based promotion and price tactics. As even the competition in market goes on to intensify, there is need for the company to continue taking the appropriate measures to ensure they remain ahead of the competition.

Works Cited

Anderson, H. Bradbury. Building relationships: great employees, great customers, 2007. Web.

Best Buy Co, Inc. 2012. Best Buy political activity & government relations policy, 2012. Web.

Best Buy Co. Inc. Company description, 2012. Web.

Best Buy goes efficient, Greek Squad to do home energy audits 2011. Web.

Best Buy plugs into the power of customer centricity 2009. Web.

Best Buy profit falls, but earning top estimates 2012. Web.

Bhasin, Kim. Best Buy is either gaining market share or holding in these key categories, 2012. Web.

Mason, Alan. Super Focus: Best Buy’s Angels and Devils Strategy, 2008. Web.

Using Innovation to fuel growth 2012. Web.