Shunning customers can be a delicate business
In case you were wondering whether our new rich-get-richer culture will have an effect on morals and values, check this out: Analyzing Customers, Best Buy Decides Not All Are Welcome.
Who are the unwelcome customers? Coupon-clippers, bargain-hunters, rebate-scroungers. Some of them are misers; some of them look for loss-leaders because they have a (now entirely justified) vendetta against Best Buy; but I bet most of these "devil" customers just can't afford all that pricey merchandise, yet they want to keep up with the Joneses. In other words, Best Buy now officially wants to shun poor people, while targeting the new legions of moneybags:
Store clerks receive hours of training in identifying desirable customers according to their shopping preferences and behavior. High-income men, referred to internally as Barrys, tend to be enthusiasts of action movies and cameras. Suburban moms, called Jills, are busy but usually willing to talk about helping their families. Male technology enthusiasts, nicknamed Buzzes, are early adopters, interested in buying and showing off the latest gadgets.
Staffers use quick interviews to pigeonhole shoppers. A customer who says his family has a regular "movie night," for example, is pegged a prime candidate for home-theater equipment. Shoppers with large families are steered toward larger appliances and time-saving products.
The company hopes to lure the Barrys and Jills by helping them save time with services like a "personal shopper" to help them hunt for unusual items, alert them to sales on preferred items, and coordinate service calls.
Meanwhile, "To deter the undesirables, it is cutting back on promotions and sales tactics that tend to draw them, and culling them from marketing lists." In other words, shunning them. It's a cutthroat world, but not since the Jim Crow days have I heard of a company actually attempting to shun customers as a business strategy. Really, what's going on here?
I remember my last trip to Best Buy, coupla years ago, to buy a new CD player. I am not a "Barry", so needless to say I bought the cheapest one of the lot, and was thereupon practically thrown to the ground and kicked about by the well-trained employee because I didn't want to join in their warranty scam. I suspect you all have had similar experiences. It's a creepy operation, now getting creepier.
Need I add that this newly upscale operation is still called "Best Buy", and their logo is still a yellow bargain price-tag?
posted by Mark D. @ 1:39 AM |
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14 Comments:
I have been to Best Buy and I have bought goods at best buy. And yes they always try to sell you there service contract. I never take it but I also never felt I was thrown to the ground and kicked. ( Possible exageration Mark? ) There customer service has sucked forever so your post is no revelation. But if you can sit there with a straight face and tell me that someone with a $100 bucks walks in there store and wants a $60 dollar DVD player, they don't want that buisness? Give me a break. Why don't you talk about the minnesotans that they employ or for that matter the americans all over the country they employ? Thats right, you'all on this blog only see the evil in everything. I read the article and it sounds to me they want to eliminate the scumbag scammers not some schmuck buying a DVD player.
OK I'll talk about the Minnesotans they employ: Best Buy has outsourced most IT operations to Accenture.
As for your point that they really do want the business of some poor schmuck buying a DVD player, they had already announced last March that they were moving their image distinctly 'up-market', which is code for "Poor schmucks please shop elsewhere."
I will post good news when I find it. Never fear!
This reminds me of the time that I thought I'd attempt to pick up an ethernet crossover cable. The guy who attempted to assist me swore up and down that there was no such thing and that I'd need a couple of regular ethernet cables and a hub/switch in order to do what I wanted to do. Ugh. Of course when the guy's working part time and probably making less than $7.00/hour, I can't really complain too much. Do you suppose that the Best Buy employees will see a pay raise when the company pushes it's focus toward Buzz, Barry and Jill?
I doubt it.
Best Buy can suck it.
The only thing getting their warranty is worthwile on is cell phones, which break all the time anyway.
Microcenter, bitches!
Good strategy. Sell more to the people who pay more. There are two issues in the way they are trying to do it though.
First is the fact that while this strategy may help prop up earnings in the short term, its not a long term strategy. Consumers are becoming more and more informed and particularly electronics customers. The internet has made competative shopping relatively easy and as such, mirgins are being squeezed.
Second, while they are targeting this market segment of "barrys and jills" they aren't doing anything to differentiate their offering. Unless they have a plan to offer some unique value proposition to this segment they will continue to see their share shrink. Particularly as people tend to model different buying models at different times. For example I may only buy CDs that are discounted, marked down for intro or marked down for clearance. This makes me undesirable to BB. However, I may be willing to pay top buck to get an iPod for Xmas. In this sense they covet my business. The issue is that if they have excluded me on CDs, they won't get an opportunity to pick up my looser, higher margin business.
Of course, I could be wrong. Byerly's and Lund's have pursued this model and are very effective at capturing upscale clientale that will overspend on food. However, walking into Byerly's is a different experience than walking into Rainbow or Cub. Best Buy doesn't strike me as upscale though, even the name makes it a value contender.
Lastly there is the question of where this strategy fits in terms of market leadership. Conventional thinking says that to be a leader an org can focus on operational excellence which is what best buy has done in the past. (Better bulk purchases, distro etc.) It can focus on growing customer relationships/intimacy, which is more consultative than retail typically allows, or it can be innovative. This doesn't strike me as the later.
So far as the folks commenting on the outsourcing of the IT dept. Its a good move for BB. They are not in the IT business and spent too many cycles trying to be. And just because a job is outsourced doesn't mean no one local is hired. That's just silly. Its also proven to be a good financial move and has eliminated alot of risk in performance. Look for Target to follow suit (opps sorry Target'rs) in the next couple of years.
Anyway, interesting idea. Got some real potential, but I suspect that BB can't pull it off. (That doesn't mean its not a good idea.)
Last comment: How is this different than Circuit City's strategy?
At the risk of starting a civil war...I am an entreprenuer and a buisnessman myself. I don't see anything inherently flawed or evil in BB's strategy. Every decent business has to figure out who their target market is, what they want to sell them and how. Barrys and Jills - it's just marketing-speak for you and me. It isn't like they won't sell you something cheap if that's what you want. If their sales tactics get too annoying, it will eventually piss off customers - again like you and me - and they will self-correct. While it might not sound too enlightened, BB is certainly under no obligation to target one market over another. They are obligated to their shareholders to optimize profit.
Anonymous and Chris, but the WSJ article says this: "Mr. Anderson's new approach upends what has long been standard practice for mass merchants. Most chains use their marketing budgets chiefly to maximize customer traffic, in the belief that more visitors will lift revenue and profit. Shunning customers -- unprofitable or not -- is rare and risky." So it *sounds* like they're doing something other than just upscaling: they're actively trying to get rid of certain bargain-hunting customers. What do you think? Are there other merchants doing the same thing?
Anyway, I'll start the civil war later, but my knee-jerk reaction is that this is symptomatic of the new Bushite world of worsening economic inequality.
Oh yeah, Chris: I don't think Barry and Jill are supposed to represent "you and me", at least not in the Best Buy training module. It sounds like they represent suburban men with money, and "soccer moms" with money (I work with a soccer mom who lives paycheck-to-paycheck, I doubt she'd qualify as a "Jill"). Nothing wrong with focusing on them, I guess, as a rational business strategy, but what sucks is that now bargain-hunters like me now feel unwelcome there.
Yeah, but... when's the last time anybody actually felt WELCOME upon walking into a Best Buy? I take this to mean not that BBC is working to alienate part of the buying public, but to stop alienating a few key segments of it.
Me again.
Mark Customer segmentation is nothing new. Again, look at Byerly's, look at Starbucks, coffee is cheaper at SuperMom's...
What I see different here is something that has been perculating for a while, and rather than creating economic inequity, its eliminating it.
For example, been to Vegas lately? Used to be that if you dressed well, carried around a lot of chips, and looked busy you could get comp'd pretty well without a big investment in actual play. The records were really only as granular as
"Customer ABC bought 2k in chips cashier #8"
"Customer ABC played $20 blackjack table 53 position 2 at 2:00"
"Customer ABC played $20 blackjack table 53 position 2 at 3:00"
"Customer ABC played $20 blackjack table 51 position 5 at 5:00"
"Customer ABC cashed out $1940 cashier #12"
Cashier goes, hmmmm - $20 blackjack player 4 hours of play, didn't lose much but in the fat part of the bell curve, We need to keep this guy in the casino before he takes all that cash and goes to another casino...
"Sir, can I offer you dinner for two and tickets for our 2nd run show?"
Now the analysis on your play looks like, "over last 4 visits 15.9 hours ABC wagers $405/hour all blackjack, plays tight with a factor of 4% edge. $16/hour player." And as you cash out they say "Thank you." But they don't really mean it.
They just have enough info now to decide to let you stand at someone else's table and free up space for a player who will hand over more $$$ faster.
What they are doing is removing the inequity that was there before. I promise, anyone that plays in a way that hands them $100/hour will get the dinners and shows. They don't care where you are from, what color you are or who you like to bump uglies with.
Apparently BB thinks they have what amounts to a relevation in terms of customer understanding. With debit cards replacing cash, you have to allow for the posibility they might.
...so what you're saying is that Best Buy 1.0 was able to size me up as a thirtysomething male who knows the difference between Surround Sound and Dolby 5.1. Well-groomed but not fashionable. Fit but not a health nut. Okay income, but not a VP. And they could sell to me based on that.
-but-
Best Buy 2.0 can do all that, plus check their own records and see my Wells Fargo Gold check card has been used at their store 4 times in the last 13 months, and I've bought nothing but "Gymkata" from the $4.99 bin, printer cable, and "Girls Gone Wild," so no matter how well I dress that day, I'm screwed?
Maybe, but that still doesn't address the fact that a store is not a casino.
We can talk about technology removing iniquity all we want, but it's really just shuffling it around. That casino is about maximizing the interface between my ass and their chair, weighted by the rate my money moves. And their data helps them do that. Best Buy is about having the things I want to buy, at the moment I will buy them. I don't believe their data does help them do that.
For one thing, I'm in Vegas for a few days; Best Buy is down the street. I might need 6 trips in 15 months to be sure I want (and can afford) to drop $2100 on that plasma flatscreen with all the trimmings. They assume that past performance is an indicator of future performance in such a way that they can afford to EVER turn me away if I don't fit the right profile.
Who's gambling now?
ZenViking I think we're close to agreement. My point is that BB must think they have a new way to segment. I believe they probably do, but I'm not conviced its good enough to be actionable, and even conceding that, I'm not sure they can execute.
I do believe its a strategy likely to fail this time. I also believe that its a strategy that will be done right by someone else and be successful.
anonymous: but the Best Buy strategy is not about *letting* me stand at someone else's table, it's about kicking me out of the casino and making it clear I'm not welcome back! As for market segmentation, yes I know, I know. But Byerly's did not begin as an edge-of-town bargain grocery store, offering discounts and rebates left and right. They deliberately catered to the status-seeking types from the get-go. What Best Buy is doing is analagous to Cub Foods no longer accepting coupons or WIC, so as to attract a higher-spending clientele.
But what bugs me the most is that we working-class folks have been pressured by consumer culture to "keep up with the Joneses", buying nice TV's, computers, a bookcase full of DVD's, etc. And in order to do this we've either had to run up a huge credit card debt or figure out how to bargain-hunt (usually both). Now, Best Buy is telling us to go away, shop at Radio Shack or something. In fact, they seem to be saying "fuck you" to the very market segment that built their empire. Nothing new I guess, but it's still fairly disgusting.
As a new employee of Best Buy I have had an intimate experience with Best Buy's training model and their new focus. Skeptical myself of Best Buy's motives I thought the training would be interesting. BB is becoming a company that places focus on the customer not selling product. We do not, or are trained not to, ignore any customers whatsoever. Everyone is important and developing a realtionship to gain customer loyalty is a priority. Employees, however, are introduced to a "cult" culture where they are treated well and have fun. This however does not extend to lackey employees who are cut at first opprotunity. Best Buy expects its elmployees to be smart and business savvy and it does this as part of the training (which is not about profiling customers). I think what they are doing is risky but previous research on customer satisfaction showed that change was needed and they are doing just that. Jack and Jill stores may not be popular but much of what BB is doing to take on this transition will introduce new good ideas, and good ideas are always good.
Comment:"Ray" will completely change this debate but I will not divulge now.
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