Thursday, April 19, 2007

Best Buy vs Circuit City:Customer Centric

CRM is the last course of my MBA life and I am enjoying this course. It makes me think from three angles : Strategy, Marketing and IT. It also gives me an opportunity to integrate what I have learnt earlier. The assignments involve 12-15 minute individual presentations (a lot of conceptualization involved) followed by a 10 min Q&A session (that really tires me out)! But I am enjoying this course coz I like the cases (cases on telecom,retail and airlines) and the teaching style of the prof Louis Gialloreto ( He initiates discussions and gives real world instances!).

One of cases that we discussed was of Circuit City vs Best Buy
In North America, if you want to buy consumer electronics, the first two names that strike your mind are obviously Best Buy and Circuit City.

As a part of the CRM course, we are analyzing both the companies and the difference in the strategy employed by each of them.Best Buy is doing well thanks to its Customer Centric Strategy. The use of real time data and replacement of "hunches with facts" has shifted the the company's focus from pushing gadgets to catering to customers.

There were quite a few interesting articles to read.The bottom line that these articles want to indicate is that "not all customers are profitable ones. Some are very lucrative to deal with, while others cost more to sell to than the business is worth."

Best Buy
understood this pretty well. It soon figured out segments that made the most money and then realigned its stores to meet the needs of customers. It empowered employees to focus on their angels ( high potential customers) so that they spend more and increase their share of wallet (SOW).

Best Buy identified its customer needs and classified them into some highly valuable segments:

Barry: Affluent professionals who want the best technology and entertainment experience

Jill:: Busy suburban moms who want to enrich their children's lives with technology and entertainment

Buzz: Active younger males who want the latest technology and entertainment

Ray: Family men who want technology to improve their lives—practical adopters of technology and entertainment ( price conscious)

Storefront: Small-business customers who can use Best Buy's products and services to enhance the profitability of their business.

Carrie: Young single women

Helen and Charlie: Empty nester

Then based on sales and demographic data they tailored their customer location to that needs.

On the other hand, Circuit City fell behind in the race. Initially, Circuit city had got it all right. It was the first company to introduce the POS. It was one of the first retailers to allow consumers to check local store inventories online, and to purchase products online and pick them up or return them in stores. But it failed to make the best use of the tons of data that it had in its database.

There was also this article from the book on Return on Customer

Some interesting stuff !

"As a starting premise, it's important to distinguish between your customer's need and your product's attribute or feature. In fact, different customers often want the same attribute or feature in order to satisfy very different individual preferences. One person might buy a high-performance car, for instance, because he wants to drive fast, while another might buy the same high-performance car because he wants people to think he drives fast.

Three basic types of insight can help you anticipate what your customer needs: memory, editorial inference, and comparisons with other customers. Your memory of a customer's past choices or preferences is the simplest and most direct method of anticipating her future needs. When she rents a car and doesn't have to specify the car model, credit card, or insurance options, the car rental firm is using its memory of her past transactions or the profile she specified in order to anticipate her. If a florist's customer sends flowers to her mother on her birthday, the florist can remember the date and anticipate her need for flowers the next year.

A second way to anticipate a customer's need is to use your memory of the customer, as above, but to couple it with some type of content or "editorial" categorization. The fact that a customer celebrates her mother's birthday with flowers means she might want to celebrate Mothers' Day, too, or perhaps some of her other relatives' birthdays. Because a customer buys music CDs she might be interested in CD cleaning solutions or CD players. If a customer buys Italian suits, he might be interested in Italian loafers. The fact that a customer has bought business books on enterprise growth and relationship management might mean he's interested in buying Return on Customer.

Third, you can anticipate a customer's needs by comparing this customer with other customers. Every customer is unique and individual, but customers have similarities as well. Almost everyone who has rented Movie A has also liked Movie B. People who like books by this author also tend to like books by that one. People who wear this type of clothing also tend to drive this type of car. Your goal in making such comparisons is simply to do a better and better job of anticipating what it is that any particular customer needs"

I just came across this interview of Best Buy CEO Brad Anderson .

An interesting statement that caught my attention was when the CEO says "In our world the way you win the game isn't the price of the TV - which is about the same for all retailers - but the experience you give customers once they are in our stores" Talk about CEM ! :)



At 8:17 AM, Anonymous knowledge skills and abilities sample said...

It was also highlighted in some of the earlier statements for the students to put every possible guides and probabilities which are said and considered to be important.


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