Best Buy to tout plan
Developer of new sales initiative explains
As Best Buy Co. convenes its annual
meeting today at its Richfield headquarters, one business consultant
will have a big imprint on the affair without even showing
Best Buy executives will brief shareholders
on a cutting-edge, customer-focused initiative they are rolling
out across the chain's 619 U.S. stores. "Customer centricity''
would transform retailing for the nation's largest purveyor
of consumer electronics.
The inspirational force behind the
program is Larry Selden, a business professor emeritus from
Columbia University in New York.
Selden first introduced Best Buy
senior managers to the approach in a leadership talk two years
ago at the company's headquarters. He then hooked on as a consultant
to help the company design and implement the program at 33
"Larry has a bracingly different
point of view,'' said Best Buy chief executive Brad Anderson,
adding the business professor has made a cogent case that a
company's financial success is intimately tied to what it really
knows about its customers.
Before, Best Buy focused much of
its research and marketing on product categories. Now, a key
component under the new retailing pitch: Best Buy is identifying
different customer segments, researching their lifestyles and
their shopping needs.
The program also gives store employees
greater freedom to tailor products, services and packages to
meet those needs.
"The heart and soul (of Selden's
viewpoint) is you have to go much deeper'' in researching and
understanding the customers' lifestyles, Anderson said. "We
have to get into why people are doing things,'' he added.
Yet Best Buy has tapped the brakes
on its rollout plans for customer centricity, saying it's fine-tuning
the program. Last week, Best Buy executives said they plan
to put the program in place at 70 to 75 California stores this
fall. The company had said earlier it planned spend some $50
million to convert 110 stores in five states by year's end.
Best Buy's initiative is crucial
to its efforts to fend off companies like discount giant Wal-Mart,
Dell Computer and other rising electronics retailers, the company
has said. Although it's posting strong earnings gains now,
discounters and direct retailers are looking to carve out a
growing niche of the key products that have fueled those gains,
including digital cameras and high-end televisions.
Best Buy sales topped $24 billion
last year, more than twice traditional electronic retailing
rival Circuit City's total. But electronics accounted for 9
percent of Wal-Mart's discount store sales last year — or
nearly $16 billion. At direct marketer Dell, sales passed $41
While many companies have adopted
bits and pieces of customer centricity, Best Buy is among the
first retailers to put all the parts together, Selden said.
Those parts are: defining customer
segments, identifying attractive shopping propositions for
those customer groups and having well-trained employees to
serve the various customer segments. The ultimate goal for
the company: Reap exceptional sales and profits.
"No other large-scale retailer like
Best Buy is embracing it holistically,'' Selden said.
Said Anderson: "I think other retailers
will be looking to see what we are doing.''
For his part, Selden said his ideas
about customer-focused business have been evolving over the
past 20 years. As a consultant for a wide array of businesses,
from banks and credit card companies to convenience stores,
Selden discovered that a majority of many companies' profits
come from a relatively small percentage of their customers.
Another thing Selden discovered:
Many companies gathered geographic and demographic information
about their customers but rarely could connect that information
with the success or failure of their marketing campaigns. "I
observed companies spending massive amounts on marketing with
no apparent idea of what kind of return they were getting,''
Since those discoveries, Selden has
pushed his corporate clients to drill down to better know their
customers, then hold managers and employees accountable for
truly serving them. "Once you do that, the whole world changes,''
said Selden, co-author of the 2003 business book titled "Angel
Customers & Demon Customers.''
Selden noted, for example, that Royal
Bank of Canada has embraced "customer centricity'' in its entirety
and has seen a boost in its business.
In Best Buy's case, Anderson said
he realized his company needed to re-examine its core business
and growth strategy following the company's failure with its
acquisition of music retailer Musicland Corp., which it dumped
Said Selden of Anderson: "I admire
him for being innovative. It takes a courageous leader to do
what is required for the best interests of the customers and
employees and shareholders.''