In 2004, Best Buy initiated its customer-centric innovation. This initiative quickly became one of the best practices for customer-centric innovation in the market, especially in retail industry.
The key factor leading to Best Buy's customer-centric innovation would be the company's vision that is stated "Making life fun and easy". This vision is supported by values among which "Show respect, humility, and integrity" and "Unleash the power of our people" had the greatest impact on the initiative. To show respect to its customers, the company decided to use the concept of "customer in charge" in 1989. The idea behind this concept was "customer do not want to be sold, they want to buy" and customer-centric approach perfectly fitted this concept. Moreover, in 1989, Best Buy began to put their sales forces on salary instead of paying commission. This change created a need for sustaining the sales force's productivity. As the customer-centric innovation encouraged Best Buy's people to contribute more to the company, it helped Best Buy unleash its people's creativity to serve customers better.
Another reason for Best Buy's customer-centric innovation is that it met the company's demand for sustaining and increasing the company's position in the marketplace. One of Best Buy's weaknesses was its dependence on
The successes that Best Buy gained during the innovation indicated that customer-centric innovation is one successful approach to Pareto's rule. At Best Buy, customer-centricity bases on careful market segmentation and detailed analysis on buying patterns of each segment. Before implementing the approach, the company had noticed that "31% of customers drive 80% of the company's revenue". Best Buy also pointed out the five different segments those drive the majority of its revenues. These segments were named Barry, Jill, Buzz, Ray and Mr. Storefront. Based on this analysis, Best Buy redesigned its stores and re-allocated its resources to meet the demands of key segments in the location of the stores.
However, customer centricity does not necessarily mean redesigning entire stores to appeal to certain narrow segments. As of its definition, customer centricity refers to "an approach to doing business in which a company focuses on creating a positive consumer experience at the point of sale and post-sale". Therefore, this concept focuses on the key factor that underlies marketing activities: customer satisfaction. Best Buy redesigned their stores to serve its target customers better. However, the critical factor for its success is its improved talent system that helped recognize and reward employees for their unique talent rather than the redesigned stores.
Instead of investing millions dollars in redesigning entire stores, Best Buy could have done differently to be customer-centric. For example, Best Buy could spare some space at each store for technical consulting purpose. If customers are technical people, they will not drop by this space to seek for advice. If one customer needs help with their problems, the technical consultants will show them possible solutions and give recommendations. This technical space would be equipped with models and simulation applications that make the recommended solution visible and understandable to the customers. By doing this, Best Buy could have considerably saved redesigning costs for the whole store while improving customer experience.
Customer centricity is an innovative approach to marketing. It is necessary for businesses to create competitive advantage over their competitors. Because it is market-driven, the approach itself is not too risky. However, the way Best Buy implemented this approach in reality may show certain risks. Specifically, redesigning its stores to appeal to certain narrow market segments may put the company at some risks as follows:
The company may lose customers for its competitors when the demographic description of an area changes. Because each store is designed to appeal to the certain segments in the area, if these segments get smaller while others get bigger, the store will lose customers.
Huge amount of money may be spent for redesigning to catch up with demographic change to attract the profitable segments. Unless the company is willing to give up a number of customers to its competitors, it will have to spent lots of money updating the store design to fit the new demographic description of the area.
As demographic description is subject to change, Best Buy's customer-centric approach may cause some possible problems. First, this approach may lead to the inflexibility in staff allocation. For example, the customer assistants at a store designed for Jill and Buzz will focus on their Jills and Buzzes rather than other customers. In certain cases or on certain occasions, the increase in number of other customers such as Barry, Ray or small business will cause the temporary personnel shortage.
Second, the problem would be the low customer satisfaction. Because of the customer-centric approach, each store gives much focus on predetermined customers and hence low satisfaction is very likely to happen. At the present, CustomerServiceScoreBoard.com ranks Best Buy's customer service 133 out of 315 companies. This rank is remarked "disappointing" because there are much more complaints than positive feedbacks. Unless Best Buy quickly takes appropriately corrective action to improve the implementation of its strategy, this practice will result in other impacts on the company's operations.
In an article titled "Customer-centric Markets Are a Must", C.D. Hobbs wrote, "Customer-centricity is a philosophy that can guide a company to success". Best Buy has been the outstanding practitioner who put this philosophy into actions to sustain and increase the company's position in the retail market. Even though the efforts has paid off and the company has tended to expand this innovation to all the store system, Best Buy's approach to this philosophy has shown some risks and problems that the needs corrective actions of the company to improve the effectiveness of implementation.
Reference:
Best Buy - Customer Ratings and Comments (n.d.). In Customer Service Score Board. Retrieved from http://www.CustomerServiceScoreboard.com
Boyle, M. (2006). Best Buy's Giant Gamble. Fortune. Retrieved from http://money.cnn.com
Customer-centric (n.d.). In Business Dictionary. Retrieved from http://www.businessdictionary.com/definition/customer-centric.html
Datamonitor (2008). Best Buy Co, Inc. Retrieved from Retrieved from Business Source Premier database.
Fair Isaac Corporation (2009). Best Buy Plugs into the Power of Customer Centricity. Retrieved from http://www.fico.com
Smith, S. (2004). Best Buy Gives Details on 'Customer Centricity'. TWICE. Retrieved from http://www.twice.com
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