An Analysis on Best Buy's Customer-centric Innovation

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 North America market. The event of Sept 11th 2001 "sapped demand across the industry" and thus "sent Best Buy's stock plunging". In addition, other competitors such as Wal-Mart and Cosco increased their electronics offerings and improved their market. Meanwhile, Best Buy faced pressure from Wall Street to make a 20% annual growth rate. Because of the market saturation, the company had to seek for solution to maximize its revenue and customer-centric approach appeared to be the best choice.

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

Hobbs, C. D. (2002). Customer-centric Markets Are a Must. Power Economics, Vol. 6 Issue 6, p. 12. Retrieved from Business Source Premier database

Smith, S. (2004). Best Buy Gives Details on 'Customer Centricity'. TWICE. Retrieved from http://www.twice.com

Stopper, B. (2006). Best Buy: Customer-centric innovation. HR. Human Resource Planning, Vol. 29, Issue 3, pp. 34-37

An Analysis on Craigslist's Ongoing Success Story

Craigslist's Ongoing Success Story is about an interview in which CEO Jim Buckmaster of Craigslist.org answers Jessi Hampel's questions about the website craigslist.org. During this interview, Buckmaster emphasizes on the concept that customers guide the business. According to him, businesses should focus on serving customers rather than on maximizing profit because when a business serves its customers well, it will make profit. Take craigslist.com as an example. The design of the website is simple so that its users can post their advertisements easily. Because the users do not want to see other features, craigslist.com does not have other features. In words of Buckmaster, "everything you see there today is the result of user feedback". Despite its simplicity, this website has been staying well in top ten most visited websites in the U.S. and remaining profitable since 1999.

In addition to the concept as discussed above, the article also reflects some changes in marketing. In advertising area, internet helped create many forms of advertising. Before the introduction of internet advertising, we had advertisements on publications, radios, TVs, posters or so forth. The introduction of internet advertising brought us other types of advertising such as banner placing, text advertisement, commercial e-mails, commercial clips on media networks … etc.

In the area of distribution, internet marketing helped shorten the distance from sellers to buyers. In the pre-internet era, we could only received the product we wanted only if it were available in the local stores. Thanks to internet, we are now able to place an order directly to the provider and received the product we want within the agreed time no matter where the provider is.

Third, in the area of business ethics, internet requires businesses to take ethical issues more seriously. The introduction of Web 2.0 gave internet users more controls over the contents published over internet. A criticism on a conduct can widespread over the world and destroy a marketing effort within a few minutes. Therefore, the businesses are getting more cautious with their activities to protect their reputation. For instance, on the website craigslist.org, a certain number of flags for an advertisement will remove that advertisement automatically. In words of Buckmaster, "inappropriate ads usually come down within a few minutes".

From my viewpoint, the concept that customers guide the business shows some advantages because it reminds businesses to value their customers. Customers are not only people who pay for products a company produces but also those who vote for or against the company conducts. Moreover, if a company knows how to listen to its customers effectively, it will have its own customers fuel its innovation. For example, when my previous employer lost many public telephone agents for our competitors, we had thought that it was because we paid them low commission. However, when we did a survey to collect the agents' ideas, we found that the main reason for their leave was the problems with our support services. Thanks to these feedbacks, we knew how to maintain our relationship with the agents.

Nonetheless, this concept also reveals some drawbacks because over-powerful customers will cause many problems. In the list of customers will be there some people who work for our competitors but we do know. If our competitors use these "customers" in order to make the chaos, it will be difficult for us to handle the situation. For example, craigslist.com removes a post automatically when the number of flags on it is reached. If a competitor asks they staff to flag hundreds of valid posts, the craigslist.com will face problem. Over-powerful customers may also make a company's strategies more market-driven thus prevent the company from developing market-driving strategies.

The introduction of World Wide Web led to initiative of internet marketing with business websites and commercial emails. Then, the introduction of Web 2.0 give some controls to the internet users and facilitated marketing through social media, social networks, online games, search engines. We are now can access to internet via smart phones and other handheld devices and mobile marketing catches the attention of businesses. Thought TV is still the dominating mean for marketing so far, the strong growth of internet penetration will make internet the dominating marketing mean in near future.

Reference:

Hempel, J. (2007, May 15). Craigslist's Ongoing Success Story. Business Week Online, p. 18. Retrieved from: http://find.galegroup.com/.

Chrysler LLC SWOT Analysis

CHRYSLER SWOT ANALYSIS

Strengths

Reputation for V-8 Hemi engine

Chrysler has been known as the lead of horsepower race since 1951 when the company unveiled its V-8 Firepower engine, also called Hemi engine. Hemi has been recognized as sign of powerful machine for over 50 years. For this reason, Hemi was also Chrysler's profit machine. Though Chrysler announced to limit the use of Hemi for its new products recently, the reputation that Hemi created for Chrysler will be supportive to the company's auto engine initiatives.

Domination of minivan market

Chrysler has been the dominant of minivan market for over 25 years. Although the auto market has shrunk recently and many players have tried to expand their market share, Chrysler and Dodge still hold over 40% share of U.S. minivan market. This position would bring the company advantages over the competitors if the Chrysler gives more focus on this market.

Focus on customer

Chrysler is the first auto company having Chief Customer Officer. Even though customer care was not a strong point of Chrysler before, the company has give more focus on customer care by appoint Douglas Betts to the Chief Customer Officer. This move is a significant improvement in customer services and able to create great competitive advantage.

Weaknesses

Small and declining market share

Despite the dominant position in minivan market, Chrysler's overall market share is still small and declining. In 2009, the company's market share was only 9.2% (The Wall Street Journal, 2010), dropped from 11% of the previous year. Though the company gained a bit improvement in market share by September 2010 (9.5%, The Wall Street Journal, 2010), this is still too small in comparison with other automakers.

Management problems

It is said that the merger with Daimler in 1998 had made Chrysler "a German-inspired mess" before Cerberus Capital Management acquired it in 2007. Additionally, analysts notice that the new owner does not have experience in auto industry and "doesn't want to be in the auto business; it is in the money business". The acquisition by Cerberus is thought to be "the beginning of the end of Chrysler as a recognizable automaking entity altogether".

Quality problems

Chrysler's vehicles usually present in the list of worst vehicles ranked by Consumer Reports and J.D. Power. This will definitely have negative affects on the customer's buying decision.

Opportunities

Partnership with Fiat

The strategic partnership with Fiat would create opportunities for Chrysler. Though minivan and SUV are Chrysler's strong points, Chrysler needs to have smaller car in order to penetrate to South America or Asia market. Whereas, Fiat is well know for its smaller cars. Thus, the partnership with Fiat would be helpful for Chrysler to produce small car for new markets.

Increasing demand for green cars

The green car market is on the rise and forecast to top 3 million by 2015, of which U.S. market will account for 55%. As manufacturing green cars is one of the Chrysler's focuses, this will be a great opportunity for the company to improve its position.

Threats

Disappointed dealers

Under the control of Daimler, the dealer consolidation initiative "had drained their passion for selling cars" because they had to "take more products than they could possibly sell". The new owner has not resolved the problem and this would be a big obstacle for the company's business.

Reliance on U.S. market

Chrysler is known to reliant on U.S. market as more than 90% of its sales comes from North America. Therefore, the company would be very vulnerable with the declining demand and fierce competition in this market.

CHRYSLER'S MARKETING POSITION

Chrysler LLC is known as one of the 30 world largest automakers whose focus is on U.S. market where the company dominates the minivan segment. Chrysler's Hemi has been the symbol of powerful vehicles for over 50 years. Nonetheless, the company has encountered management problems that have disappointed the dealers. In addition, product quality has not been significantly improved and its small market share has kept shrinking. In an effort to improve the situation, Chrysler has chosen Fiat as a strategic partner. Chrysler hoped that this partnership would help the company penetrate to small car market in U.S. and other countries. Moreover, the partnership would also support the company's focus on green cars for those the demand has been on the rise.

As analyzed above, Chrysler has a weak marketing position in the auto market so far. In order to improve the company marketing position, it is recommended that Chrysler should take prompt actions to improve the dealership policies and give more attentions to quality issues. Successfully resolving these problems will help the company handle other issues better and create new competitive advantages.

Reference:

Colvin, G. (2008). Chrysler. Fortune, 157(7), 50-54. Retrieved from Business Source Premier database

Flint, J. (2003). Chrysler's Marketing Mistakes. Forbes.com - Magazine Article. Retrieved from http://www.Forbes.com

Flint, J. (2009). GM, Chrysler, Toyota: How They Doin'?. Forbes.com - Magazine Article. Retrieved from http://www.Forbes.com

Helliker, K. (2009). Chrysler's Nagging Quality Issues. The Wall Street Journal. Retrieved from http://online.wsj.com

J.D. Power: Annual U.S. Hybrid Sales Beyond 1 Million by 2015 (2010). Hybrid Cars. Retrieved from http://www.hybridcars.com

Sauer, A. (2010). Chrysler Hemi: Semi-Retired?. Brandchannel. Retried from http://www.brandchannel.com

Strong, M. (2009). Chrysler Celebrates Minivan Dominance with 25th Anniversary Edition Models. The Detroit Bureau. Retrieved from http://www.thedetroitbureau.com

Taylor III, A. (2008). Can Chrysler Survive?. Fortune, 158(3), 110-117. Retrieved from Business Source Premier database.

Wallace, E. (2009). Why Chrysler Failed. Business Week. Retrieved from http://www.BusinessWeek.com

Welch, D. (2007). Could Chrysler Go Bankrupt?. Business Week. Retrieved from http://www.BusinessWeek.com

Welch, D. & Matlack, C. (2009). Fiat Won't Be Chrysler's Savior. Business Week. Retrieved from http://www.BusinessWeek.com

Winter, D. (2005). Chrysler’s Hemi is Profit Machine. Wards Auto. Retrieved from http://www.gminsidenews.com