Case Analysis, One-page analysis for the question: How do you evaluate the need to adopt a new strategy when Brad Anderson became the CEO of Best Buy?


9-506-055
REV: OCTOBER 16, 2006
________________________________________________________________________________________________________________
Professor Rajiv Lal with Executive Director Carin-Isabel Knoop and Research Associate Irina Tarsis, both from the Global Research Group,
prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of
primary data, or illustrations of effective or ineffective management.
Copyright © 2006 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
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photocopying, recording, or otherwise—without the permission of Harvard Business School.
RAJIV LAL
CARIN-ISABEL KNOOP
IRINA TARSIS
Best Buy Co., Inc.: Customer-Centricity
Over the years, our most significant advances as a company generally have resulted from periods of stress.
. . . Today, in contrast, we are transforming the company despite being at the top of our game.
—Brad Anderson, Vice Chairman and CEO1
Sometimes it’s painful to be on the cutting edge.
—Matt Monroe, Best Buy Store General Manager, Natick, Massachusetts
With fiscal year 2005 sales of $27.3 billion, Richfield, Minnesota-based Best Buy Co., Inc. was the
leading retailer of consumer electronics, home-office products, and related services in North America;
its operations included the distinct store formats Best Buy, Future Shop in Canada, and Magnolia
Audio Video as well as service provider Geek Squad. For the eight years leading to 2004, Best Buy
had reported double-digit revenue growth each and every year and rarely missed earnings.
But on December 13, 2005, Best Buy missed its third-quarter earnings per share (coming in at
$0.28, not $0.30).2 The company’s stock price fell nearly 12% that day, a loss of $2 billion in market
capitalization. (See Exhibit 1 for financials and Exhibit 2 for stock price history.)3 The poor results
were attributed to the aggressive rollout of 144 new “centricity” stores—revamped retail formats
featuring a customer-centric operating model and designed to offer targeted “value propositions” to
one or two distinct customer segments. The new format was a departure from Best Buy’s winning
formula and required adjustments in interactions among various parts of the Best Buy organization,
including a new set of segment leaders.
CEO Brad Anderson, the driving force behind the move to make Best Buy “talent powered and
customer driven,” was convinced that customer-centricity was imperative for the company’s future.
He saw Best Buy, with nearly 120,000 employees, as a mature retailer headed for a slow decline
unless it reengaged with its customer base. Reflecting upon the third-quarter results, the corporate
team admitted that they did not fully understand why the last set of “centricity” stores had not fared
as well as the pilot ones. Was it a function of poor execution, a flawed model, or just a lag between
implementation and results? To get to the root of the problem would require a review of the pace of
store conversions, the labor model, and the expense structure. How well did the company implement
customer-centricity? Who was in charge of the new strategy, and who should have been? As he faced
the dual dilemma of showing immediate results while changing his organization and developing
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new skills, Anderson noted that the customer-centric strategy was “different enough that it could not
withstand failure to financially perform for an extended period of time.”
Company Background
Best Buy grew from a single high-quality audio electronics store, Sound of Music, established in
1966 by Richard M. Schulze in St. Paul, Minnesota. Schulze used radio advertising and outdoor
displays to lure his initial targets: 18- to 25-year-old male shoppers interested in technology. The
customer base grew as the product mix expanded and technology began playing a greater role in
everyday life. In 1970, Sound of Music revenues reached $1 million. In 1973, a music buff, Brad
Anderson, joined the three-man store as a commissioned salesman. Living in a mobile home after
attending a Lutheran seminary, he took the store job seriously only after making his first sales; from
then on he became addicted to sales.4 Around this time, Sound of Music started acquiring other
electronic stores in the Twin Cities suburbs; by 1978 it had stores in nine locations.
After a tornado tore through Sound of Music’s flagship store in 1981, Anderson and his colleagues
sold off damaged inventory at a bargain “best buy” sale that was very successful and led to a new
corporate name. However, by then, the company’s margins had started to erode as the audio market
matured. To compensate, Best Buy began opening superstores with an expanded product line that
included audio and video equipment, cameras, microwaves, and large appliances. In 1989, as
competitors such as Circuit City (founded in 1949) mimicked the superstore model, Best Buy
introduced a self-service, value-store concept.5 Staffed with a salaried sales force to provide a
pressure-free shopping experience, the new model propelled Best Buy into the second-largest
electronics retailer position behind Circuit City.
Expansion
By 1995, Best Buy was opening on average 35 new stores annually and had emerged as the top
retailer of PCs to home users.6 Best Buy’s rapid expansion was enabled by an encyclopedia of sales
rules that went under the acronym of “SOP,” or standard operating platform. Conceived in the mid-
1990s, the 200-page SOP manual included procedures for virtually everything that happened in a Best
Buy store, ranging from inventory management to customer relations, store administration, and
product sales and services. Its aim was to ensure uniformity of service across the network and help
train a predominantly part-time sales force. “If you wanted to brush your teeth right now, we’d have
a protocol for that,” joked Brian Dunn, president of retail, North America, who joined the company in
1985.7
As its consumer base continued to evolve from informed customers to technological novices, Best
Buy installed information kiosks and populated the sales floor with highly trained service staff. To
cater better to such customers, Best Buy in 2001 acquired Seattle-based Magnolia Hi-Fi, Inc., a highend
audio and video products retailer; in 2002, Best Buy expanded abroad, acquiring a Canadian
electronic retail chain, Future Shop Ltd. Three years later Best Buy integrated 20 Magnolia centers
into the U.S. Best Buy stores and operated over 100 Future Shop stores and 30 Canadian Best Buy
stores, in every Canadian province (see Exhibit 3 for retail square footage data).8 Between 1998 and
2002, company revenues rose from $8.3 billion to $19.6 billion, gross margin hovered around 25%,
and the company’s stock outperformed that of its peers.9 As of November 26, 2005, Best Buy Co., Inc.
operated 796 Best Buy stores in the United States, 119 Future Shop locations, 43 Best Buy stores in
Canada, 20 stand-alone Magnolia Audio Video stores, 13 stand-alone Geek Squad outlets in the
United States, and four stand-alone Geek Squad outlets in Canada.10
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Best Buy Co., Inc.: Customer-Centricity 506-055
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Much of Best Buy’s success was attributed to skillful merchandising and marketing. However, its
blue shirt and khaki-clad sales force (“Blue Shirts”) provided the key competitive advantage. Blue
Shirts were trained, motivated, rewarded, monitored, and measured every hour the stores were open.
At many locations around the country, the sales teams started their day with the “7–3–1”—a
corporate cheer that began by people slightly bending forward, slapping their thighs seven times,
clapping their hands seven times, then rising up, clenching their fists in the air and bellowing “Best!”
Three more slaps on the thighs, three claps—“Buy!” Then one slap, one clap, and “Best Buy, Best Buy,
whoa, Best Buy!” And the encore, “Best Buy . . . Wooo!”11 To foster team spirit and boost employee
retention, in some stores, when a sale was made, a “five-clapper” would occur, five staccato claps
from the general manager (store manager or GM) and whoever else was in the vicinity. Some GMs
yelled “Boom” or sang Elvis tunes over the intercom to acknowledge large sales. Sometimes good
work was rewarded on the spot with $50 restaurant vouchers, a generous incentive to a high schooler
working part time for $8 an hour, or even to full timers making $20 an hour. Blue Shirts could also
buy company stock at a discount. Supervisors’ bonuses were tied to annual departmental and store
performance, along with performance during big sales seasons.
Controlled Revolution
Anderson took over as CEO in mid-2002 after 11 years as president and chief operating officer.12
Despite previous stellar performance, he worried that “Best Buy’s competitive advantage was fading
vis-à-vis mass merchandisers such as Wal-Mart or Target, and online retailers such as Amazon.com
and Dell.” In the past, the competition targeted mainly price-conscious customers, without providing
extra support or services; however, in 2003, Wal-Mart began to push into the higher-end consumer
electronics that had been Best Buy’s most lucrative domain, and Dell was bringing its highly
successful direct-sales model to bear, selling everything from MP3 players to flat-panel TVs along
with its portfolio of brand computers. Competitors imitated many elements of Best Buy’s strategy,
including remodeling of displays, cutting down on back-room storage, and poaching well-trained
Best Buy salespeople. (See Exhibit 4a and Exhibit 4b for an overview of the competition.)
Despite the rise of these formats, Best Buy’s main direct competitor remained Circuit City. With
more than 600 stores in the United States and Canada and online sales, Circuit City offered a similar
array of products, including home-office electronics, entertainment systems, and peripherals such as
mobile computing devices, telephones, and video games.13 Just as Best Buy had adopted Circuit
City’s superstore format in the mid-1980s, Circuit City had copied some of Best Buy’s tactics,
including staffing model and merchandising decisions. Nevertheless, in 2004, Best Buy’s sales per
square foot were still double those of Circuit City.
Meanwhile, consumers were changing again, putting more emphasis on service and support and
less on the technical aspect of products. While most electronics were getting easier to use, their
interaction required specific knowledge that only a fraction of the client base possessed. In addition,
Best Buy research found that about a third of its store visitors left dissatisfied, in part because the
store’s broad focus did not meet their individual needs.14 Since the “one style fits all” approach was
no longer valid, Best Buy determined to understand what individuals sought. “We have to shift our
focus from products to customers and redefine our value proposition,” the new CEO explained.
Anderson’s executive team identified and pursued four pivotal strategic initiatives: “customercentricity,”
“efficient enterprise,” “win with service,” and “win in entertainment.” Of these,
customer-centricity was deemed the most important.
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506-055 Best Buy Co., Inc.: Customer-Centricity
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Toward Customer-Centricity
U.S Best Buy stores sold items in four product categories: consumer electronics, home office,
entertainment software, and appliances (see Table A).15
Table A U.S. Best Buy Revenue by Product Group (% of total revenue)
Product Group FY05 FY04 FY03
Consumer Electronics 38% 37% 37%
Home Office 34% 34% 34%
Entertainment Software 22% 23% 23%
Appliances 6% 6% 6%
Source: www.bestbuy.com, accessed February 4, 2006.
Part of Best Buy’s success came from offering a broad selection of name-brand products
purchased by the company at a significant discount due to its sales volume. The five main suppliers
were Sony, Hewlett-Packard, Toshiba, eMachines, and Samsung, representing nearly 33% of the total
merchandise offered.16
To remain the leading consumer electronics retailer in the United States, Best Buy had to sell more
high-margin products and services or add more stores; however, growth through new store openings
was unsustainable as the company neared market saturation with 1,000 stores in the United States.
Studies had shown that the economic value added by a new store peaked after six or eight years.17
Another option was to sell more to existing customers by developing a better understanding of their
requirements and by lavishing them with attention, service, and know-how.
Best Buy determined that 20% of its customers (“angels”) accounted for up to 80% of sales by
purchasing high-definition TVs and newly released DVDs without waiting for markdowns or
rebates.18 “Devils,” in contrast, were high-maintenance bargain shoppers who asked for price
matching, returned purchases, and bought items with returned-merchandise discounts. Anderson
believed that Best Buy would be better off if it could focus on the most profitable segments and deter
unprofitable shoppers (about 20% of its customer visits were unprofitable).19
Best Buy invited a group of consultants to help foster an “innovation culture” that would enable
the firm to identify and better serve its most profitable customers. The formulation of the customercentric
strategy came on the heels of this work. Launched in May 2003, the strategy was designed to
encourage employees to think and behave as owners and to engage with customers to meet their
unique needs.20 By connecting with customers, offering them a broader assortment and shopping
assistance, Anderson expected to build loyalty with profitable segments and leverage the company’s
existing assets. It was evident to Anderson that Best Buy’s key competitive advantage was “owning
the last 10 feet to the customer.” The only question was how this could be leveraged.
The customer-centric model operated under the assumption that Best Buy was servicing five
major segments that together accounted for 50% to 90% of total revenue (see Exhibit 5). Identified by
shoppers’ demographics, behaviors, and attitudes, each category was assigned a name. For example,
the segment named Barry referred to affluent professional males of 50 years and older. Customers in
this segment tended to be very profitable. Female shoppers were separated into categories depending
on their age and family status (no children, with children, older children out of the house, i.e., empty
nesters). Male shoppers were distinguished by income (ability to purchase), affinity to explore
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Best Buy Co., Inc.: Customer-Centricity 506-055
5
technology (attitude), and types of items they purchased. A separate category was assigned to target
small businesses. Each segment was run by a segment leader whose responsibility was to deeply
understand his or her segment’s shopping behavior and attitude (see Exhibit 6).
The idea behind customer-centricity was to become the customer’s “smart friend” and provide a
“complete solution.”21 Managers believed that Best Buy could fully capitalize on the dominating
trend transforming consumer electronics, namely convergence, only by focusing its sales staff on
providing such solutions. This required salespeople who could demystify the benefits of a wireless
home network, sell customers on the joys of watching a plasma-screen TV, and convince novices of
the benefits from bundling hardware and accessories with software and services such as Netflix.22
Sales associates were continuously trained online or at weekend meetings on the technology and
bundling options. “Selling a solution versus selling a single item is like the difference between a layup
and a three-pointer in basketball,” one salesperson explained. “It’s all about maximizing the
score.”23
In launching customer-centricity, Anderson used an “autocratic set of power tools” and expected
swift support from his top team to execute his vision. Customer-centricity was a “top-down” strategy
that required the stores, the buyers, and the segment organization to work together as never before.
At times, in his role of a “customer-centricity cheerleader,” Anderson had “to be a cheerleader with a
baseball bat.”24 To Dunn, the challenge of instilling customer-centricity in the company was akin to
reengineering “a race car going around the track at 200 miles an hour. . . . People’s fingers get hurt in
that kind of scenario.”
Customer-Centricity in Practice
To test the first version of customer-centricity, the company set up 12 “laboratory stores,”
subsequently rolling out tested concepts in 32 pilot stores, most of them in California. The conversion
to a centricity model involved changes in merchandizing, service, and infrastructure renovations
(such as installation of elaborate home-theater displays). The primary investment was in the labor
model; it involved adding specialized positions, such as Geek Squad agents, home-theater installers,
and personal shopping assistants.25 The model also required extensive training on the customer
segments, to recognize and think about the varying needs of different types of customers and to
identify customers most likely to buy the packages from particular product domains. Blue Shirts were
expected to begin practicing the right behavior ahead of any physical changes to the store floor by
doing “psyche walks” (see Exhibit 7a and Exhibit 7b). The staff had to be able to decide best practice
in the moment and be flawless in that execution, explained Tina Decker, senior vice president of HR:
“We cannot train all our people to do this, but I do believe that it is a skill that can be taught.”
When pilot stores reported performance gains in comparable-store sales double those of other U.S.
Best Buy stores and a gross profit rate higher by about 0.5% of revenue, the company began rolling
out its customer-centricity initiative to an additional 110 stores nationwide. 26
Bringing it All Together
In some instances customer-centricity enabled Best Buy to leverage prior acquisitions, such as
Magnolia and Geek Squad. For example, the Barry segment was intensely interested in the benefits of
technology and had the discretionary income to be early adopters, and the Magnolia Audio Video
room, with a top-of-the-line selection of home-theater electronics and furniture, was a perfect tool to
serve this customer group. Luckily, Best Buy’s acquisition of Magnolia Hi-Fi, Inc. provided access to
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506-055 Best Buy Co., Inc.: Customer-Centricity
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an upscale merchandise mix. Previously, Anderson recalled, “We could get virtually no suppliers of
high-end equipment to let Best Buy sell their products.” At one point, he and the son of Magnolia HiFi’s
founder observed as customers walked back and forth between a Magnolia and a Best Buy store
about 200 yards apart. Anderson thought it would make sense to join the stores. When the idea was
tested, results “just hit the ball out of the park right away.”
Renamed Magnolia Audio Video, the new store within a store offered two product groups—
consumer electronics and home-office equipment—and appealed to the Barry segment and to the Jill
segment, which described affluent women with kids who wanted to control their children’s
entertainment (see Exhibit 8). While home-theater sales to the Barry segment tended to focus on the
technology, in a Jill sales team, a segment team leader explained, “We would talk about the hometheater
experience. When you inspire her with the time-saving value it has in her home, offer a
trendy presentation and design that she did not think would inspire her, she will buy it without her
husband’s approval. We show store managers how to do a display that might appeal to her.”
Stores offering this package were well staffed with commissioned sales personnel, sales support
staff, mobile electronics installers, and two or three managers—a store manager, an audio/video sales
manager, and a mobile electronics sales manager. While Magnolia occupied less than 1% of Best
Buy’s total retail square footage, it generated average revenue of about $6.9 million per store. By the
end of 2006, Best Buy expected to have at least 100 stores with a Magnolia module.
Geek Squad
Store operations changed by making more referrals to other service groups. For example, Geek
Squad service was envisioned as a valuable support for small business and was well suited to assist
the Best Buy for Business (BB4B) segment (see Exhibit 9). Best Buy acquired Geek Squad, Inc., a
residential and commercial computer support service, in 2003 to provide 24-hour computer
installation and repair services. With 7,000 agents, by 2005 Geek Squad was available through every
U.S. and Canadian Best Buy store, providing valuable loyalty-building service to customers both in
the stores and at home. Best Buy planned to add another 5,000 agents in fiscal 2006 and expand their
services to network installation and server maintenance.27 The wide popularity of this service
instigated a discussion of dispatching similar service support teams for Best Buy’s home-theater
installation business.28
Before customer-centricity, customers seeking particular products were simply told where to find
them on the shelf and left alone. Under customer-centricity, Blue Shirts were encouraged to
determine the ultimate use of the product, for example a PC. If it were for business use, the customer
would be introduced to a Geek Squad representative who would help the customer with the optimal
configuration and explain the benefits of other peripherals, such as printers, a high-speed Internet
connection, and so on.
In another illustration, a manager reported how Will, a 19-year-old car audio installer, had
harnessed the possibilities of customer-centricity when a customer came in to have a global
positioning system (GPS) installed. Will noticed that the car was full of PC equipment and that the
stereo, purchased at a Best Buy competitor, was not working properly. Apparently the customer
worked out of his car. Will tweaked the car radio and sought out a Geek Squad partner who found a
way to put the equipment in the car trunk. In the past, the customer would have just gotten his GPS
installed. “And he may or may not have ever come back,” the manager continued, “but he certainly
wouldn’t have the relationship with Will he has today.”
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Best Buy Co., Inc.: Customer-Centricity 506-055
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Frontline Decisions
Customer-centricity called for empowering sales associates to make merchandizing decisions.29 In
the standard-operating-platform world, for example, displays at the end of rows close to the store
entrance had been centrally decided and identical across the nation. Customer-centricity implied
associates could move items around if they felt that doing so would help them sell better. Associates
were trained to approach problems using the scientific method: form a hypothesis about customer
behavior, create an experiment to test it, and examine the results so they could implement new ideas.
“A lot of our employees are high-school students, or people usually without advanced education,”
explained Anderson, “so we started teaching employees the basic financial foundation to the
business.” The point was to make them aware of the impact of decisions within their purview.
“There’s space for them to think differently,” a GM explained. For example, in Pasadena in 2005,
store-level associates had suggested a reconfiguration of the store to better appeal to suburban moms,
moving small appliances down onto lower racks along the store’s main walkway, rather than leaving
them stocked on higher shelves among the major appliances. Within a few months, sales of small
appliances recorded double-digit gains. The employees then planned to create displays that
showcased items such as refrigerators, stoves, and washers and dryers in homelike settings along the
perimeter of the appliance department and to create a child play area.30
Customer-centricity had also empowered the stores to tailor their marketing communications to
new ethnic groups. For example, in certain areas heavily populated by Vietnamese-Americans, Best
Buy could opt to run ads in Vietnamese in the local newspapers or add Vietnamese-speaking
salespeople to work the floor. “The intent was initially that most of the innovation will come out of
the stuff that the stores can do pretty much on their own with variables that they control within the
context of the store itself,” Anderson explained. “If they’ve got a chance to substantiate their
hypothesis, they can move that test into other stores, and if they get enough momentum underneath
that they can make it as a general recommendation for the enterprise.”
The Stores
By 2005, Best Buy operated over 900 stores across the United States and Canada.31 U.S. Best Buy
stores were organized into 70 districts in eight territories. District managers oversaw GMs who
traditionally had been responsible for executing against the SOP but had limited say in
merchandizing and pricing. Only top-performing stores were selected for centricity conversion. “To
be a successful store in centricity,” Dunn explained, “you have to have the basics almost flawless. So
you’ve got to have leadership in place, you’ve got to have talent in place, and you have to know your
SOP and be world class in execution.”
To introduce customer-centricity in the stores, segment leaders worked with merchants and store
organizations to identify those stores that could benefit most from a particular value proposition. The
individual store managers and their respective district managers were then approached with the
results of the lab stores.
Depending on the region, individual stores intended for centricity conversion focused on one or
two major segments. Some segments could coexist in one store, and some could not. While it was
more cost-effective to combine segments in each store, GMs had to be careful to grasp the core
differences between various demographic needs to avoid alienating any customer segment. The Jill
segment, for example—targeting an affluent woman with kids who wanted to control her children’s
entertainment—could not be coupled with a Buzz segment seeking high-energy, loud, exciting,
mature-rated games. On the other hand, Jill and Barry segments could work together, just as Barry
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506-055 Best Buy Co., Inc.: Customer-Centricity
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and BB4B could. GMs could target no more than two segments in one store, so there was a
codependence between assortment choices. Each converted store reported daily sales by segment.
To make any value proposition work, it was up to the store manager to execute the value
proposition. Without overspending on labor, the store manager had to be able to justify a certain
amount of sales force on the floor. The questions Dunn believed good managers posed were, “How
many folks can I afford to have on the floor? When should I have them on the floor? How many
installers can I afford? How much do I need to generate for every dollar I invest to get over the hard
times? You could take it all the way out on everything from how much local promoting can I do, can I
afford to send one of my home-theater pros out to call on a couple of restaurants that have expressed
interest in getting a home theater for their bar?”
The segment leader in each store also played a key role. For example, the segment leader in the
home-theater room had to have a clear understanding of all the elements of a great experience for
both customers and employees. “That ties right directly to the talent box,” Dunn explained, “where
we absolutely have to have the right people in that room. It doesn’t work if we just take somebody
that was working selling television and slap a shirt and tie on them and put them in the home-theater
room. That doesn’t work. What we need is a passionate person who loves home theaters and thinks
of them as the new hearth.” The passion had to be matched with discipline, however. “We can’t overinvest
in labor. We can’t overspend in fixture. We have to have the right level of inventory, otherwise
the model won’t work. We have to have the right scheduling approach for our home-theater
installers. You’ve got to have all the disciplines, because if you don’t, it breaks down.” The
responsibility for discipline and execution fell to both the segment leader in the store and the store’s
general manager. Dunn continued: “At the end of the day, the execution variable was directly tied to
the performance of those two. Because we know the value proposition put in is worth X. And where
we get an exponential benefit is when we get X plus Y and then the X times Y. The multiplier is the
understanding of the segment leader and the store manager.”
Indeed, in the case of home-theater equipment offered through Magnolia, it was up to the sales
force and team managers to know as much or more than anyone else in the world about what those
customers wanted and needed, especially since many customers were not able to articulate their
needs. In theory, passion for the value proposition would facilitate the identification of the customer
and the solution. Dunn compared it to the Wikipedia approach “where across the country people
share learning points on each of these segments and a national picture starts to develop that is
directionally correct. And then you bring your local day-to-day, hour-to-hour experience to it, say,
oh, I understand this, this is where this connects and this is what this customers wants. And
relationships form in that segmentation bucket.”
According to Dunn, customer-centricity put enormous pressure on the stores to move beyond
implementation excellence along what he described as a six-part continuum:
The first step is leadership. The second is talent. The third is SOP. The fourth is business
acumen, meaning that all store employees had to have an understanding of ROIC [return on
invested capital]. Fifth is segmentation. The very act of focusing on one customer segment
makes you better across the broader spectrum. The sixth, innovation, is basically that in the
process of the conversation with the customers, you will identify things that you may not be
able to provide right now but could provide in the existing platform.
The first three elements were foundational. The other categories were customer-centric elements.
“We have to have foundational discipline to focus and drive a differentiated experience,” Dunn
explained. “If we just have innovation and not the foundations that allow for economy of scale, we
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Best Buy Co., Inc.: Customer-Centricity 506-055
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will be in trouble just as surely as if we just stayed focused on the first three elements, the SOPfocused
elements. My job is to move that imaginary line after the SOP to come after segmentation.”
While some parts of the organization resisted change, Dunn noted, others just wanted to focus on
“innovation, innovation, innovation. The truth of the matter is I have to have both,” Dunn added,
“and it’s OK for different leaders to be in different places or have different strengths along that
spectrum or that continuum, but the challenge is having both. The challenge is that we have 120,000
people all in different places with different interpretations and different biases and their own
personal thoughts about what ‘good’ looks like.” For example, when the Xbox 360 launched and
customers camped outside of Best Buy stores, they were given the possibility of buying the new Xbox
as a bundle—a productive outcome of customer-centricity but one that only worked for some of the
company’s customers.
From Managing Product to Managing People
Under customer-centricity, GMs were expected to lead by example by being engaged on the floor,
talking to employees and customers and matching customers with the best associates to meet their
needs. “This takes five times more time as they felt they needed before to drive their business,” HR
Vice President Decker explained. “Our GMs have always been quite gifted at being able to
understand their store and look at their scorecards. They were able to drill down to a specific SKU
[stock-keeping unit] and know one of seven things they needed to do. But we have pulled them back
to a much more strategic level. We’re moving to an owner/operator mind-set, which is quite different
than working a store where you get your marching orders every morning.” Decker continued:
In the past, strategy used to be developed at the top, and the field organization worked like
an army with the general. It was very task driven, we had a plan for everything, where you
stand, how you open store in the morning, everything! With customer-centricity, we had to
figure out how to get Blue Shirts to be that trusted friend and come up with a solution versus
more products. To get that we have to develop a relationship between the employee and store
team that models the deep relationship you want associates to have with customers.
Naturally, associates expected to be compensated more for the extra effort expected of them on the
sales floor. “If your frontline employees are adding more value, and you have a true meritocracy, it
works out,” Decker explained. “Plus, you are rewarding the people who very specifically are adding
value to your bottom line.” In the past, job class determined compensation more than performance.
(See Exhibit 10 for behavior and development guide used in performance evaluation.) However, a
manager explained, “When you turn the strategy on its ear you have to also then begin to unwind the
systems and processes that you have in place that reward the old behavior, when what you’re trying
to do is reward the new.” Best Buy typically turned over two-thirds of its general managers a year,
which was not uncommon in the industry. But retention was up in 2005. A young starting store
manager in a midsize box probably earned about $50,000, to as much as $150,000.
Taking Stock
The Best Buy reporting system provided daily feedback on how centricity (and noncentricity)
stores were faring and how well store teams executed against the strategy. Indeed, several times a
day, stores tallied totals for revenue, productivity (the revenue versus the number of store visitors),
and close rate (the number of visitors versus the number of products sold), department by
department. GMs knew every day where their store ranked in terms of sales and ROIC in the district
and in the region and how they stacked up against every other Best Buy store in North America.
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They reported results to their associates in daily “chalk talks” (see Exhibit 11). Every morning,
department supervisors received a sales goal for the day. They in turn asked their sales staff to
provide a daily goal. Daily meetings offered an opportunity to educate associates on the drivers of
store profitability. The meetings were also useful for teaching employees good business practices.
Occasionally, managers would videotape an interaction with a customer, then break it down for the
sales clerk, often asking: “If we were delivering the level of customer service to these particular
segments, whatever they were looking for, how much more would we have been able to gross?” For
improvement opportunities, segment leaders also examined daily store scorecards for stores in which
their segments were represented.
The Merchants
Prior to customer-centricity, the merchant organization, which was in charge of buying, pricing,
assorting, and merchandizing, was organized by business units: MP3 players, CD players, TVs, PCs,
cameras, and so on. Strategic thinking occurred at the senior vice president level, with the strategic
business development group making decisions on the corporate level as to what selection of
inventory to offer in the stores. According to Anderson, Best Buy had always been “a merchantdriven
company.”
The new model forced merchants to collaborate with segment leaders, and Anderson observed
that “those used to dictating were forced to work in a team, which was more complicated.” The
merchant organization was therefore redesigned to take a more holistic view of the industries and the
customer needs that relate to those industries. The new structure was based on seven domains, such
as “sharing memories” or “listening to music” (see Table B). Domains cut across different
merchandise categories and focused on customer solutions. Anderson observed that merchants had
to look at “customer-centricity groups as primary lifestyle drivers in their choices of shared groups of
customers.” After the introduction of a new product structure, goods were divided into 15 categories:
10 fell into discrete customer segments, and five cut across all segments. For example, a category
identified as “voice and data” (cell phones, memory devices, etc.) had universal application.
Table B Merchant Organization Domains
Name Sample Merchandise
Home-entertainment experience TVs, DVD players, speakers, remote controls, batteries
Sharing memories Digital cameras, printers, camcorders
Personal communication Phones, pagers, headphones, modems
Listening to music CD players, CDs, MP3 players, headphones, portable
music devices
Playing games Game stations, accessories, games
Home life Kitchen accessories
Business minded Modems, computers, calculators
Source: Company documents.
Seven domain heads reported to three senior VPs via directors or business team leaders. The role
of the VP was not only to be the chief merchant but also to be the chief strategist and think about how
different goods could be rolled up into a domain. Ron Boire, executive vice president and GM,
oversaw four vice presidents, one responsible for operations and three for domains. While the third
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senior VP could make deals without getting permission from the other two senior VPs, he was
accountable for his decisions and shared profit-and-loss (P&L) responsibility. They also had targets
related to economic value added (EVA) (profit), customer metrics (inventory), and engagement
metrics (customer). They were also in charge of setting prices, selecting the assortment, and
developing promotional strategies.
Merchant VPs were expected to think of possible customer services in their area and to grow their
business by offering accessories and services as well as to identify the customers most likely to buy
these packages. According to Boire, for example, the sharing memories domain evolved from a
digital imaging goods category and could appeal to a number of segments, such as Jill or Ray. With a
particular segment, such as Jill, the role of the sharing memories team was to understand everything
about this particular segment’s needs around memories and the solutions she might want. “The
biggest problem with Jill today is that all these products are very complicated. Her value drivers are
she has no time and she’ll do anything for her kids,” a manager explained. “Today we think about
everything from the device used to capture the picture, transferring the picture, storing the picture,
managing it, improving it, sharing it, reproducing it, as part of the value chain. So where we
previously would have looked at this domain as a $5 [billion] or $6 billion domain, we now look at it
as something like a $25 billion domain.”
Boire observed that there were significant changes in decision rights. In the past, if a merchant had
an idea and wanted to test something, she just came in the store and tested it. Under customercentricity,
merchants were required to test their new ideas in lab stores in an orderly fashion through
a pipeline process. “It used to be that the only source for input on what we’re going to sell was the
merchant team,” Boire explained.
Now there are all these other sources of input. If the segment leader wants to sell guitars in
a lab, we’ve got to go out and buy guitars. So the rules and responsibilities change a little bit,
and quite a bit in the labs. As you get into scale, obviously, because we’re a large enterprise,
you get into a lot more rationality. So the experts buy and the experts market and the experts
talk to their customers and the experts operate the stores. But in the lab environment, if you’re
really going to innovate, you really need somebody who’s just completely obsessed with the
customer, focused on the customer experience, and give them the authority to operate that lab
the way that they see fit. As long as, of course, they’re getting the results and the learning.
At best, segment leaders and domain leaders had a mutually beneficial relationship. “The segment
leaders should be a great input into the domains and how we think about product and how we talk
to our vendors about building out solutions,” Boire explained. Conversely, the Barry segment leaders
might not know all the thousand different technologies that Barry could buy. So the merchant group
could be an asset in suggesting what Barry might like. “As customer-centricity evolves, we get closer
and closer to that kind of behavior,” Boire said. In the meantime, Anderson mused, “Merchants were
used to being pretty much the king, so it’s tough for them to start having these other voices in there
that they have to respond to, and that genuinely makes their life much more complex.”
When customer-centricity was introduced, the new strategy did not fully engage pricing and
promotion. U.S. Best Buy pricing strategy was centralized but as a defensive response, at a store level;
if in a market there was a competitor whose price was lower, the GM could reduce the price on an asneeded
basis.
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The Segments
Segment organization was the newest addition to the Best Buy structure, a direct result of the
customer-centricity model. Armed with insight into consumer needs, segment leaders tried to
articulate the marketing and related sales opportunities both to GMs and to merchant teams. This
was not always an easy sell. Indeed, while GMs and merchants felt that they had already been
managing a portfolio of customers successfully, segment leaders were asking them to focus on one or
two groups, “expecting a leap of faith that the extant customer base would not be eroded.”
Furthermore, they were “asking to shift focus from a wide segment to a particular customer need.”
Indeed, segment leaders required that some SKUs, such as computer accessories, get more attention
and some less. Segment leaders observed, “Merchants were used to driving the whole boat, and now
they have somebody sharing that.” Segment leaders tended to focus on the opportunity from the
perspective of the consumer.
Dunn illustrated a potential tension point—a segment leader might go to a buyer and describe the
assortment needed to execute a certain value proposition in some 50 stores and then ask the buyer to
buy this for the other 550 stores, at the best deal. The buyer might retort that this plan does not fit his
profit plan: “I have these SKUs planned with this vendor. Oh, I understand what you want to do, but
those aren’t the right SKUs. These are the right SKUs.” Or “Boy, that’s interesting, but you’re not
thinking about the back-money allowance we’re getting, so now you’re impacting my profitability.”
In the store, segment leaders worked with the store manager and the team assigned to each
segment to execute on the value proposition. For a conversion to be successful, the right talent,
rewards, and information systems needed to be in place, and the segment leader in the store had to
be able to continuously improve segment strategy at the store level. That required a particular kind of
person, one who could enroll store and department managers into the vision of his or her segment.
Segment organization P&L was heavily dependent on the merchants and the stores. Indeed, the
segment organization was held accountable to deliver incremental growth in store sales per segment
and better identify segment needs.32 Since segment leaders had to manage P&L per store where their
segments were present, they felt frustrated if their ideas were not being accepted by the store and the
merchant organization. They felt “completely handcuffed in terms of growing their business or
growing their P&L,” Dunn said.
A central question was who should own the vendor relationships, the merchants or the segments.
Dunn felt that merchants should keep the capabilities and the skills they had in being the lead in the
vendor relationships but that the segment leaders needed to have a way into the discussion: “We
need to be careful not to lose our leverage of being a huge company.”
The Right Choices
The P&L Debate
A main point of contention was that the stores, merchants, and segments ran their own P&L. Each
was evaluated along its respective EVA, return on capital, and top-line sales growth. 33 Executive
officers were paid on EVA.
Boire believed P&L monitoring helped business teams “focus on actionable knowledge and the
competencies of each team as Best Buy grew up in the strategy.” “We really, truly probably have
done that incorrectly,” a segment leader countered. “There should be one P&L, since we all have a
piece or a contribution of it.” It was unclear however, which one of the three sectors was the true
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“owner of customer insight.” The debate raised the question of whether the segments and merchants
should continue to stand alone and, if so, who should report to whom and how should each part of
the organization work with all others. “When you put people into situations in which they’re
codependent,” Anderson had learned, “leaders in particular have a difficult time with that
codependency.” Dunn proposed a different tack:
I would love to make it simple and say they should be one organization. But I don’t think
so. I think we should be organized around end-to-end ownership of horizontal initiatives. We
will eventually integrate into business teams an integrated operating model that has a
merchant, a segment lead, and a field leader. That organization would be responsible for
delivering end-to-end service to the customer and P&L to the shareholders.
Synchronization and Pace
In 2005, Boire concluded, “We went into scale mode, and in the scale mode, just like anything else,
you hit road bumps.” He believed that the third-quarter results reflected a lack of synchronization
and optimization among the three business units. The potential benefits of customer-centricity were
far from realized. Segment leaders were frustrated when stores did not meet their sales by segment.
In turn, some GMs and the sales force felt that neither merchant group nor segment organization was
listening to their valuable insights. Anderson admitted:
We spread ourselves thinner and thinner and thinner, we really didn’t deliver the value
propositions to the customer as we expanded out. Last year, we did 67 stores at once, which
we thought was going to test substantially and might break the value proposition. By this year,
we have about 250 centricity stores. That last batch did not deliver as well as the other batches
have. I think we knew we were pushing and we pushed it too far.
In the most recently converted stores, higher gross profit margins could not compensate for
conversion costs and selling, general, and administrative expenses. Many converted stores had not
been upgraded in a long time. Rising staffing expenses were another culprit. Higher labor costs were
associated with adding business-oriented sales associates, personal shopping assistants, and other
such positions. Expenses increased 21.7% in the third quarter of 2005 as compared with 19.5% in the
prior year.
Best Buy planned to simplify internal processes and increase retention to further improve the
customer experience and company productivity.34 “We are going to have to pare back some of the
things that we change,” speculated Anderson. “If the choices of what things you pare back are poorly
made, you can either damage or kill the innovation culture we’re trying to build.” Still, he felt
confident that his team would come through:
One biggest source of contention was the new strategy’s inability to meet the ego needs of
some of our leaders. I was trying to be a change leader. I foisted consultants or strategy on
folks without the real ability for them to choose. Today I am trusting the leadership team that
we have with the choices of what they edit in and out, and therefore trusting that they will
cherish the core ingredients to give us the real growth options for the future.
As the company regrouped, more and more stores agitated for prompt conversion. With more
attention and resources going to centricity stores, a manager warned, “How do you keep your folks
in your base stores highly motivated? They’re the engine, but while others are doing interesting little
innovations, the folks in the base business get to keep the engine running. How do you get a line
drawn on what you’re trying to accomplish as a company and have everybody feel like they’re part
of the story, whether they’re in a centricity store or not?”
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Fragmentation
There was also some debate around the fragmentation brought about by excessive segmentation.
Beyond the first five segments, Best Buy later identified three more segments (two empty nesters,
Helen and Charlie, and a single professional female, Carrie); however, subsequent subdivision of the
client base seemed inadvisable. In fact, the notion of “cluster stores” had emerged. For example,
several segments might be 10% to 12%, 15% of the store population; aggregated they would represent
35% or 45% of the store. As an example, personal shopping assistant service, originally developed for
the Jill segment, was appropriate for a store with the Magnolia home-theater room. Boire looked for
such “high-value intersections”:
Like any new strategy that shifts power and decision rights, you end up with a “focus on
everything” strategy where everyone tries to do everything. Now, with data that’s come out of
centricity, we’ve made decisions about where to focus our assets. For example, we focus our
home-entertainment experience against Barry and Ray. So most of our effort should be around
optimizing our home-entertainment returns for Barry and Ray while not significantly
impacting the other customer segments.
Furthermore, the possibility of establishing BB4B as a stand-alone unit was under consideration
because the small-business sector was so important to Best Buy and cut across various segments.
Meanwhile, as Anderson was reimagining the retail concept, replacing Best Buy’s high-volume,
uniform system with one that emphasized agility, responsiveness, and accuracy and pinpointing
smaller, sales floor-ready deliveries to meet the changing desires of specific customer segments, he
was concerned that some segments were expecting Best Buy to do something exceedingly different
from the company’s initial plan. For example, “Jill wanted Best Buy to be something the store is not
because the stores were designed for men,” Anderson said.
Unlocking Human Potential
Despite all the challenges, a New England district manager was sanguine about Best Buy’s
prospects: “When we’ve got to get mean and lean, we’re the best at it.” Anderson and his team were
counting on such spirit for, by 2008, all of the U.S. stores were expected to include elements of the
customer-centric model (see Exhibit 12). Anderson anticipated “latent human capital” to raise store
revenue by 10%; thus, he wanted to use innovation that came from individuals. He explained:
Almost all organizations, particularly large organizations, waste human capital. There is a
latent human capital that could be beneficial to customers and ultimately shareholders, and it
is a part of leadership to unlock human capital. For example, if there are long return lines, it
costs the store 25% of value of product. If we can do things that reduce the percent of times
customers are confused, the economic value would be created. Unlocking human capital
would generate structural savings.35
Meanwhile, Wal-Mart marched on. In 2004, Wal-Mart had 14% of the consumer electronics
market, compared with Best Buy’s 18%, and Wal-Mart’s rise was expected to continue. What had
become clear was that selling harder, smarter, and classier had been very expensive for Best Buy. The
risk for the firm, analysts warned, was eroding its price advantage or margins or both. With its
salaried workforce, they asked, could Best Buy offer the type of hyperinformed sales help usually
reserved for much higher-market retailers such as Nordstrom while continuing to be a “best buy”?
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Best Buy Co., Inc.: Customer-Centricity 506-055
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Exhibit 1 Best Buy Financial Highlights ($ in millions, except per share amounts), 2002–2004
Fiscal Yeara 2004 2003 2002
Consolidated Statements of Earnings Data
Revenue $24,548 $20,943 $17,711
Operating income 1,304 1,010 908
Earnings from continuing operation 800 622 570
Loss from discontinued operations, net of tax (29) (441) —
Gain (loss) on disposal of discontinued operations, net of tax (66) — —
Cumulative effect of change in accounting principles, net of tax — (82) —
Net earnings 705 99 570
Per Share Data
Continuing operations $2.41 $1.90 $1.77
Discontinued operations (0.09) (1.34) —
Gain (loss) on disposal of discontinued operations (0.20) — —
Cumulative effect of accounting changes — (0.25) —
Net earnings 2.13 0.31 1.77
Cash dividends declared and paid 0.40 — —
Common stock price:
High 62.70 53.75 51.47
Low 25.55 16.99 22.42
Operating Statistics
Comparable store sales change 7.1% 2.4% 1.9%
Gross profit rate 23.9% 23.6% 20.0%
Selling, general and administrative expense rate 18.6% 18.8% 14.9%
Operating income rate 5.3% 4.8% 5.1%
Year-End Data
Current ratio 1.3 1.3 1.2
Total assets $8,652 $7,694 $7,367
Long-term debt, including current portion 850 834 820
Total shareholders’ equity 3,422 2,730 2,521
Number of stores:
U.S. Best Buy stores 608 548 481
Magnolia Audio Video stores 22 19 13
International stores 127 112 95
Total retail square footage (000s)
U.S. Best Buy stores 26,421 24,243 21,599
Magnolia Audio Video stores 218 189 133
International stores 2,800 2,375 1,923
aFiscal 2001 included 53 weeks. All other periods presented included 52 weeks.
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Exhibit 1 (continued) Consolidated Results ($ in millions, except per share amounts)
Consolidated Performance Survey 2004 2003
Revenue $24,548 $20,943
Comparable store sales % gain 7.1% 2.4%
Gross profit as % of revenue 23.9% 23.6%
SG&A as % of revenue 18.6% 18.8%
Operating income $1,304 $1,010
Operating income as % of revenue 5.3% 4.8%
Earnings from continuing operations $800 $622
Gain (loss) from discontinued operations, net of tax (95) (441)
Cumulative effect of changes in accounting principles, net of tax — (82)
Net earnings $705 $99
Diluted earnings per share—continuing operations $2.41 $1.90
Diluted earnings per share $2.13 $0.31
Source: Annual Report 2005, www.bestbuy.com.
Exhibit 2 Best Buy Stock Price vs. Competition
Best Buy & Competitors Stock Prices
1992-2005
0
10
20
30
40
50
60
70
80
90
Dec-91
Dec-92
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
US $
BEST BUY
CIRCUIT CITY
AMAZON.COM
WAL MART
Source: Datastream International.
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Exhibit 3 Best Buy Retail Square Footage from Continuing Operations, FY1993–FY2005a
Actual, Not Weighted (in 000s) U.S. Best Buy
Magnolia
Audio Video International Total
As of end of Fiscal Year
1993 3,250 3,250
1994 5,072 5,072
1995 8,041 8,041
1996 10,771 10,771
1997 12,026 12,026
1998 12,694 12,694
1999 14,017 14,017
2000 16,205 16,205
2001 19,010 133 0 19,143
2002 21,599 133 1,923 23,655
2003 24,243 189 2,375 26,807
2004 26,421 218 2,800 29,439
2005 28,260 194 3,139 31,593
Source: Company documents.
aExcludes Musicland store square footage.
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506-055 -18-
Exhibit 4a The U.S. Consumer Electronics Landscape in 2002
Estimated U.S. Consumer Electronics Sales ($ mil.) Estimated Market Share Sales/Sq. Foot ($)
Store 2001 2001 % Change 2001 2002 % Change 2002
1 Best Buy 14,629 16,730 14.4% 15.3% 16.5% 1.18% 753
2 Wal-Mart 12,522 14,141 12.9% 13.1% 13.9% 0.83% 563
3 Circuit City 9,520 9,960 4.6% 10.0% 9.8% -0.15% 485
4 Dell 4,485 5,300 18.2% 4.7% 5.2% 0.53% N/A
5 Target 4,236 4,799 13.3% 4.4% 4.7% 0.30% 269
6 Radio Shack 4,775 4,577 -4.1% 5.0% 4.5% -0.49% 382
7 CompUSA 3,953 4,155 -5.1% 4.1% 4.1% -0.04% 692
8 Staples 3,632 3,863 6.4% 3.8% 3.8% 0.01% 178
9 Sears 3,250 2,750 -15.4% 3.4% 2.7% -0.69% 181
10 Office Depot 2,688 2,670 -0.7% 2.8% 2.6% -0.18% 103
Source: Henri Bourgeois and Balaji Chakravarthy, “Best Buy: Staying at the Top,” IMD—International Institute for Management Development, Case No. IMD–3–1430 (Lausanne,
Switzerland: 2004), taken from Morgan Stanley, TWICE Market Research. Sales only include CE-related products, including computers.
Exhibit 4b Comparative Competitor Data, 2003
($ million) Best Buy Wal-Mart eBay Dell Amazon.com
Revenues 20,946 256,329 2,165 35,404 5,263
Gross margin 25% 22% 81% 18% 17%
SG&A 20% 18% 52% 9% 18%
Net margin 0.05% 6% 21% 6% 1%
Cash 1,914 5,200 1,381 4,317 1,102
Working capital 1,074 -2,997 1,499 -263 568
Inventory 2,077 26,612 — 327 293
Inventory turn 10x 9.7x — 108x 17x
ROIC 15.7% 14.8% 9% 31% NA
Debt ratio 11% 16% 2% 3% 90%
Source: Henri Bourgeois and Balaji Chakravarthy, “Best Buy: Staying at the Top,” IMD—International Institute for
Management Development, Case No. IMD–3–1430 (Lausanne, Switzerland: 2004).
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19
Exhibit 5 Segment Representation in Customer-Centricity Rollout
Best Buy for
Business
29%
Family Man
20%
Affluent
Customer
19%
Suburban Mom
17%
Young Early
Adopter
15%
Source: Henri Bourgeois and Balaji Chakravarthy, “Best Buy: Staying at the Top,” IMD—International Institute for
Management Development, Case No. IMD–3–1430 (Lausanne, Switzerland: 2004).
Exhibit 6 Major Customer Segments
Type Description Merchandise
Barry Affluent professionals who want the
best technology and entertainment
experience
Home theater
Buzz Active younger males who want the
latest technology and entertainment
DVD players, latest CDs and DVDs
Ray Family men (policemen, firemen,
teachers) who want technology to
improve their lives—practical
adopters of technology and
entertainment
Entertainment and recording
devices
Jill Busy suburban moms who want to
enrich their children’s lives with
technology and entertainment
Educational software, desktops,
devices to store and share images
(digital cameras)
BB4B/Best Buy for Business Small-business customers who can
use Best Buy’s products and services
to enhance the profitability of their
businesses
Modems, routers, computer
equipment
Source: Casewriter.
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506-055 Best Buy Co., Inc.: Customer-Centricity
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Exhibit 7a Barry Psyche Walk
Barry’s Psyche
• He’s male
• Age 31+
• Top 10% of household income & wealth
• Typically married
What are his needs?
Time Maximizer: SERVICE
• Barry strives to balance career and family, needing to carve out time for family and friends.
• He has more money than time, but despises wasting either.
• He wants a store that provides a convenient, hassle-free shopping experience.
• He needs end-to-end service in one place.
Respect and Trust: EXPERIENCE
• Barry is accustomed to respect and trust, and therefore he expects it.
• His focus is on career and family. He expects his family to get the same treatment, if not better, than he does.
• His wife (Ginger) is key influencer—if she is happy, Barry is happy.
• He considers networking and relationship building important. A trusted friend, colleague, mechanic,
stockbroker, sales associate and so on, are his resources because they are shortcuts to getting things done.
The Best Stuff: ASSORTMENT
• Barry is an achiever and proud of his accomplishments.
• He seeks to be important in the eyes of others.
• He wants others to recognize him as the best.
• He believes he deserves the best.
• He wants premium brands and services. Quality and value are important to him, and as such he prefers
“premium-grade” products and services because increased quality saves him time and hassles.
• He is informed about advances in technology. He is not afraid to try the latest and greatest. He tends to be an
early adopter. If the benefits are clear to him, he will buy.
Source: Company documents.
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Best Buy Co., Inc.: Customer-Centricity 506-055
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Exhibit 7b Jill Psyche Walk
Jill’s Psyche
Who is Jill?
• Affluent suburban moms
• Has kids under age 18
• Household income top 30% of country
• Family is the most important thing in her life
• CEO of the household
• Incredibly busy with all of the tasks on her “to-do” list
• Likes to share ideas with other moms
What are her needs?
• Make my experience as practical as possible.
• Help me find ways to enrich my children.
• Help me find ways to unleash my creativity.
• Respect me and my needs.
Jill Subsegments
Toddler Jills (5 or under):
• All about their children—helping kids discover the world
• Satisfaction of being a mother is defined through milestones their young child(ren) achieves
• More price conscious since they aren’t contributing; relish the game of price shopping
Elementary Jills (6–8):
• “But Why Mom?”—assisting in child’s growth
• School is now taking on educating the children; however, she is looking for things that make time with kids fun
• Seasonality/school year plays a role in balancing learning and fun
• Kids are too old for Just for Kids, yet not heavy into video games, CDs, DVDs
Tween Jills (9–12):
• “Taxi-Mama”—enabling child to achieve in all aspects
• Kids getting excited about technology, Best Buy
• Growing pressure from school, homework, and activities on kids—make or break point
Teenager Jills (13–17):
• “Movin’ On”—coping with kids’ independence
• Kids are key users and introducers of entertainment and technology in the household
• Jill relishes the “last time” activities (graduation, prom, driving)
• Worries about her kids driving, having sex, doing drugs, choosing colleges, and health concerns for herself
and parents
Source: Company document.
For the exclusive use of A. HE, 2019.
This document is authorized for use only by ANQI HE in Customer Data Analysis 2019-1-1-1 taught by ABDOLREZA ESHGHI, Bentley University from Jan 2019 to Jul 2019.
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Exhibit 8 Magnolia Room, Best Buy in Shoppers World, Natick, Massachusetts
Source: Casewriter.
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This document is authorized for use only by ANQI HE in Customer Data Analysis 2019-1-1-1 taught by ABDOLREZA ESHGHI, Bentley University from Jan 2019 to Jul 2019.
Best Buy Co., Inc.: Customer-Centricity 506-055
23
Exhibit 9 Best Buy for Business Segment and Geek Squad Customer Support Center, Best Buy in
Shoppers World, Natick, Massachusetts
Source: Casewriter.
For the exclusive use of A. HE, 2019.
This document is authorized for use only by ANQI HE in Customer Data Analysis 2019-1-1-1 taught by ABDOLREZA ESHGHI, Bentley University from Jan 2019 to Jul 2019.
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Exhibit 10 Performance and Development Guide—Value Goals: Sample Behaviors Reference Sheet
Value Not Living Living Teaching
Have fun while
being the best
– Does not create an inclusive environment; takes
energy away from interactions
– Focuses on roadblocks and is generally negative
– Avoids work-related team activities
– Does not enjoy being at work
– Likes to have fun but does not contribute significantly
to team output
– Blames others
– Withdraws from interactions, not aligned with team’s
vision
– Seeks results at the expense of others
– Does not recognize or ensure “fun” activities are
inclusive of everyone
– Seeks to understand others’ definition of fun and
provides diversity in activities
– Views and approaches things in a positive manner
– Continually raises performance standards
– Is solution oriented (is active in developing solutions
to problems vs. only pointing out problems)
– Builds strong working relationships
– Values and offers education/learning opportunities for
everyone to celebrate differences and how it
contributes to company success
– Motivates and pushes team to excellence
– Continually adds energy to interactions
– Drives toward resolution
– Ensures all learning activities are fun and high energy
– Provides consistent messages in department
meetings or other settings about the value of
celebrating and enjoying the differences in all
employees and customers
Learn from
challenge and
change
– Avoids seeking feedback
– Denies feedback when offered or takes it personally
– Derails positive efforts of change or resists change
– Avoids challenging assumptions
– Challenges assumptions in a confrontational manner
– Avoids uncomfortable situations
– Does not hare information—leverages information as
power
– Does not share opinion from his/her area of expertise
– Avoids addressing and driving solutions
– Does not effectively mediate tension or conflict
among different employees
– Gives constructive feedback
– Takes feedback well and applies going forward
– Asks others for feedback
– Respectfully challenges assumptions
– Adapts well to change
– Accepts change as a growth opportunity
– Responds quickly to business needs
– Seeks and shares best practices
– Raises difficult issues; disagrees respectfully
– Continually looks for opportunities to improve
– Actively engages and welcomes a variety of diverse
perspective in resolving problems
– Understands and applies change management
techniques
– Respectfully challenges assumptions and engages
others in dialogue around issues
– Embraces change as a growth opportunity
– Adapts well to change and helps others adapt as well
– Helps others understand business case for change
– Continually looks for and acts on opportunities to
improve
– Looks to every opportunity/interaction as a learning
opportunity
– Articulates how they have written themselves into the
“change” story
– Understands and shares lessons of past, reality of
present, and consequences for the future
– Effectively interacts with a wide range of diverse
individuals or groups and welcomes opportunities to
be immersed in environments which they are
unaccustomed to
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This document is authorized for use only by ANQI HE in Customer Data Analysis 2019-1-1-1 taught by ABDOLREZA ESHGHI, Bentley University from Jan 2019 to Jul 2019.
506-055 -25-
Exhibit 10 (continued)
Value Not Living Living Teaching
Show respect,
humility, and
integrity
– Dismisses some points of view
– Assumes negative intent
– Treats people differently because of their status
– Has fun at the expense of others
– Assumes “my way is the only way”
– Aligns only with those who “are like me”
– Actions conflict with statements
– Blindsides others
– Avoids partnering with others
– Takes credit for others’ work
– Takes shortcuts at the expense of others in driving
for results
– Does not demonstrate tangible examples of how
he/she creates an environment which welcomes a
variety of perspectives
– Appreciates the vast knowledge and capability of
others
– Respects and values the contributions of others
– Solicits ideas from others
– Listens and acknowledges others’ ideas
– Treats people fairly
– Interacts with others in an honest and straightforward
manner
– Walks the talk
– Prefers to “ask” versus “tell”; seeks to understand
– Assumes positive intent
– Asks for help when necessary
– Understands how employees differ in the way they
experience the work environment and consistently
seeks input
– Listens to and understands others’ ideas
– Acts on opportunities to educate others on your work
– Articulates work through the eyes of others/
customers
– Encourages others to share point of view
– Creates an environment where others walk away
from a challenging situation feeling positive, heard,
and empowered
– Ensures diverse perspectives are included on action
planning teams (like viewpoint) and coaches
employees on ways to invite a variety of perspectives
in problem solving improvement opportunities
Unleash the power
of the people
– Does not allow or trust people to do their jobs
– Dictates how people should do their jobs
– Micromanaging employees/peers
– Does not recognize the value of others
– Does not partner well with others
– Works in a silo
– Does not seek input from others
– Does not have clear examples which demonstrate an
understanding of each employee’s strengths
– Encourages diversity of ideas and strengths
– Articulates how employees contribute to the goals of
the team/company
– Shows commitment to individual and team
engagement
– Trusts others to do their jobs in their own ways
– Recognizes the values of others
– Helps others understand where to add value
– Gives others honest, thoughtful and constructive
feedback
– Shows how diverse employees participate on
important projects and assignments
– Drives team engagement
– Mentors to peers
– Positions others to do their best work
– Leverages and/or engages others to accomplish
projects
– Utilizes the virtuous teaching cycle to share power in
decision-making
– Has demonstrated a TPOV on diversity to his/her
team and how it contributes to helping each
employee use their talents and strengths in support
of the company mission
Source: Company documents.
For the exclusive use of A. HE, 2019.
This document is authorized for use only by ANQI HE in Customer Data Analysis 2019-1-1-1 taught by ABDOLREZA ESHGHI, Bentley University from Jan 2019 to Jul 2019.
506-055 Best Buy Co., Inc.: Customer-Centricity
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Exhibit 11 Chalk Talk Data
Source: Casewriter.
For the exclusive use of A. HE, 2019.
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Best Buy Co., Inc.: Customer-Centricity 506-055
27
Exhibit 12 Store Opening Plans FY2005 and FY2006
U.S. Best Buy FY2005
Opening Plans
U.S. Best Buy FY2006
Opening Plans
Q1 10–12 11
Q2 8–10 16–18
Q3 25–27 25
Q4 13–15 6–7
Source: Company annual reports, www.bestbuy.com.
For the exclusive use of A. HE, 2019.
This document is authorized for use only by ANQI HE in Customer Data Analysis 2019-1-1-1 taught by ABDOLREZA ESHGHI, Bentley University from Jan 2019 to Jul 2019.
506-055 Best Buy Co., Inc.: Customer-Centricity
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Endnotes
1 CEO Anderson’s Letter to Shareholders, Best Buy Annual Report 2005, p. 1, www.bestbuy.com, accessed
February 10, 2006.
2 Best Buy’s fiscal year ended in February.
3 “BBY-3Q2006 Best Buy Co., Inc. Earnings Conference Call,” Preliminary Transcript, Thomson StreetEvents,
www.investext.com, accessed February 5, 2006.
4 Michael Copeland, “Best Buy’s Selling Machine He’s 26. He Wears Hoop Earrings. He’s a Demon Salesman.
And The Electronics Chain He Works For Is Cranking, Thanks To An Army Of Folks Just Like Him. But Is That
Enough To Save It From Death-By-Wal-Mart?” Business 2.0, July 1, 2004, available on Factiva, accessed
February 19, 2006.
5 Best Buy 2005 10-K report, www.bestbuy.com, accessed February 4, 2006.
6 www.bestbuy.com, accessed January 2006.
7 Copeland, “Best Buy’s Selling Machine.”
8 Best Buy 2005 Annual Report, www.bestbuy.com, accessed February 9, 2006.
9 Dorothy Leonard and Brian DeLacey, “Best Buy Co. Inc. (A): An Innovator’s Journey,” HBS Case No.
604-043 (Boston: Harvard Business School Publishing, 2005).
10 Company Fact Sheet, http://www.bbycommunications.com/newscenter/FY05_Fact_Sheet_Q4.pdf.
11 Copeland, “Best Buy’s Selling Machine.”
12 Anderson had been vice chairman since 2001 and president and COO since 1991.
13 Circuit City Stores, Inc., www.hoovers.com, accessed February 14, 2006.
14 Ken Cottrill, “Best Buy’s Customer-Facing Supply Chain,” Harvard Business Review, December 2005.
15 Best Buy 2005 10-K report, p. 6, www.bestbuy.com, accessed February 4, 2006.
16 Best Buy 2005 10-K report, p. 8, www.bestbuy.com, accessed February 4, 2006.
17 Henri Bourgeois and Balaji Chakravarthy, “Best Buy: Staying at the Top,” IMD–3–1430, 2004.
18 For more detail, see Anita Elberse, John Gourville, and Das Narayandas, “Angels and Devils: Best Buy’s
New Customer Approach (A),” HBS Case No. 506-007 (Boston: Harvard Business School Publishing, 2005).
19 Joe Quennana, “The Shoppers from Hell,” Chief Executive, April 1, 2005, www.factiva.com, accessed
February 19, 2006.
20 Best Buy Annual Report 2005, p. 24, www.bestbuy.com, accessed February 9, 2006.
21 Copeland, “Best Buy’s Selling Machine.”
22 Ibid.
23 Ibid.
24 From Customer-Centricity: A conversation with Brad Anderson, CEO, Best Buy, IMD–3–1430–V4.
25 Q3 2006 Best Buy Co., Inc. Earnings Conference Call, Thomson StreetEvents, www.investext.www,
accessed February 5, 2006.
26 Don Peppers and Martha Rogers, “Best Buy Counts Customers,” CIO, July 1, 2005, available on
www.factiva.com, accessed February 19, 2006.
For the exclusive use of A. HE, 2019.
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Best Buy Co., Inc.: Customer-Centricity 506-055
29
27 Best Buy Annual Report 2005, www.bestbuy.com, accessed February 9, 2006.
28 Best Buy Annual Report 2005, p. 26, www.bestbuy.com, accessed February 9, 2006.
29 Cottrill, “Best Buy’s Customer-Facing Supply Chain.”
30 Peppers and Rogers, “Best Buy Counts Customers.”
31 “Corporate Overview: Profile,” www.bestbuy.com, accessed February 2, 2006.
32 Helen segment leader, interview.
33 Calculated as the difference between net operating profit after tax (NOPAT) and a capital charge (invested
capital times weighted average cost of capital, or WACC).
34 Best Buy Annual Report 2005, www.bestbuy.com, accessed February 10, 2006.
35 Best Buy Q&A Session with Brad Anderson: the Customer-Centricity Strategy, IMD–3–1430–V1.
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