Best Buy Case

Best Buy Integrative Case

October 15th 2012

Best Buy Integrative Case

October 15th 2012

Question 1

Customer Centricity for Best Buy (BB) arose as an answer to an ever-increasing competition. This came not only from brick & mortar retailers such as Wal-Mart (WM), Target, Circuit City and the likes, but also increasingly from on-line retailers like Amazon, Dell and even eBay that were giving Best Buy a bang for their buck.

The main problem for BB was that if it only maintained its basic value proposition, that is, delivering an appreciable amount of SKUs of electronic goods at excellent prices, its differentiation versus competition would diminish over time. If things kept on going the way they were, WM would eventually be able to offer better prices just by sheer negotiation power with manufacturers. On the other hand if BB wanted to compete on offering, it would also most likely fail miserably given Amazon’s fundamentally distinct business model that enabled them to carry a myriad SKUs.

BB had to stand out. The only logical answer remaining would be to differentiate itself in shopping experience and service. In order to do this, BB must know its customers profoundly. This knowledge must definitely go deeper than to just carry the correct SKUs for any given customer, it should go to the length of knowing values, needs and wishes that prompted every purchase. If BB could tailor solutions taking into account deep customer insights, it would not only create a competitive advantage, it would also create value for its shareholders and become more appealing to its shoppers.

In short, Customer-Centricity is rethinking the business in such a way that the customer is at the center of everything it is offered. For BB, this meant posing a shopping experience that emphasized not individual items but integral solutions for a customer’s needs. They decided to segment its customer base identifying the most profitable part of their business and grouping them into...