Saturday, January 2, 2010

How to build Best Buy’s Service culture

This is a topic that I am probably not nearly done with, but if I don't upload it now, I will likely continue to add to it forever.

This is what Reuters has to say about Best Buy:
Best Buy Co., Inc. (Best Buy) is a specialty retailer of consumer electronics, home office products, entertainment software, appliances and related services. The Company operates retail stores and Web sites under the brand names Best Buy (,,, and, The Carphone Warehouse (Carphone, Five Star (, Future Shop (, Geek Squad ( and, Magnolia Audio Video ( It operates through two business segments: Domestic and International. The Domestic segment consists of the store, call center and online operations in all states, districts and territories of the United States operating under the brand names Best Buy, Best Buy Mobile, Geek Squad, Magnolia Audio Video and Speakeasy. The International segment is comprised all Canada store, call center and online operations, under the brand names Best Buy, Best Buy Mobile, Future Shop and Geek Squad.

A specialty retailer is the first part of the definition, with services seemingly an afterthought. They view Best Buy as a retail store. If we want to build a true culture of service we have to shake the perception that we are retail. Because Wal-Mart is the king of retail grossing hundreds of billions of dollars a year and we all know that there is no logical person that will mistake them for a service company. The question moving forward is this: “Are we a retail company that offers services or are we a Service company that offers product?” If we allow Wall Street or our customers to answer this question today, we would likely see that we are the former, but how do we shift the perception to the latter? This blog update will cover a few ideas on how that can happen.

Rebranding Best Buy to Geek Squad

Rebranding the Best Buy store to Geek Squad is one possible solution, but with the cost of giving up the Best Buy brand this may be a hard sell to most powers that be, so instead of rebranding every store in the company we could have true Geek Squad stand alone stores instead of the stand alone precincts we have tried in the past. These Geek Squad stand alone stores would essentially be rebranded Best Buy stores with Geek Squad agents/autotechs/installers working on the sales floor; these members of Geek Squad would be able to provide the sales advice for customers along with being able to perform the services required. The plan would be to one of these Geek Squad service stores in each district, that way they would be close to the other stores and be able to use Geek Squad members from these other stores in a rotation. The Geek Squad stand alone store should drive more services than any other store as it would be those most qualified to talk about the services that we offer on the front lines offering them to our customers. This would also be a great place for other stores in the district to send their employees for training around the services that we offer.

Change the Signage

One easy way to allow customers to know that we offer services is to change the price tag. Instead of the largest most visible price being that of the product, it should be that of the product combined with the most applicable service that we offer. The product price should still appear on the price tag, but should be a reduced size. This will give customers who aren’t speaking to a Blue shirt the knowledge that we do offer services as a company. This also gives breaks the illusion that we are simply adding services on to the product. This also helps the customer understand that it is our mission to make their lives better through a complete solution. To select which services to add to the price tag, I would suggest looking at the most common services sold on whichever product we are talking about (e.g. Netbooks would have optimization). Another great thing about having the prices on the tag is that associates covering from another area in the store would have an easier time offering services.

Leverage Speakeasy, Napster, and D-Subs(Digital Subscription)

It isn’t a large stretch to think of a content provider offering services (e.g. DirecTv setting up a new TV or AT&T setting up your network). One thing we to need leverage now more than ever is the fact that we offer content, as the margins on consumer electronics plunge lower and lower every year, one constant remains that we have to turn a profit to stay in business. We are heading towards a future where televisions are a loss leader to bring customers in (where computers are today), customer traffic drivers like CDs and DVDs are obsolete (replaced by digital download), and online retailers can sell products far below costs of big box retailers and turn a profit (Amazon is already consistently doing this). In this crazy future we will need to find products and services that provide the margin our business needs to stay healthy.

If our business routinely matched customers up to content that we either provide or are a conduit to, they will think of us when it is time to do any of the service work to make it work. This hypothesis is based on the current culture where customers have a tendency to hold Best Buy responsible for products that don’t work properly because they know we have a service center and fix things, where they don’t typically hold other retailers responsible in the same way (e.g. Wal-mart/Target). Essentially by strengthening this part of our business we will grow the services aspect and add margin while we do it.

One way to do this is to have bigger more interactive displays for the content and D-subs we offer currently: Napster, Netflix, CinemaNow/Blockbuster, AT&T, Comcast, etc. Make it a simple process for a customer to sign up, with or without an associate present. By making this a process that the customer can do by themselves we also save on SG&A and potentially making it a faster experience for the customer during very busy times where associates may be helping other customers.

One innovation that comes to mind is having a D-sub display that is zoned by an employee of Best Buy, or even allow the third party to use their own labor. For example, Netflix is a great D-sub that we are offering right now. We could have a 4 foot section devoted to Netflix (or even use the one of the FEZ in Home Theater), this section would have a TV, a computer, and an Xbox/PS3. A Netflix account would be created for each one of these displays. We could use a MiFi to provide internet to all of the devices, and truly show customers how easy it is to stream Netflix. If we assume that all of the product would be on planogram anyway and nearly any mobile vendor would jump at the chance of having their MIFI associated with this type of display, the only real extra cost to us would be in the labor. If the average d-sub has a $35 dollar vendor credit behind it, and we assume the average line level employee makes $10 per hour, the goal would be for the associate to sell one per hour. This would give a margin of $25 per hour.

Now if these assumptions are correct lets add it all up. Assuming that this display sells an average of 10 per day, and we have half our stores that meet this goal and the rest did nothing, we would do an extra $125,000 per day in margin. If we assume that type of performance for 360 days out of the year we would gross and extra $45 Million a year in margin. Now I understand this is only an increase of about .001% in a $40 billion dollar company, but it is a move in the right direction and it assumes a very small investment with a very small impact. If we move those goals up a bit, to have 70% of the stores participating, 2 an hour, still 360 days a year we move up to $126 Million which is .003% of that $40 billion dollar business.

Obviously these assumptions are not all completely accurate, as the $35 amount is just one created for the sake of creating an equation that may be solved. Depending on the D-Sub that is chosen the number sold and the vendor credit could be completely different, but the point remains if there is an amount of margin that exceeds the employees’ salaries a small section in each store that changes periodically would be a boon for Best Buy along with whichever company we were selling in that vignette. This would be doubleplusgood if we used Napster as one of these manned vignettes, as we can leverage our business to compete with Apple, although right now we aren’t going to go into depth around how we sell gift cards for our competition.

Change Free Delivery Offer

The issue that is caused by Free Delivery is the “hook up” where delivery will connect a single source, usually for the purpose of making sure the TV works before they leave. Customers have a hard time separating from an installation (Geek Squad employees performing the service) and delivery and hookup (Third party connecting one device). This leads to problems when trying to match the customer to the proper services, as they feel that those services are going to be free before they come into the store. Free delivery works very well VS. Wal-Mart/Target & other retailers, but is hurting our installation business.

The question I would pose is this, “What do we want to do?” Are we trying to win a war with Wal-Mart in TVs or are we trying to build our business into one that we want to run and our customers want to shop?

If we are trying to win a price/VPE war with Wal-Mart in TVs we might as well give up now, the reason I say that is because of the results so far – TV margins are very slim, Wal-Mart and Best Buy have similar prices, and Wal-Mart attempts to copy every innovation made by Best Buy. The problem with all of this is that Wal-Mart is 5 times larger and sells groceries meaning they can sell more product and they can use their entire electronics department (a Best Buy clone without the Blue-Shirts) to drive traffic and still make margin off of the odds and ins that other retailers can’t/don’t carry.

Home Theater Changes

If the answer instead is that we want to build the business into one that we enjoy and that our customers want to shop at we have to change some of our thinking and strategy to work for the long term result.
One way we can drive installations is to work with our vendors for backend support, offering discounts on the installation prices with the purchase of certain brands each week. This would be a promotion that we would run every week with alternating brands for 6 months to a year. The goal is to drive word of mouth advertisement to friends and family of those having the work done, along with putting our agents in more homes which gives us the chance to inspire and demonstrate the art of the possible, and with backend support from our partners it gives us the margin that we would normally have. If we go with this strategy I would caution that the services should never be free at first it should be around 30-50% off and by the end it should be reflecting a 20-40% discount, this will keep the HT(HE) associates offering. The issue with giving it away for free can make the associates a little more apathetic in their offering when it is no longer free.

Another way to drive installation is to take pictures of our completed installations. We can then use these on, in local stores (“brag books”, on the TVs in the HT loop, as posters, etc), and in different forms of advertisement. Some stores already use pictures like this, but installers aren’t all taking pictures after every job (with customer permission of course). The more pictures of completed installations we can show our customers the more they will trust our work along with feeling confident with our ability to do a great job.

Advertise Repair

One of the areas that we don’t talk about often is the repair service that we offer. If we look at the smaller local businesses that sell appliances and offer repair we see a key difference between the vehicles we use and the ones they use. Theirs call out the products and services they offer along with contact information where ours typically are either plain (e.g. Delivery + appliance install/repair) or mysterious (Geek Squad), and while I agree that there is a certain appeal that is gained from the mystic that Geek Squad vehicles have, there is also an opportunity to advertise what we do, and that mystic can only last so long before customer get tired of trying to figure out what it is that we do. One big thing we can do with our vehicles is to put some information of what we offer somewhere on our vehicles. The type of information and location to print it will vary from vehicle to vehicle, but as an example on the back of a Geekmobile we could put 1-800-Geek-Squad and a reference to computer setup/repair. Perhaps as OLED screens become a little more common place we could use screens like these to display advertisements on our vehicles.

We should also use in-store signage to let customers know that we can repair old appliances, TVs, computers, etc. Along with putting this information in our weekly advertisements will allow us to drive our repair business. The goal here again is a long term one, where by educating customers that we can repair their products we also gain their trust and demonstrate our prowess which will lead to more installations sold in the future.

Low priced services – Ala Cart

Price shopping customers tend to balk at the price of our services, which is an issue when we are trying to drive a service culture. Even Wal-mart is starting to learn that there is a finite amount of boxes that you can sell to a customer, but one thing that we are both forgetting is that the lower income customer has a set budget for the TV when they come in and the reason they will do it themselves most of the time is not because of some joy of the manual labor, or even that the service doesn’t have enough value for the money, but more likely because it exceeds the amount of money in their wallet. To cater to these customers I would suggest having budget services, where we have a low opening price point to appeal to these customers, but with a very limited service offered. For the sake of example let’s take a look at the TV Mounting service that we currently offer and the low priced version of this service.

TV Mounting - $149/$249/$349 depending on the size of TV. This service has a huge value for the money, and provides a really great job, the downside is that with the price of TVs dropping a 32” TV may only cost $299-$399 which means that the service nearly doubles the price of the TV. The low price version could be $90/$180/$270 and the trade off would be that we no longer conceal the wires in the wall and we don’t do an educational demo – these being two of the more time consuming pieces of the wall mount.


Another large piece that we are missing out on is the training around consumer electronics. This should be a category on every page on It should be difficult for a customer to go without knowing that we offer training on nearly every product in the store. One big innovation that my store has been using for years with varying degree of success is an in store training at $29.99 on Camera’s and iPods. I would assume that if we had a large push companywide that we could drive a great deal of services. Very much like the example above with D-Subs, this training drives a margin of about $24.99 on average. This makes for a very profitable symbiotic relationship with our customers. Taken a step further, if we offered a class every weekend for $10 per person, and taught a classroom full of people, we could increase participation and margin quite a bit. If this were an hour long class held every Saturday with a minimum of 5 clients scheduled for each class, assuming that each store was able to hold 2 of these a month with the minimum number of clients we would drive an additional $1.2 million in revenue each year, which may be a very small amount of money in the big picture, but this would represent 10,000 customers each month that we are reaching out to in a very personal way.
These customers would be educated on product categories they own and/or intend to buy along with reasons why Best Buy. The other large thing to consider here is that normal people only use about 20% of the features of any piece of technology in their house. With that said, they typically will need a cable, or just one other piece to unlock a great deal of the potential of what they have. If we are able to supply the knowledge and the product, this becomes a win-win situation for us and the customer.

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