Business Case Studies, Positioning, Repositioning, Reverse Positioning Strategies Case Study, Segmentation of Stores in Best Buy: Is It Really Customer-centric?

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Case Title:

Segmentation of Stores in Best Buy: Is It Really Customer-centric?

Publication Year : 2006

Authors: Sanghamitra Bhattacharya & Aruna N

Industry: Retailing

Region:USA

Case Code: POS0027B

Teaching Note: Available

Structured Assignment: Available

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Abstract:
Since the late 1980s, Best Buy, the $30-billion-a-year company had ruled the US consumer In 2002, Best Buy adopted the angel-devil strategy to identify profitable and non-profitable customers. The company started preparing customer-profiles and collected data from each of its transactions and interactions across multiple brands, suppliers and third party suppliers to create customer profiles. In 2002, after studying the market, Best Buy segmented its store into five customer-centric categories. Each store catered to a specific product as characterised by the profile of the customers. The company trained its employees to focus on specific customers rather than on the product and also modified its supply chain to cater to the needs of the customers. Though the performance of the customer centric stores were better than the other Best Buy stores, a survey conducted by the company in 2005 reported that some of its customers were unhappy with the segmentation of stores. In addition to this, competitors like Wal-Mart, Circuit City and Radio Shack were gaining market share in Best Buy’s profitable areas (DVD & television, Home Theater equipments, computers and home appliances). To combat competition and to satisfy customers, Best Buy decided to merge its five segmented stores into three groups. Analysts opined that while segmentation was an expensive proportion for Best Buy, merging these stores would further drain Best Buy’s financial resources. But other analysts felt that, since Best Buy’s segmented stores performed well, managing cost would not be a major criterion for Best Buy. The company also planned to expand its business in China. Industry observers felt that Best Buy was juggling too much. Would Best Buy’s customer centricity live up to the customer expectation and help in maintaining its market position?

Pedagogical Objectives:

  • To understand how a customer-centric segmentation strategy was applied by Best Buy
  • To analyse how a segmentation strategy could be an effective competitive strategy for the retail industry
  • To understand the different methods of segmentation affected by Best Buy.

Keywords : Customer Centricity, Market Research, Point of Sale, technology enabled, Gureilla advertising, Segmentation strategy, Angel and Devil customers, Marketing Strategies Case Study, Multiple brands, Competition, Merging, Customer Profilling, Customer electric market, Turnaround, Training of employees

Contents:

  • Best Buy
  • Customer-Centricity in Best Buy
  • Challenges
  • Best Buy, the Best?

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