Best Buy's Diamond as Big as the Ritz
For example, when my wife, Peggy, and I sold our business and moved to Philadelphia 14 years ago, we wandered into David Mann Audio in Center City to purchase a B&O CD player. Soon thereafter, David Mann was fired as a reseller and the only B&O store in the area is 20 miles outside of Philadelphia in King of Prussia, Pa.
In my opinion, a down-'n'-dirty database analysis of customers is a lot cheaper--and a lot more informative—than hiring Ed Schlossberg to design a money-losing experiential environment in the vague hopes of divining the inner workings of the young female mind as it relates to one high-tech product, the digital camera.
Takeaway Points to Consider
- For years, Bang & Olufsen assumed that its customers were urban yuppies. Remember: "When you assume, you make an ASS of U and ME.
- Best Buy's 700 stores get 500 million visits each year. Of those, CEO Brad Anderson found that 20 percent—or 100 million—were money losers. He figured out a way to discourage those folks from remaining customers, enabling him to concentrate on developing the top four quintiles.
- The old rule that 80 percent of your business comes from the top 20% of your customer file is pretty accurate. The object of marketing—apart from acquiring profitable new customers—is to make such attractive offers that all existing customers in one quintile will be moved up into the next quintile.
- The process starts with database analysis.
- Best Buy has records of 400 million profitable store visits a year—nearly a billion over 24 months. Except for the occasional cash customers, somewhere in the Best Buy computers are tens of millions of names and addresses plus the three most basic elements of customer analysis: Recency-Frequency-Monetary Value (RFM).
- Imagine if this file were bumped up against one of the giant direct marketing co-op databases or credit reporting agencies—or both—that could append to the retail chain's internal data the demographics and behavior patterns of all its customers.