Finding the Good Money
When we work with clients on differentiation and positioning, we help them define clients that give them the “good money.” These are the clients that are willing to pay full value for products and services provided, don’t nickel and dime you to death and are customers that you would go to the wall for on deliveries, service and other aspects. They are customers that you want for a lifetime.
A recent article in The Wall Street Journal and in the daily e-mail Cool News shows how Best Buy uses the concept of “Finding the Good Money” to run a better business.
Best Buy’s Angels. “…A company should view itself as a portfolio of customers, not product lines.” That was the advice given to Best Buy CEO Brad Anderson by Columbia University business professor Larry Selden, and it is driving an unusual sales and marketing strategy that actively spurns the retailer’s “bad” customers while courting its “good” ones, reports Gary McWilliams in The Wall Street Journal. It seems Best Buy has examined sales and demographics data along with its databases, and has concluded that about “100 million of its 500 million customer visits each year are undesirable.” These visits -- by what Best Buy calls its “devil” customers -- involve rebates, returns and re-stocking, and, net-net, lost revenues. Mr. Anderson’s fear is that unless something is done to stop the devil-shoppers, Best Buy eventually will be squeezed to death by Wal-Mart on low-end, and Dell on the high-end.
And so, Best Buy is “cutting back on promotions and sales tactics that tend to draw” the devils, “and culling them from marketing lists.” The retailer has also cut ties with sites such as FatWallet.com, which it says is set up to enable devil-shoppers, and imposing a 15 percent re-stocking fee to thwart serial returners, “who return …purchases,” and then “buy them back at returned-merchandise discounts.” On the flipside, Best Buy has identified five kinds of its “most desirable customers” -- the “angels” -- who fall “into five distinct groups: upper-income men, suburban mothers, small-business owners, young family men and technology enthusiasts.” Best Buy has even given cute nicknames to these shoppers: high-income men are known as “Barrys;” suburban moms are called “Jills” and male technology enthusiasts are referred to as “Buzzes.”
Each
store picks two of these groups as its focus, and trains its staff
to identify and steer them toward highly profitable purchases,
and perhaps sell them a highly-profitable service plan, too. For
example, on Tuesdays, when new DVDs are released, Best Buy’s blue-shirts
trawl the aisles looking for angels, and then “steer them into
a back room that showcases $12,000 high-definition home-theater
systems” --
a room decked out in “easy chairs, a leather couch, and a basket
of popcorn.” Best Buy’s angel-devil strategy currently is
still in pilot -- at just 100 of Best Buy’s 670 stores. Even though
the overhead at the pilots “have run one or two percentage points
higher than traditional stores,” CEO Anderson says they “are
clobbering” the traditional stores: “Through the quarter
ended August 28, sales gains posted by pilot stores were double
those of traditional stores,” and “Mr. Anderson says the
average cost per store should fall as stores share winning ideas for
targeting
customers.” Best Buy has already begun converting another 70 stores.
Check out Best Buy for yourself and then go out and find your “angels.”
Talk to you soon,
Kae Groshong Wagner
CEO, Founder — North Star Marketing
Award-winning Author, Speaker
Brand Consultant
CEO Advisor for Sales & Marketing