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Getting to Know You

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Falling sales, higher costs and weaker-than-expected earnings; all have been associated with Best Buy in recent years. With pressures from every end, the electronics retailer is looking to analytics to help it walk the tightrope between a better customer experience and lower prices.

Best Buy has a number of data functions throughout the operation, including merchandising, end-of-life optimization, space management, supply chain analytics and business intelligence, and it emphasizes sharing across teams. “We operate in a highly networked, highly matrixed way,” says Scott Friesen, senior director of analytics, customer insights unit and CRM development. “We try to establish and develop informal connection points.”

A quarterly gathering of analytic groups was coined the “Psychic Friends Network” by Geek Squad founder Robert Stephens because “he says we knew everything before it was going to happen.”

They also might be referred to as the “Truth Squad” — an important, if potentially unpopular, role within a company that lost $1.23 billion in its most recent fiscal year and has seen same-store sales decline.

More personal experiences
Friesen believes that analytics can help the company find its way. “Best Buy is under the strain of trying to meet multiple needs simultaneously,” he says. “Smaller and smaller margins of difference matter. When companies are faced with improving their service experience at the same time they’re trying to cut cost and price, it requires intelligence be applied to ‘de-average’ the system.”

That means creating an experience that is “more personal, more relevant,” Friesen says. “The only way to do that where you both get the economics of scale and simultaneously have a more personal experience is through data and analytics.”

That’s why the company is exploring ways to better tie customer data together. Currently, a customer may interact with Best Buy through its stores or online, but they also may purchase subscriptions or services, have installers or repair technicians in their home or interact with a call center.

“You have a splintering of the identity of an individual,” Friesen says. “They are showing up in all these different places and at different times. People talk about Amazon’s great data work, but they have only one front door. When you have a number of door fronts, keeping track of which is which becomes complicated.”

That’s where Best Buy’s analytics could improve, Friesen believes — by providing better data on the front end. “The tool and the talent on the team is not the weakest link. The data is.”

The company is in the midst of a project to overhaul its customer data enterprise. The goal: “I recognize you, I remember you, I understand you.” That means knowing a customer when he interacts with the company on any front, linking together all the interactions and providing relevant offers.

“To understand you, I need to not send you offers about things you’ve already bought,” Friesen says. “I have to know who you are to make that connection.”

That’s exactly what today’s consumers want, says Diana McHenry, SAS’s director of global retail product marketing. “On the customer side, it’s, ‘I want you to know me,’” McHenry says. “If I trust a brand, and do business with them, I want them to know me and communicate relevant offers.”

McHenry likens it to walking into her favorite women’s clothier and being told that those trousers that she’s had her eye on are in stock and in her size or — at the opposite end of the spectrum — making a $1,500 purchase at a furniture store and receiving only a $3 off coupon. “Customers easily can have something else delivered to their doorstep tomorrow,” McHenry says. “It’s imperative to leverage analytics as a competitive weapon, whether they are a small company or large.”

More relevant messaging
While the project is still in the early phases, Best Buy has already made strides with its e-mail marketing campaigns thanks to analytics. “We’ve gotten better at targeting customers with more relevant messaging,” Friesen says. “That’s been an improvement and it’s come at a time when the cost of e-mail marketing has continued to go down. The return has multiplied over the last couple of years.”

The next phase, he says, “really is about a different definition of return on advertising spend,” he says. “I think it’s return of attention span. Cost is not a limit. My limit is making sure that I don’t communicate with customers so much that I annoy them.”

The success of any e-mail campaign is revealed by the unsubscribe rate, a figure which Friesen says has remained stable though the company has increased its communications. “It’s a little like tuning an engine,” he says. “You have to find the right spot.”

More and more retailers are trying to find that right spot, whether through e-mail marketing changes or some other form of analytics. But these days, it’s from a position of strength rather than looking for nickels and dimes to make quarterly budgets, McHenry says.

“What we saw after the economic downturn was targeted approaches so that folks would come to us and say, ‘I want to do just X or Y and get a quick bang,’” she says. “Now we’re seeing people build that underlying foundation, an omni-channel view in understanding the customer.

“Retailers can add business capabilities to empower their growth strategy and be able to get better margins, better inventory, sales associate productivity and more satisfied customers,” McHenry says. “It’s almost like we’ve learned our lessons as a worldview: The foundational things will pay long-term results in addition to the short-term win.”

Friesen believes that’s the viewpoint at Best Buy.

“I think that the reason there’s a place for us in the market is that it is still hard for consumers to get everything they want out of the technology they buy,” he says. “The biggest thing on the customer side is we will be able to help customers get more out of the technology with less effort on their part.”

For example, he says, “If I know what you just bought and what else you own, I can give you tips on how to connect those together. There’s a hunger out there for guidance on how to make those things work in people’s lives.

“For a long time we got away with the fact that our Blue Shirts knew a bunch of stuff and customers came in and could talk to them,” Friesen says. “That interaction will be a key component, but I don’t believe it will be the only component. We have to enable those Blue Shirts and the customers to have more information at their fingertips.”