In their new book, Return on Customer, Don Peppers and Martha Rogers explain why corporate America needs to realign its focus from selling products to giving customers what they really need. In this excerpt from Chapter 3, they discuss how Best Buy has made strides to achieve such a customer-centric focus.
Understanding what customers need from you is vital to your firm’s long-term success. In many industries, customer-oriented firms can secure a competitive advantage, and this competitive advantage can easily translate not only into higher earnings but into a higher price-earnings ratio for a company’s stock as well.
Customer-centric firms such as Dell, Royal Bank of Canada and Best Buy concentrate on raising their returns on specific customer segments. The combination of increased earnings and an increased stock rating can catapult such firms’ stock prices upward. This isn’t about "marketing." It’s about your company’s ability to succeed and grow.
Take Best Buy’s recently launched "customer-centricity" effort, for example. Best Buy trained its store-level employees to recognize and think about the different needs of five types of highly valuable customers:
- Affluent professionals who want the best technology and entertainment experience
- Active younger males who want the latest technology and entertainment
- Family men who want technology to improve their lives—practical adopters of technology and entertainment
- Busy suburban moms who want to enrich their children’s lives with technology and entertainment
- Small-business customers who can use Best Buy’s products and services to enhance the profitability of their businesses
After a successful pilot project involving 32 stores, the company began rolling out its customer-centricity initiative to an additional 110 stores. A UBS analyst report suggests that this initiative should provide Best Buy with stronger financial results as the company refines its program. It also should provide less cyclical results, as more stable relationships with high-value customers counteract shifts in general consumer spending and demand for consumer electronics. The UBS report also notes that employee empowerment is crucial to the success of Best Buy’s program. "Best Buy empowers its store-level employees—those individuals closest to its customers—to tweak merchandising, store signage, store layout and so on to best appeal to [particular customers]," the report says.
For example, a Pasadena store employee explained how store-level associates had suggested a reconfiguration of the store to better appeal to suburban moms, moving small appliances down onto a low rack along the store’s main walkway, rather than leaving them stocked on higher shelves among the major appliances. According to the report, "sales of small appliances skyrocketed to well into double-digit gains from moderately negative."