Zoning in for Best Buyers

Zoning in for Best Buyers
Tags: CRM, Customer Experience, Customer Service, Loyalty Programs, Marketing, Payments, Retail - Electronics, ROI, Technology
September 14, 2010

Looks like last year’s fine-tuning of Best Buy’s Reward Zone loyalty plan is paying off for the retailer, but time will tell if it is delivering for members.

In a second-quarter earnings call Sept. 14, Best Buy Chief Financial Officer James Muehlbauer told analysts that the chain has been relying on customer data, particularly from its Reward Zone program, to gauge customer reaction to certain promotions. As a result, it is shifting investments from less successful events to the better-performing ones. Best Buy posted a quarterly profit of 60 cents per share, beating Wall Street expectations of 44 cents.

“We made some changes to our loyalty program last year to provide richer benefits to our better customers in the portfolio and reduce expense associated with folks who weren’t that engaged with Best Buy,” he told analysts. “So that trickled through our business through the entire year . . . It most predominantly shows up in our higher-ticket categories, like appliances, in-home theater, where customers are getting a lot of Reward Zone points for those purchases in their portfolio.”

Best Buy in June 2009 changed some of the rules of its points-for-purchase Reward Zone program, including a requirement that members must make at least one Reward Zone purchase a year and also placing an expiration date on points. The latter translates to potential debt reduction for Best Buy, because points earned but not yet redeemed are recorded as accounts payable.

But will members feel redeemed? If they lose their points, will they feel cheated and drop out – and worse, tell others? There is that risk, and I am sure Best Buy took it into consideration. Muehlbauer did reference “better customers” as well as “folks who weren’t engaged.” It clearly weighed the value of casual members against those who shop its stores regularly for big-ticket items, like televisions.

A retailer does have to generate top-line results, and often this requires tweaking and fine-tuning. Hopefully, Best Buy’s associates have been trained to be absolutely clear about program requirements.