case study best buys retailer-led product strategy

8/4/2019 Case Study Best Buys Retailer-led Product Strategy

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2010, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Inormation is based on best availableresources. Opinions refect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar,and Total Economic Impact are trademarks o Forrester Research, Inc. All other trademarks are the property o their respective companies. Topurchase reprints o this document, please [email protected]. For additional inormation, go to www.orrester.com.

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ExECutivE SummaRy

Most retailers sell other companies goods; on occasion, they will sell products developed by others but

branded as their own. Best Buy does both o those things, but the company has also done something

dierent in order to dierentiate itsel in the market. First, it leveraged its deep knowledge o consumers

to understand what consumer needs were unmet in the market. Second, it approached PC OEMs to

develop a unique line o laptops to meet consumers specications. Tird, it bundled the laptops with

extended warranties, antivirus protection, and/or Geek Squad service. Finally, it created its own categorybrand or these laptops (You Spoke. We Listened.) that conveys relevance and simplies the buying

process, yet it relies upon the OEMs own brands to convey quality and reliability. With this retailer-led

product strategy, Best Buy uses its unique relationship with customers to create product dierentiation

while also delivering on its overall goal o delivering tech solutions to its customers. Consumer product

strategy proessionals at retailers can similarly create a retailer-led product strategy to leverage their

customer knowledge or product dierentiation.

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mailto:[email protected]://www.forrester.com/http://www.forrester.com/go?docid=57040&src=57080pdfhttp://www.forrester.com/go?docid=56616&src=57080pdfhttp://www.forrester.com/go?docid=55199&src=57080pdfhttp://www.forrester.com/go?docid=55199&src=57080pdfhttp://www.forrester.com/go?docid=55199&src=57080pdfhttp://www.forrester.com/go?docid=55199&src=57080pdfhttp://www.forrester.com/go?docid=56616&src=57080pdfhttp://www.forrester.com/go?docid=57040&src=57080pdfhttp://www.forrester.com/http://www.forrester.com/mailto:[email protected]


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BeST Buy DeSIgneD ITS OWn PC BRAnD TO SuPPORT ITS TeCh SOLuTIOnS STRATegy

Best Buy has worked to change its core strategy rom that o being a retailer o technologyproducts

to being a provider o technologysolutions. Tis strategy shi began with the acquisition and (re)

launch o Geek Squad, Best Buys in-house team o employees that install, repair, and upgrade

technology either in store, online, or in a customers home.1 Best Buy believes that bundling services

and products together orms a solution and that these bundles have led to growth. For example, Best

Buy experienced 29 consecutive quarters o double-digit growth in notebook computing a streak

that began exactly the same quarter it bought Geek Squad.2

In order to urther this goal o providing tech solutions, as well as to dierentiate itsel rom other

computer-selling retailers, Best Buy decided to develop its own internal category brand o laptops.

Rather than build its own, Best Buy approached a number o original equipment manuacturers

(OEMs) with specs to include in new laptop models to be built exclusively or Best Buy.3 Ten, the

retailer bundled the machines with extended warranties, antivirus protection, and short-term GeekSquad service plans. In so doing, Best Buy created new, exclusive PCs rom well-known brands like

Dell, HP, Sony, and oshiba in eect creating new PCs with a level o service not ound in other

laptops or rom other retailers.

Cstomrs, Vdors, Ad Sals Associats Sapd T Bst B PC Prodct Propositio

Best Buy markets these machines under an umbrella brand called You Spoke. We Listened. (see

Figure 1).4 As that name indicates, Best Buy listens to whats going on in the market in order to cull

the best ideas and capitalize on the most important trends. It then uses that inormation to build a

spec sheet or products that deliver those benets to consumers, and it works with the OEMs that

manuacture them. Best Buys product strategists rely upon three key audiences when developing

what goes into these machines:

What they hear rom their customers. Best Buy has many avenues or learning whatconsumers want rom their laptops. Its legion o Blue Shirt salespeople interacts with thousands

o customers on a daily basis, hearing how they use their laptops and what eatures and

unctions are important, unimportant, or missing. It also knows the pain points experienced

by consumers who use Geek Squad or troubleshooting or repairs, as well as the eedback it

receives rom its customer service channels. And it receives insight rom engaged consumers on

Best Buys IdeaX Web site, where the community can oer up ideas or product improvements

and vote on those ideas with which they agree.5

What they hear rom component vendors. Best Buy maintains strong lines o communicationwith vendors that build PC components, so it is aware o the latest and greatest breakthroughs

and innovations that can inuence uture PCs. Knowing the capabilities o the inputs to the

actual machine gives Best Buy the ability to vet consumer interests against the realities o the

marketplace.


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Source: Forrester Research, Inc.57080

Source: Best Buy Web site


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What they know themselves. As one o the primary technology retailers in the country, BestBuy has its own sales and inventory data about PCs, home networking gear, soware, and the

like so it knows what consumers are buying and, just as importantly, what they arent. Tis

proprietary data gives Best Buy insight that OEMs lack and on a scale that is unmatched by

other technology retailers.

Bl Labl Ad nxt Class Catr To Two Distict Smts O PC Brs

Best Buy created two sub-brands under the You Spoke. We Listened. umbrella so that it could

target two distinct segments o PC buyers.

Blue Label PCs target knowledgeable users who want the perect PC. Best Buys rstoray into developing voice-o-the-customer PCs was its Blue Label product, which caters to

consumers who want what it pitches as the perect PC (see Figure 2). Te rst iteration o Blue

Label laptops aimed to deliver extreme portability (light weight, great battery lie) and the abilityto use the machine more eectively in the dark (a back-lit keyboard). Te current iteration o

Blue Label machines ocuses on high perormance and delivers an easy way to view PC content

on the V (via Intels Wireless Display technology). While these machines are eature-laden,

they are designed to meet valid and relevant consumer needs.6

Next Class PCs cater to students. For students, providing the best technology and cutting-edge eatures is not the goal. Instead, Best Buy developed its Next Class brand, in which

the PC is designed with an eye toward efciency, portability, and a low cost (see Figure 3).

Microso Ofce Student edition is bundled into the purchase, so it is ready to use once the PC

is congured or use. A ull two-year Geek Squad membership is also included, which oers

students (and their parents) reassurances against technical problems. Tat benet goes a long

way with parents who might be buying the PC or their son or daughter, and it supports Best

Buys strategy o selling technology solutions.


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Best Buy evolves the You Spoke. We Listened. initiative with each successive product rollout

(see Figure 4). Te rst iteration o Next Class products ocused on student needs but built on the

concept o portability (size and battery lie) that was a cornerstone o the initial Blue Label products.

Version 2.0 o the Blue Label PCs (our term, not Best Buys) builds upon the earlier 1.0 iteration o

Blue Label by incorporating all o the previously identied benets and yet also borrows rom the

Next Class product by including increased warranty and support in the package. Te rm continues

to improve these internally branded products based upon what customers tell Best Buy they want

thus paving the way or uture success.7




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Fir 4 the El o y Spke. We Lseed. Prdcs

As you can imagine, including eedback rom multiple sources to build what you are billing as the

perect laptop is no easy task. Not unlike other market research processes, Best Buy starts with

higher-level qualitative issues, then hones in on the details. Collecting consumer data is continuous

and ongoing, o course, but there is a timeline that Best Buy ollows in advance o the launch o its

Blue Label products.

Eighteen to 20 months rom launch:Generate a list o customer needs and eatures. Gathertogether the current list o pain points rom Best Buy sources (Blue Shirts, customer service,

Geek Squad, the IdeaX Web site), and create a working list o 25 to 30 eatures to consider or

implementation. Tere are always some ideas or concepts whose time is not right. For example,

consumers oen complain about batteries running out o power. While a quick-charge solution

may be available today, the tradeos are currently unappealing; the PC gets too hot, or the

battery lie cycle is too short and needs replacing too quickly. Best Buy also uses conjoint

analysis to assess eature tradeo (e.g., portability versus screen size) and qualitative analysis

(ocus groups) to gure out what the exact eature set should look like.

Fourteen months beore launch:Refne the list. Narrow the larger list down to a set o threeto ve eatures to include in the next iteration o the product. It is at this stage that Best Buy

reaches out to vendors like AMD, Intel, Microso, and NVIDIA to ensure that it has a ull view

o the product ecosystem and to learn o tech advances that can deliver new eatures.


You Spoke. We Listened.Product Blue Label 1.0 Next Class Blue Label 2.0

Launch October 2008 July 2009 January 2010

OEMs Toshiba, HP Toshiba, Sony, Dell, HP Toshiba, Sony, Dell

BenefitsExtreme portability

Reasonable cost

Backlit keyboard

Source: Best Buy interviews, March/April 2010

PreloadedMicrosoft OfficeHome & Student

Warranty andsupport

PortableBacklit keyboard

Wireless connectivityto HDTV sets

High performance

Warranty and support

Extreme portability


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welve months beore launch:Give the fnal specs to the OEMs that will build the products.Once Best Buy has nalized the spec sheet, it needs a complete redesign o the PC; the OEMs

need at least one year to manuacture this. For the current Blue Label product, Dell, Sony, and

oshiba were Best Buys partners; or Next Class, that list also includes HP.

Troughout the process:Evaluate customer input all along the way. Te You Spoke. WeListened. product teams constantly go back and check their work, looking or how customers

needs have changed or how their the Internet use has altered, both o which might aect the

product. Te Blue Label team conducts quarterly surveys o PC users in order to keep abreast

o the latest thinking. For Next Class, a series o ocus groups with 18- to 24-year-olds is used,

ranging rom listen only sessions to hands-on experience with prototype machines and to

testing o soware builds, wherein the team is ultimately looking or the answer to the question:

Did we get it right?

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enDnOTeS

1 Geek Squad services are available to anyone, not just those consumers who purchase products at Best Buy.

Source: Geek Squad (http://www.geeksquad.com/).

2 Best Buy acquired Geek Squad on October 24, 2002. Source: Best Buy and Geek Squad Join to Serve the

Public, Police echnology and Protect Te World, Business Wire, October 24, 2002 (http://ndarticles.

com/p/articles/mi_m0EIN/is_2002_Oct_24/ai_93303783/). Source or recent results: Best Buy Co., Inc.,

Q4 2009 Earnings Call ranscript, March 25, 2010 (http://seekingalpha.com/article/195669-best-buy-co-

inc-q4-2009-earnings-call-transcript?page=4).

3 Best Buy has its own exclusive brands or a variety o products, including Vs, cameras, GPS, and

accessories (Insignia and Dynex); home ofce urniture (Init); and gadgets and connectivity accessories

(Rocketsh).

4 According to our interviews with Best Buy executives, Best Buy originally used the You Spoke. We

Listened. phrase as a marketing tag line or its Blue Label product line. As the initial Blue Label product

gained momentum and the Next Class brand emerged, the company realized that You Spoke. We Listened.

was actually the mantra or what it was trying to do, so the tag line was elevated to the umbrella brand.

5 BestBuyIdeaX.com is Best Buys innovative Web site that invites visitors to provide eedback on anything

relating to the Best Buy experience rom in-store suggestions to product eatures.

6 Advances in technology combined with market efciencies are making it possible even necessary or

products to include eature upon eature to stand out rom the pack or attract savvy consumers. Yet eature

bloat was already a problem or many o these products, such as DVRs and mobile phones, and products

will only suer i they descend urther into a syndrome that Forrester calls eaturitis. We recommend that

companies evaluate their eatures with a needs-based eature assessment map that builds on Forresters

Convenience Imperative research and its undamental human needs model. See the May 14, 2010,

Mapping Product Features o Consumer Needs report.

7 According to Best Buy, new iterations o the Blue Label product line are driven by consumer demandor, and availability o, unique cutting-edge eatures and benets, whereas Best Buy plans to introduce

Next Class products on an annual cycle coinciding with the new school year, oering the same general

efciencies but with rereshed PC hardware.

8 Source: Q2 2010 Global Consumer Product Strategy Research Panel Online Survey.
http://www.forrester.com/go?docid=56914&src=57080pdfhttp://www.forrester.com/go?docid=56914&src=57080pdf


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9 As the worlds largest corporation, Wal-Mart is known to be quite demanding o its suppliers. Source: John

Anderson, Running the Gauntlet at Wal-Mart, Inc. Magazine, November 1, 2003 (http://www.inc.com/

magazine/20031101/walmart.html).


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case study best buys retailer-led product strategy

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