Best Buy uses analytics to boost sales

Best Buy’s enterprise-wide approach to analytical decision-making has contributed to maximizing its financial performance. Most recently, they have introduced free financing offers for entire shopping cards full of items – rather than one product at a time.

As the recession spiraled, consumers’ spending habits changed dramatically. Many stopped spending altogether and those who were still hitting stores showed some disturbing patterns. The number of customers signing up for financing on such purchases as big-screen TVs and computers surged. At the same time, the number of shoppers spending over $1,000 per trip plummeted. In response, the electronics retailer introduced the free financing offer to convert as many shoppers to Best Buy purchasers as possible. Best Buy Chief Marketing Officer Barry Judge said "We realized that storewide financing could be a powerful differentiator in the marketplace.”

When the economy was booming a few years ago, Best Buy decided to forgo short-term revenue to dig deeper into customer habits. They removed the annual fee from its bonus card and nearly 10 times more shoppers signed up. Armed with more customer data, the company understood its shoppers better and was able to align merchandise accordingly. In another instance, Best Buy collected data on 60 million US households through customer interactions. They used insights from this information to develop eight customer profiles. This was used to train store associates to have the right conversions and target the right demographics based on needs.

It is more important than ever that business decisions be made based on analysis of rapidly changing customer preferences & behaviors, and be optimized for sales growth without compromising margins. A single poor decision on which products to promote can make the difference between meeting or beating expectations. Analytics have had a tangible result at Best Buy: Its strong culture of analytics has enabled it to withstand a tough retail environment with minimal damage.

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Best Buy is the largest consumer electronics retailer in the U.S., with about 20% of the $170 billion market. With the 2009 acquisition of 50% of the Carphone Warehouse's retail operations, the firm increased its stake of the $700 billion global consumer electronics market to roughly 6%. The firm also operates under the Future Shop and Five Star trade names in Canada and China, respectively, and Magnolia Home Theater, Pacific Sales Kitchen and Bath, and Geek Squad in the U.S. It was formerly known as Sound of Music, Inc. and changed its name to Best Buy Co., Inc. in 1983. The company founded in 1966 and is headquartered in Richfield, Minnesota.

Indus Insights is a specialized consulting firm that assists organization in leveraging analytics to drive business performance. They use state-of-the-art mathematical and statistical techniques to unlock game-changing insights hidden in data; and then translate these insights into actionable strategies.