Best Buy

4 May 2012

Social Tools at Best Buy: A Cautionary Tale

by Freddy J. Nager, Founder of Atomic Tango + Occasional Tool User…

My father runs a plant nursery up in Oregon, and for years he enjoyed a steady business with few disruptions beyond the weather. Then one day WalMart lumbered into town, and like a scene from a Godzilla flick, it began crushing everything. Mom-and-pop shops that had served the community for decades were flattened.

Some store owners heard that the best way to beat the low-price leader was through customer service – after all, that’s what every business guru was saying:

“It’s all about relationships.”
“Customer service is the new marketing.”
“Don’t be product-centric, be customer-centric.”

Of course, none of that worked. As my father observed at his nursery, people would come in for his expert advice, which he would patiently and generously dole out. He would walk them around the nursery and point out the perfect plants for their yards. The people would listen and take notes and thank him profusely — then drive to WalMart and buy the same product for a lower retail price than what he could buy it for wholesale.

Sure, customers want great service, but some like low prices even more.

My father’s solution was to stop selling anything WalMart carried. He redid his entire inventory to focus on obscure plants and niche products that were too localized and specific for a mass-market chain. Yes, he went product-centric, and his sales aren’t what they used to be, but he’s still in business today.

Well, the big boxes like WalMart are getting a taste of their own medicine from a more formidable behemoth: Amazon.

Target, for example, stopped selling the Kindle because it no longer considers Amazon a complement or collaborator, but a fearsome no-holds-barred competitor. They’re right.

And then there’s Best Buy…

For years Best Buy enjoyed a steady business with few disruptions, and its big-box buying power enabled it to crush small retailers as well. Then came Amazon, which was able to sell electronics for even lower prices because, as an online-only retailer, Amazon didn’t have the expensive retail spaces, sales clerks, and (at least for a while) the sales tax burdens that Best Buy incurred.

So Best Buy looked for a solution, and it heard what the business gurus were saying:

“It’s all about relationships.”
“Customer service is the new marketing.”
“Don’t be product-centric, be customer centric.”

Indeed, Best Buy’s CMO Barry Judge fancied himself a guru, blogging about the new marketing and its focus on customer “dreams.” He even made a video:

Overnight, Best Buy was hailed as a social media pioneer. Self-proclaimed social media gurus, visionaries, thought leaders, and other snake-oil peddlers cited Best Buy as a “best practice” and a “case study” in how to do marketing. Best Buy employees were encouraged to tweet and Facebook and have conversations with customers, to learn about their dreams, and to foster relationships.

Well, you can already predict what happened next, right? That’s right: all those customers would listen and take notes and thank Best Buy profusely — then use their mobile phones not to get Best Buy deals (as seen in the video), but to check prices on Amazon, where they ultimately made their purchase.

Cue Queen, “Another One Bites The Dust.”

Today Best Buy is downsizing, going to smaller stores with limited stock, and shutting down other stores altogether. The smaller stores will serve more as showcases than retail outlets. And Barry Judge? Oh, he resigned. His blog, where he used to write about social media and the marketing of the future, now looks like this: Learn all about the power of social media here.

Now, I’m not picking on Barry. I like a lot of what he said in his video. Those are some nice tactics that could actually work — in the right market for the right company and the right customer. Like, say, in elective surgery, where the combo of a customized solution and total transparency and close customer relationships does have value, and where price isn’t all that matters.

But those social tools and tactics don’t work all that well in big box retail. Why? Because we all know why we go shopping at a big box. It’s not for help or insights or relationships. It’s not to have a minimum-wage clerk or commission-based sales rep actualize our “dreams.” We go shopping at a big box because we want massive selection and we want it at the lowest possible price and we want it now. That’s the only reason we tolerate these massive blots on the landscape. Yo, Box, we’ll let you drop a freakin’ warehouse in the middle of our parkland and neighborhoods, but you better give us variety and mega-discounts — or else why bother?

We don’t have feelings for big boxes. We don’t have loyalty to them — if we’re willing to let mom-and-pop fend for themselves, why should we care about a mega-corporation?

“Social” is not a strategy; it’s a tool.

If your fundamental business model doesn’t match your market, then no amount of tweeting and Facebooking, blogging and pinning, will help. Indeed, going social could hurt you if you’re wasting your time and money mucking around in it instead of investing in what might actually work — like creating products that are completely different from what your competitor carries or would even want to carry. (And, yes, that means paying attention to your competitors, not just your customers.)

So please do learn about social media. But also learn about other marketing options. And by all means learn about your customers AND your competitors AND your community AND your own company strengths and weaknesses. Then select tools because they’re right for the situation, not because some guru’s video tells you they’re the future.

After all, many of those people who were predicting the future are now history.

Update 5/16/12: Apparently, Best Buy wasn’t very good at this “transparency” thing either.

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Freddy is the Founder & Creative Strategist of Atomic Tango. He also teaches at the University of Southern California (go Trojans!), shoots pool somewhat adequately, and herds cats. Freddy received his BA from Harvard and his MBA from USC.

3 Responses

  1. Amen! Great insights—it’s all about what you substantitvely are; the technique is only about style.

  2. Thanks for being explicit that PRICING is an essential component of product marketing, especially in commoditized sectors such as Consumer Goods Retailing, and Retail Banking. I can only hope that Community Bank and Credit Union business & marketing executives are paying attention!

    No doubt relationships matter, but the Best Buy and a mountain of other empirical evidence illustrates that consumers are not stupid and generally dislike overpaying.

    Social Media is an important channel for marketers, particularly in the Retail Banking sector. Yet, as you point out – social media is not a strategy… just as email marketing is not a strategy. Sadly, my experience suggests that too many Community Banks and Credit Unions have no strategy, other than to pray and hope. As a result, they tend to follow yesterday’s tactics, many of which have proven to be highly ineffective.

  3. this is a very insightful article. Everyone talks about social media. But how you use it is so important.

    thanks for sharing

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