What Best Buy Is Doing Right: Rewarding Loyal Customers

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Best buy CustomersFinally there's some good news for Best Buy (BBY) shoppers -- and perhaps, eventually, its shareholders.

Lost in last week's dreary announcements of job cuts, superstore closures, and potentially problematic employee incentive programs was a mandate to beef up its customer loyalty programming.

Reward Zone Silver -- the program that Best Buy reserves for customers spending at least $2,500 a year at its stores -- already offers some enhanced features that include free ground shipping on most BestBuy.com orders and relaxed terms on returns and reward point expirations.

Last week's quarterly report promises even more advantages to Reward Zone Silver members, who already account for a significant chunk of the company's business.
  • Reward Zone Silver customers will soon be upgraded to free expedited shipping on their BestBuy.com orders.
  • Members will receive "premier access to many of the most popular products and major sales events" at the store.
  • Silver members currently have a 45-day window for returns, slightly longer than the 30 days that other buyers have. The new policy will offer "no hassle" returns and price matching for up to 60 days.
  • The beefed-up plan will include a free house call from Geek Squad, Best Buy's tech support arm. The current plan already offers a complimentary home theater consultation, so one would think that this is related to other home tech issues.
How to Keep Shoppers From Straying

One can always argue that there aren't too many people spending $2,500 a year at Best Buy, especially these days, when lower prices are typically easy to find online.

However, customer loyalty plans work. Just ask members of frequent flier programs whether they even bother to check the fares at rival carriers when they need to book a flight. The same can be said for lodging chains with their customer reward programs. You'd be surprised how the promise of free WiFi or in-room amenities will keep travelers ignoring cheaper rates at nearby hotels.

Video game retailer GameStop (GME) has been able to hold its own during the past three years, which have been disastrous for the sale of games and gear, by growing the number of its PowerUp Rewards members.

PowerUp Rewards is a free program that offers GameStop shoppers points on purchases which can be used for discounts, exclusive game codes, and more. There is also a $15-a-year PowerUp Reward PRO option that includes even more goodies, 10% discounts on pre-owned purchases, and a magazine subscription.

Taking a Page Out of the Amazon.com Playbook

If some of the new Reward Zone Silver initiatives seem familiar, it may be because the meandering consumer electronics giant is eyeing some of the ideas that have been working for Amazon.com's (AMZN) Prime program. (As far as companies to emulate, Amazon's a good choice: Motley Fool analysts named it one of the cash kings changing the face of retail.)

There are reportedly millions of Prime members paying $79 a year for the program, which provides free two-day shipping on all of the Amazon.com-warehoused goods. Yes, that's the "expedited" shipping that Best Buy appears ready to roll out to Reward Zone Silver members.

Amazon also offers Prime customers some unique digital perks. They get a free Kindle "rental" once a month from a select group of titles. Amazon also has growing video catalog of 17,000 titles that can be streamed at no additional cost.

Best Buy obviously doesn't have an e-reader platform to promote. It does have a digital movie service, but CinemaNow doesn't appear to be gaining any kind of traction. However, Best Buy is giving Reward Zone Silver members some neat perks that regular shoppers are certainly not getting.

Saving Best Buy -- Is There a Chance?

Is Best Buy the next Amazon.com or the next Circuit City? Negative store-level sales in four of its past five quarters, layoffs of hundreds of employees at the corporate and support levels, and plans to close 50 of its superstores this year may indicate that Best Buy is walking the path of Circuit City and smaller failed retail concepts.

However, Best Buy's resilient profitability gives it time to tweak the model and see if something works.

It may be too late. There are already too many ex-Best Buy shoppers with unpleasant memories of buying in the store, only to find the same thing elsewhere for less. Others are simply turned off by the litany of insurance protections and services that employees try to attach to merchandise sales.

We still can't underestimate the value proposition of a strong loyalty program. If Reward Zone and Reward Zone Silver can be magnetic enough to turn buyers to Best Buy the next time they need a printer cartridge or a washing machine, the company's prospects may not be as dim as last week's stock hit would seem to suggest.

For a free Motley Fool report about the cash kings changing the face of retail, click here. Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Best Buy, Amazon.com, and GameStop. Motley Fool newsletter services have recommended buying shares of Amazon.com. Motley Fool newsletter services have recommended writing covered calls on GameStop
.


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171 Comments

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yoder2mr

I will do what I can to stay away from Best Buy. The sales people won't take no for an answer when you don't want to buy add ons, like insurance. I was so upset my wife kept calming me down

April 11 2012 at 8:52 PM Report abuse rate up rate down Reply
ha

Some of the biggest complaints are about BB not selling enough CDs and DVDs? lol what? Stop refusing to acknowledge that media is changing. Besides, everyone buys that ancient stuff off Amazon anyways.

April 04 2012 at 2:23 PM Report abuse rate up rate down Reply
Warrior

I'm OK with Best Buy disappearing forever! They talk about rewarding customer loyalty...Loyalty is supposed to work both ways...It has to do with mutual trust. Best Buy Rewards Program had my personal email address. Best Buy partnered up with some firm (I believe it was named Epsilon) that sold my personal email address to advertisers without my knowledge or authorization. I suffered a massive bombardment of unsolicited advertising and emails..and, computer viruses. I was already a previous victim of identity theft; and, feel I was raped when that happened. It destroyed the little bit that I had. The bank helped me re-coup some of it; but, there were other things that created problems besides just the loss of my money. Best Buy left me wide open to it happening all over again. My ISP is another source of potential problems with their marketing schemes that collect a data base on my every move, so they can use "targeted advertising" based on my interests. First off, I do not want my privacy invaded. Second, I do not want people exploiting me, to make money, especially without my authorization. In addition, I do NOT want America to become a society run by "Big Brother!" I used to be an excellent customer of Best Buy; but, they betrayed my trust forever! Some competitor can easily replace them. I hope their employees are able to find work elsewhere...except for their marketing people and executives connected with the Epsilon fiasco. I hope Epsilon gets sued by someone, and their entire staff goes to prison!

April 03 2012 at 11:12 PM Report abuse rate up rate down Reply
dstroupe2

BEST BUY is a RIP OFF!!! I got caught up in purchasing a fax machine in 2000...it was faulty and I wanted to EXCHANGE it...and they gave me a song and dance that I "had to send it off...wait on it to be repaired, etc". I gave them back (FREE) the fax machine I purchased and told them I would be back to PICKET their store. When I showed up with my picket signs, they changed their mind and gave me one of equal value - which was what I wanted to do in the FIRST PLACE. BESY BUY...GOOD BUY!!!

April 03 2012 at 10:02 PM Report abuse rate up rate down Reply
brucea

As a customer I found that Best Buy rarely had the best price - but they did have it in stock locally, often at full retail. But if I'm going to pay a little more, I expect some of the profits to go into customer service. I still buy from them when I have to - but customer service still leaves a bad taste. Also, I bought an electric range from them recently - you'd think it was the 1950's. It took 45 minutes to do paperwork on what should have been a 5-10 minute transaction.

April 03 2012 at 9:29 PM Report abuse rate up rate down Reply
saltyiv

I am that loyal customer in a horrible return debacle. I bought an Asus tablet, a key board, the two year insurance and the Geek squad set up. The tablet's operating system failed. I returned all of the above after three weeks of trying to work with Asus to resolve the unresolvable. There were no other tablets available. I was within the 45 day return policy for a silver premiere member. I was told by the store customer service manager he would not return a credit to my Best Buy card and return an additional cash purchase for the keyboard. He would give me a gift card for the total. I was forced to spend nearly $900 on a gift card, instead of getting a refund. I escalated this to the corporate office and still have not gotten resolution after speaking to multiple supervisors.. This has been going on for over two weeks. Newspaper complaints, Consumer Fraud Agency and small claims court is my plan, if I do not receive a refund by tomorrow. They have lost my loyalty.

April 03 2012 at 9:08 PM Report abuse rate up rate down Reply
wallinginc

Best Buy forgot about customer service and assistance when you have a question. I was at an Apple Store this weekend and they had, at least, 50 staff ready to help with questions, Best Buy needs to learn people will buy products if they can talk to a knowledgeable sales rep., rather han stand there waiting for an hour before someone can assist you.

April 03 2012 at 9:08 PM Report abuse rate up rate down Reply
intunecreations

I can assure you I won't e returning back to Best Buy either after my last experience at Best Buy. Done with them! They to use to be one of my favorites....

April 03 2012 at 8:17 PM Report abuse +1 rate up rate down Reply
philmanag

If they failed today, it would be too late. I wished they had failed several years ago when I went to purchase an item on sale , but was told they didn't have it. Being the very first customer into the store that day, I asked for a rain check. I was told in a very rude manner they don't give rain checks. I told them if I was the second customer in the store, I wouldn't be bothered by it, but being the first customer, I EXPECTED TO BUY THE ITEM. After some heated exchanges with some employees, I left without the item. When I got home and called the manager, she was very rude and indifferent. I called coporate office, and they didn't offer a solution and appeared not to care. My last trip to best buy. I hope for failure for this company, because they don't know the word customer service.

April 03 2012 at 8:05 PM Report abuse +1 rate up rate down Reply
pater1

Over the years, I've had a number bad experiences with Best Buy which is why I haven't even stepped foot in the store for over 2 years. I believe they have never really gotten "it" right and it's going to take more than a rewards program for $2500 buyers. Another mess of a company..........

April 03 2012 at 8:03 PM Report abuse rate up rate down Reply