Best Buy Overhauls Rewards Website To Spur Online Sales

Best Buy (NYSE:BBY) is looking at integrating its customer loyalty program Rewards Zone with its website bestbuy.com, in order to enhance customer experience and drive sales. It wants to encourage shoppers to write product reviews or post about items purchased on Facebook, in exchange for points that can later be redeemed for perks and discounts. At the moment, the domain for Best Buy’s Reward Zone operates separately from the general website. ^[1]

In exchange for rewarding customers with points and discounts, Best Buy is hoping that positive reviews and recommendations will influence other shoppers to purchase merchandise from it. Also, the data generated can be used to target customers with tailor made deals and discounts.

This move ties in neatly with the emphasis on online growth articulated in Best Buy’s “Renew Blue” strategy to turnaround the company. It has been struggling in face of a rapid structural transformation in the consumer electronics retail industry, with the growing clout and reach of e-commerce companies like Amazon.

See our full analysis for Best Buy

Focus On Online Growth Under Renew Blue

Under the Renew Blue strategy, the big focus is on accelerating growth in the online segment. The company intends to increase online traffic and increase the conversion rate among visitors by providing a more interactive shopping experience. That means keeping track of user preferences based on their browsing history and generating recommendations accordingly. In Q1 this year, these initiatives included the deployment of best-in-class search engine marketing tools and a corresponding increase in investments in paid search. Also, Best Buy expanded its affiliate marketing channels and added an option for dynamic product recommendation to the checkout process.

These initiatives resulted in a 16% increase in domestic comparable online sales during the quarter. In the current quarter, the company’s top priority will be to optimize its natural search or SEO ranking.

Another initiative rolled out in full earnest in the first quarter is aimed at enhancing customer experience across channels, be it in-store or online. Last quarter, Best Buy unveiled a new metric called the Net Promoter Score (NPS) to track customer satisfaction levels with the company’s service. This is measured for all customers, whether they choose to buy from the company or not. We are of the view that this measurement is a very handy tool to influence and shape behavior. Indeed, Best Buy has realized that the customer satisfaction levels with its sales associates, service and price perception have improved since it introduced the NPS in November. Quantitatively, the NPS has shown a 300 basis point growth. ((Best Buy Q1 2013 Earnings Conference Call, Seeking Alpha))

Integration Of Rewards Zone With General Website A Part Of Renew Blue?

The key Renew Blue online strategy objectives of increasing online traffic, increasing the conversion rate among website visitors and providing an interactive shopping experience are applicable to the latest move. With the integration of Rewards Zone and the general website, users will be encouraged to sign in using their unique loyalty program identification. This is because they will now have an opportunity to accumulate reward points by writing reviews on Facebook and Twitter, rather than by just purchasing merchandise.

In the process, their browsing data can be captured by Best Buy, which could then use data mining techniques to discern patterns of behavior among customers. The insights gleaned from these can be used to decide store composition, plan inventory and come up with tailor made deals and discounts based on an individual’s past behavior and preferences. All of these are likely to result in higher sales as well as cost reductions by elimination of inefficiencies.

Best Buy’s Rewards Zone program is currently one of the largest retail loyalty programs in the country with 40 million members. It’s time that the company exploits the full potential of the data at its disposal. It estimates that nearly 70% of its customers research products on bestbuy.com before purchasing it from the store. By getting these people to spend more time and money on the website in addition to visiting stores, the revenue generated per customer can be increased.

Right now, the online sales of the company constitute less than 10% of its store revenues despite the high number of visitors on the website. If Best Buy is to thrive and survive in this business that is moving increasingly to the online domain, it needs to get these programs right.

We have a price estimate for of $20 Best Buy.

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1. Best Buy to merge Rewards Zone with bestbuy.com, Star Tribune [↩]