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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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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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Fir 1 y Spke. We Lseed. is Bes Bs ubrell Brd Fr Cser-ieced PCs
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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Fir 2 Ble Lbel messgg Fcses o Cser ip y asked Fr the Perec Lpp
Source: Forrester Research, Inc.57080
Source: Best Buy Web site
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Fir 3 ne Clss Cers t Sdes
Bst Bs Procss Starts 20 Mots Bor Rlas
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
Source: Forrester Research, Inc.57080
Source: Best Buy Web site
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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.
Source: Forrester Research, Inc.57080
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.
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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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