So much emphasis today is placed on knowing who your customers, and rightly so. Understanding what makes your customers loyal is critically important to a successful business. CRM programs, loyalty clubs and cards and even credit cards are all based on maintaining a strong relationship with each and every individual customer.
Can there be too much, however? Is there a law of diminishing returns? Can you get to the point where you can truly do more harm than good by getting to know your customers so well?
Best Buy, well known for their customer segmentation efforts, might be the best company to look at when asking these questions. In recent years, Best Buy has restructured their company around the customer segments that they have identified. Two years ago, when Best Buy first identified the Jills, Barrys and Buzzes of their world, they were pioneering the way that retailers look at customers. Best Buy began to drive sales increases by focusing on specific customer segments, to great benefit. For more on the success, click here.
Next, Best Buy began to think about opening up stores that spoke to only one segment at a time. They came out with EQ Life and Studio d for the Jills and Escape stores for the Buzzes.
Now in concept, this was good. This was the logical next step. If focusing stores around your segments can increase comp sales three times more than stores that hadn't been changed over, than there must have been money to be made by creating stores specifically for each segment, right?
No longer would Jill need to come to Best Buy with her husband. No longer would the Buzzes of the world have to suffer through shopping in the same store with refrigerators.
But how did it work out? Well, EQ-Life closed it's flagship store in Richfielf, MN. Studio d has gone belly up. Escape still just has one location, in Chicago, after over 2 years in business.
So what comes first, the chicken or the egg? The knowledge about the customer, or a destination for the customer in the first place?
Anymore, people don't have to go out to go shopping. You can get everything you need from home. If someone is going to a store to get something, they're going for more than just product, and that's what Best Buy forgot.
Best Buy analyzed what people purchased and not necessarily what they shopped for. Maybe the Jills liked coming for a reason other than just the merchandise they bought that Best Buy used to identify them. Maybe they liked big, warehouse type feel because it was exciting and kept their kids occupied while they shopped.
In retail, there's so many factors to consider, such as location, assortment, differentiation, price point, marketing and advertising, and, of course, customers. And however amazing the data may be that you can collect from behind the two-way mirror, engaging your customers in conversation, asking them questions, and taking their feedback seriously may prove to yield much better results.
There comes a point when you can be overburdened by the data, where you can overthink the data. Never forget the KISS mantra. Apply it to your customer segmentation.
And now, it seems, Best Buy is doing just that. They've narrowed their segmentation down a bit, and are taking a more simple approach. I'm glad that they failed so that the rest of us don't have to. They're keeping Best Buy stores that we all know and love, and tweeking the model more appropriately here and there.
10.24.2006
Over-Analyzing
So much emphasis today is placed on knowing who your customers, and rightly so. Understanding what makes your customers loyal is critically important to a successful business. CRM programs, loyalty clubs and cards and even credit cards are all based on maintaining a strong relationship with each and every individual customer.
Can there be too much, however? Is there a law of diminishing returns? Can you get to the point where you can truly do more harm than good by getting to know your customers so well?
Best Buy, well known for their customer segmentation efforts, might be the best company to look at when asking these questions. In recent years, Best Buy has restructured their company around the customer segments that they have identified. Two years ago, when Best Buy first identified the Jills, Barrys and Buzzes of their world, they were pioneering the way that retailers look at customers. Best Buy began to drive sales increases by focusing on specific customer segments, to great benefit. For more on the success, click here.
Next, Best Buy began to think about opening up stores that spoke to only one segment at a time. They came out with EQ Life and Studio d for the Jills and Escape stores for the Buzzes.
Now in concept, this was good. This was the logical next step. If focusing stores around your segments can increase comp sales three times more than stores that hadn't been changed over, than there must have been money to be made by creating stores specifically for each segment, right?
No longer would Jill need to come to Best Buy with her husband. No longer would the Buzzes of the world have to suffer through shopping in the same store with refrigerators.
But how did it work out? Well, EQ-Life closed it's flagship store in Richfielf, MN. Studio d has gone belly up. Escape still just has one location, in Chicago, after over 2 years in business.
So what comes first, the chicken or the egg? The knowledge about the customer, or a destination for the customer in the first place?
Anymore, people don't have to go out to go shopping. You can get everything you need from home. If someone is going to a store to get something, they're going for more than just product, and that's what Best Buy forgot.
Best Buy analyzed what people purchased and not necessarily what they shopped for. Maybe the Jills liked coming for a reason other than just the merchandise they bought that Best Buy used to identify them. Maybe they liked big, warehouse type feel because it was exciting and kept their kids occupied while they shopped.
In retail, there's so many factors to consider, such as location, assortment, differentiation, price point, marketing and advertising, and, of course, customers. And however amazing the data may be that you can collect from behind the two-way mirror, engaging your customers in conversation, asking them questions, and taking their feedback seriously may prove to yield much better results.
There comes a point when you can be overburdened by the data, where you can overthink the data. Never forget the KISS mantra. Apply it to your customer segmentation.
And now, it seems, Best Buy is doing just that. They've narrowed their segmentation down a bit, and are taking a more simple approach. I'm glad that they failed so that the rest of us don't have to. They're keeping Best Buy stores that we all know and love, and tweeking the model more appropriately here and there.
Can there be too much, however? Is there a law of diminishing returns? Can you get to the point where you can truly do more harm than good by getting to know your customers so well?
Best Buy, well known for their customer segmentation efforts, might be the best company to look at when asking these questions. In recent years, Best Buy has restructured their company around the customer segments that they have identified. Two years ago, when Best Buy first identified the Jills, Barrys and Buzzes of their world, they were pioneering the way that retailers look at customers. Best Buy began to drive sales increases by focusing on specific customer segments, to great benefit. For more on the success, click here.
Next, Best Buy began to think about opening up stores that spoke to only one segment at a time. They came out with EQ Life and Studio d for the Jills and Escape stores for the Buzzes.
Now in concept, this was good. This was the logical next step. If focusing stores around your segments can increase comp sales three times more than stores that hadn't been changed over, than there must have been money to be made by creating stores specifically for each segment, right?
No longer would Jill need to come to Best Buy with her husband. No longer would the Buzzes of the world have to suffer through shopping in the same store with refrigerators.
But how did it work out? Well, EQ-Life closed it's flagship store in Richfielf, MN. Studio d has gone belly up. Escape still just has one location, in Chicago, after over 2 years in business.
So what comes first, the chicken or the egg? The knowledge about the customer, or a destination for the customer in the first place?
Anymore, people don't have to go out to go shopping. You can get everything you need from home. If someone is going to a store to get something, they're going for more than just product, and that's what Best Buy forgot.
Best Buy analyzed what people purchased and not necessarily what they shopped for. Maybe the Jills liked coming for a reason other than just the merchandise they bought that Best Buy used to identify them. Maybe they liked big, warehouse type feel because it was exciting and kept their kids occupied while they shopped.
In retail, there's so many factors to consider, such as location, assortment, differentiation, price point, marketing and advertising, and, of course, customers. And however amazing the data may be that you can collect from behind the two-way mirror, engaging your customers in conversation, asking them questions, and taking their feedback seriously may prove to yield much better results.
There comes a point when you can be overburdened by the data, where you can overthink the data. Never forget the KISS mantra. Apply it to your customer segmentation.
And now, it seems, Best Buy is doing just that. They've narrowed their segmentation down a bit, and are taking a more simple approach. I'm glad that they failed so that the rest of us don't have to. They're keeping Best Buy stores that we all know and love, and tweeking the model more appropriately here and there.
Over-Analyzing
So much emphasis today is placed on knowing who your customers, and rightly so. Understanding what makes your customers loyal is critically important to a successful business. CRM programs, loyalty clubs and cards and even credit cards are all based on maintaining a strong relationship with each and every individual customer.
Can there be too much, however? Is there a law of diminishing returns? Can you get to the point where you can truly do more harm than good by getting to know your customers so well?
Best Buy, well known for their customer segmentation efforts, might be the best company to look at when asking these questions. In recent years, Best Buy has restructured their company around the customer segments that they have identified. Two years ago, when Best Buy first identified the Jills, Barrys and Buzzes of their world, they were pioneering the way that retailers look at customers. Best Buy began to drive sales increases by focusing on specific customer segments, to great benefit. For more on the success, click here.
Next, Best Buy began to think about opening up stores that spoke to only one segment at a time. They came out with EQ Life and Studio d for the Jills and Escape stores for the Buzzes.
Now in concept, this was good. This was the logical next step. If focusing stores around your segments can increase comp sales three times more than stores that hadn't been changed over, than there must have been money to be made by creating stores specifically for each segment, right?
No longer would Jill need to come to Best Buy with her husband. No longer would the Buzzes of the world have to suffer through shopping in the same store with refrigerators.
But how did it work out? Well, EQ-Life closed it's flagship store in Richfielf, MN. Studio d has gone belly up. Escape still just has one location, in Chicago, after over 2 years in business.
So what comes first, the chicken or the egg? The knowledge about the customer, or a destination for the customer in the first place?
Anymore, people don't have to go out to go shopping. You can get everything you need from home. If someone is going to a store to get something, they're going for more than just product, and that's what Best Buy forgot.
Best Buy analyzed what people purchased and not necessarily what they shopped for. Maybe the Jills liked coming for a reason other than just the merchandise they bought that Best Buy used to identify them. Maybe they liked big, warehouse type feel because it was exciting and kept their kids occupied while they shopped.
In retail, there's so many factors to consider, such as location, assortment, differentiation, price point, marketing and advertising, and, of course, customers. And however amazing the data may be that you can collect from behind the two-way mirror, engaging your customers in conversation, asking them questions, and taking their feedback seriously may prove to yield much better results.
There comes a point when you can be overburdened by the data, where you can overthink the data. Never forget the KISS mantra. Apply it to your customer segmentation.
And now, it seems, Best Buy is doing just that. They've narrowed their segmentation down a bit, and are taking a more simple approach. I'm glad that they failed so that the rest of us don't have to. They're keeping Best Buy stores that we all know and love, and tweeking the model more appropriately here and there.
Can there be too much, however? Is there a law of diminishing returns? Can you get to the point where you can truly do more harm than good by getting to know your customers so well?
Best Buy, well known for their customer segmentation efforts, might be the best company to look at when asking these questions. In recent years, Best Buy has restructured their company around the customer segments that they have identified. Two years ago, when Best Buy first identified the Jills, Barrys and Buzzes of their world, they were pioneering the way that retailers look at customers. Best Buy began to drive sales increases by focusing on specific customer segments, to great benefit. For more on the success, click here.
Next, Best Buy began to think about opening up stores that spoke to only one segment at a time. They came out with EQ Life and Studio d for the Jills and Escape stores for the Buzzes.
Now in concept, this was good. This was the logical next step. If focusing stores around your segments can increase comp sales three times more than stores that hadn't been changed over, than there must have been money to be made by creating stores specifically for each segment, right?
No longer would Jill need to come to Best Buy with her husband. No longer would the Buzzes of the world have to suffer through shopping in the same store with refrigerators.
But how did it work out? Well, EQ-Life closed it's flagship store in Richfielf, MN. Studio d has gone belly up. Escape still just has one location, in Chicago, after over 2 years in business.
So what comes first, the chicken or the egg? The knowledge about the customer, or a destination for the customer in the first place?
Anymore, people don't have to go out to go shopping. You can get everything you need from home. If someone is going to a store to get something, they're going for more than just product, and that's what Best Buy forgot.
Best Buy analyzed what people purchased and not necessarily what they shopped for. Maybe the Jills liked coming for a reason other than just the merchandise they bought that Best Buy used to identify them. Maybe they liked big, warehouse type feel because it was exciting and kept their kids occupied while they shopped.
In retail, there's so many factors to consider, such as location, assortment, differentiation, price point, marketing and advertising, and, of course, customers. And however amazing the data may be that you can collect from behind the two-way mirror, engaging your customers in conversation, asking them questions, and taking their feedback seriously may prove to yield much better results.
There comes a point when you can be overburdened by the data, where you can overthink the data. Never forget the KISS mantra. Apply it to your customer segmentation.
And now, it seems, Best Buy is doing just that. They've narrowed their segmentation down a bit, and are taking a more simple approach. I'm glad that they failed so that the rest of us don't have to. They're keeping Best Buy stores that we all know and love, and tweeking the model more appropriately here and there.
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