Reward Zone

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Reward Zone Revolutionizing Retail Retention
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Revolutionizing Retail Retention Best Buy and
COLLOQUY/Epsilon Build Customer Loyalty
Mike OberleSenior ManagerCustomer Loyalty
Marketing
John Bartold Contributing Editor Director, Sales
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Session Overview

• About Best Buy and Reward Zone
• Program Goals
• Program Challenges
• Program Solutions
• Program Results
• Lessons Learned
• Future Focus
• Loyalty Best Practices
• Questions?

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Best Buy The Facts

• 1 US consumer electronics retailer
• 2 US home office and entertainment software
  retailer
• Fiscal 06 Revenue 30 billion
• 830 stores in North America (US and Canada)
• Operations include
• Best Buy (BestBuy.com and BestBuyCanada.ca)
• Future Shops (FutureShop.ca)
• Geek Squad (GeekSquad.com)
• Magnolia Audio and Video (Magnoliaav.com)
• In May 2006, agreed to acquire majority interest
  in Five Star, Chinas 4th largest appliance and
  consumer electronics retailer

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Best Buy Growth Strategy

• Convert more stores to customer-centric operating
  model
• Add new stores to better serve existing and new
  markets
• Expand and strengthen service offerings
• Boost employee retention to deliver better
  customer experiences while increasing
  productivity
• Add individualized marketing capabilities to
  skills in mass marketing

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Best Buy is all about the customer

• Begins with being able to identify customers and
  capture their purchase behavior
• Requires listening to customers
• Building targeted and relevant offers that
  deliver against those wants/needs
• Treat customers uniquely and honor their
  differences-as segments and individuals
• Meet customers unique needs, end-to-end

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Loyalty is an outcome of the entire customer
experience

• A loyalty program is an essential piece of the
  equation

R E Policy
Direct Mail
Services
.com
Store Layout
Direct Mail
Associates
Insert
Brand
Price
eMail

• Provides a means to enable connection with
  customer
• One piece of the total customer equation

In-stocks
Checkout
Assortment
Competitors
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Reward Zone The Facts

• Pilot program launched in California in July 2002
• National roll-out in July 2003
• More than one million members registered in
  programs first three months
• Original one-year membership goal reached in
  eight weeks
• Year One 3 million members
• Currently more than 8 million members

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Reward Zone The Mechanics

• Reward Zone is Best Buys points-based consumer
  loyalty program.
• 9.99 annual membership fee
• Members earn 100 points for 1 spent storewide
• 150 spend 15,000 points 5 certificate
  (3.3)
• Reward Certificates sent 6 weeks after point
  level achieved
• Largely redeemed in music, movies
• Expire after 90 days
• Program changes coming in Sept
• free program
• 11 point
• addition of web based certificates

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Program Goals

• Improve Best Buys ability to identify and track
  customers behavior
• Drive incremental transactional activity
• Provide a point of differentiation for both
  customers and vendors
• Deliver soft-benefits to best customers
  increase value of being a member
• Free exclusive CDs
• Sweepstakes
• Special ticket opportunities
• Opportunity to attend sneak previews of new
  movies
• Other members-only events

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POS Enablement Member ID Capture

• Being able to associate a member number with a
  transaction was critical
• Alternate methods for identifying a member was
  also critical when members did not have their
  Reward Zone number
• Phone number lookup capability
• A fast, efficient process at POS was necessary to
  meet store ops needs
• Ability to track award certificates and validate
  to protect against fraud
• Multi-channel challenge
• Different systems for in-store versus on-line
• On-line serves Canada which does not have Reward
  Zone

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In-Store POS Architecture
IN STORE
STORE SERVER
TRANSACTION MEMBER LOOKUP
CASHIER SCANS PERFORMS LOOKUP
CASHIER
MEMBER ID VALID CERT
MEMBER
TRANSACTION
HOST LOCATION
MESSAGES
TRANSACTION MEMBER PROFILE
TRANSACTION
POINT BALANCE CERTS ISSUED MEMBER PROFILE
CERTS ISSUED MEMBER PROFILE
EPSILON LOYALTY PLATFORM
CUSTOMER DATABASE
POS HOST
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Reward Zone Enrollment Kit (in-store)
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Reward Zone Mailed Certificates
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Reward Zone Mailed Certificates
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Web Architecture
MEMBER SERVICES
E-COMMERCE
E-COMMERCE SERVER
MEMBER ID PHONE NUMBER
MEMBER
MEMBER
STATUS REQUEST PROFILE CHANGES
TRANSACTION
MESSAGES
HOST LOCATION
STATUS OFFERS
REQUESTS
TRANSACTION MEMBER PROFILE
MESSAGES
POINT BALANCE CERTS ISSUED MEMBER PROFILE
EPSILON LOYALTY PLATFORM
EPSILON WEB SERVER
EPSILON API SERVER
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Web base certificates (coming in Sept)
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Web site
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Program Challenges

• Program acceptance since it is a fee-based
  membership
• Get data in the right place and understand how to
  use the data
• store transaction ? database ? output format
• Determine appropriate, effective frequency and
  channels for communications
• Keep the program fresh it is a marketing piece,
  not a notice
• points alone will not last
• Drive down program costs
• cert mailing
• combine communication pieces
• effective use of store labor
• Drive 100 accuracy best customers
  deserve/require flawless execution
• Enable the program to grow scale based on
  marketing needs
• Managing rapid program growth (with free
  membership)

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Program Solutions

• Established business rules to enforce automation
• Certificate mailings
• Other marketing pieces
• Designed packages for automation, accuracy, and
  throughput cost advantages, but at added cycle
  time and program growth
• Built-in processes with store SOP
• Built-in scalability to enable growth without
  re-design
• Change is a constant
• Store buy in is critical

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Lessons Learned

• Stores are critical
• Never lose sight of the program goals
• Instill a passion to turn intentions into
  efficient and effective systems and processes
• Separate need to have from nice to have and
  identify priorities
• Communicate, communicate, communicate
• No question is a stupid question until its not
  asked
• Ask every customer for card (mention rate)
• Include everyone in program strategy

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Future Focus

• Including relevant, meaningful product offers in
  Reward Certificates, leveraging PME
• Targeted seasonal member communications and bonus
  point opportunities to increase frequency and
  traffic
• Delivering consistent, everyday offers in the
  categories that members value for frequent
  purchases
• Deliver member benefits that are meaningful and
  exclusive

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Loyalty Best Practices Employed

• Multi-tender
• Not just private label or co-brand, all forms of
  payment
• Loyalty is about the brand not the payment method
• Multi-channel
• To the customer, the brand is the same regardless
  of channel
• Optimal Allocation of Resources
• The better the customer, the more the investment
• Strategy wins, technology enables
• Focus on strategy and enable, not technology
  boundaries
• Blend of Hard and Soft Benefits
• Reward and recognition
• Constant evolution
• Most of allFast, Fun, Free (Sort of) Easy

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Data Rich Environment

• Reward Zone information provides marketing
  analysts detailed information on member behavior
• Best Buy is able to target specific groups of
  customers in support of the customer-centricity
  effort
• The information enables merchandising to better
  determine products for expansion or extension
• Data will get even richer and deeper once the
  program is free
• Most of all, the effort delivers a measurable
  return-on-investment as a stand-alone program
• More than 25 of sales are tracked
• Members shop twice as often and spend twice as
  much as non-members
• Ancillary benefits in merchandising, store ops
  and other marketing efforts

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Questions?
Thanks!

• Mike Oberle
• 612-291-8130
• mike.oberle_at_bestbuy.com

• John Bartold
• 513-248-5916
• john.bartold_at_colloquy.com