Let’s get back and ask ourselves very important questions!
1- Why do we target a specific segment not all segments?!
2- Should I deal with customers as they are always right?!
To answer these questions we have to have tactics in our marketing strategy to make the best
Product/market fit.
Today we’ll talk about an important tactic called “The Customer Centricity”.
Best Buy: one of the national largest consumer electronics retailer in America knows well that
it can’t make all its customers happy all the time. So they decided to segment the market into two groups:
(Angels VS Demons) 😀
Best Buy needed to segment its market, narrow its targeting, and sharpen its positioning.
They said that a company should see itself as a portfolio of customers, not product lines.
For that they decided to analyze the market to find which segment makes a profit, so they found two kinds of customers (Angels & Demons), Angel customers are profitable, whereas demon customers may actually cost a company more to serve than it makes from them. In fact, serving the demons often wipes out the profits earned by serving the angels!
The analysts found that angels included the 20 percent of Best Buy customers who produced the bulk of its profits. They snapped up HDTVs, portable electronics, and newly released DVDs without waiting for markdowns or rebates. In contrast, the demons formed an “underground of bargain-hungry shoppers’ intent on wringing every nickel of savings out of the big retailer.
Based on these segmentation findings, Best Buy set out to embrace the angels and ditch the demons. To attract the angels, the retailer began stocking more merchandise and offering better service to them. For example, it set up digital photo centers and the “Geek Squad,” which offers one-on-one in-store or at home assistance to high-value buyers. It established a Reward Zone loyalty program, in which regular customers can earn points toward discounts on future purchases. To discourage the demons, Best Buy removed them from its marketing lists, reduced the promotions and other sales tactics that tended to attract them.
Let’s stop for a moment!
Is it right to exclude customers?!
It’s not right to exclude your targeted customer, but it’s OK to exclude your demon customers.
Because the customer isn’t always right, the demon customers don’t make profit but loss for your business so they are not right because they aren’t your targeted customers.
Let’s check what the result from this tactic for Best Buy:
Since rolling out the new strategy, Best Buy’s overall sales (and profits) have more than doubled. And despite the recently gloomy economy, which has seen competitors such as
Circuit City, Tiger Direct, and CompUSA biting the dust or undergoing major restructuring, Best Buy has seen profit growth year after year. Revenue grew nearly 13 percent last year. And according to a recent survey, Best Buy is rated as
“The preferred place to shop for consumer electronics” by 40 percent of U.S. shoppers, with Walmart a distant second at 14 percent!
So, they succeeded and tactic is working!
For that reason we have to make our Targeting selection very sharp of our audience, and our positioning is very powerful to stick in their minds, And to send the most suitable value, And finally don’t forget the “Customer Centricity”.
That’s enough for today and see you in our next article 😉
Waiting your fruitful feedback.
Ref.: Principles of marketing 14th edition.
By: Philip Kotler.