Showrooming at Best Buy Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Showrooming at Best Buy Case Solution

Marketing Mix:

Product

In terms of Showrooming, the most popular product category is consumer electronics followed by a significant increase in online retail sales from 14.6 percent to around 27.31 percent from the year 2008 to 2012. Best Buy is known to be the leading retailer which deals in the sales of consumer electronics products.Despite an increase in e-commerce sales; the preference of customers regarding the purchase of electronic items requires stores’ visits in order to check out a new TV with a flat-screen or listening to a stereo. However, other retailers in the market have demonstrated the diversification of product assortment, to bring a reduction in the dependency of generating sales through consumer electronics.

Price

The pricing strategy of Best Buy was found to be competitive with the pricing approach of Walmart. Whereas, other competitors like Amazon tend to offer products at relatively low prices. Due to this reason, there is a requirement to bring a reduction in the product prices offered which are known to be the cause behind declining sales of the organization.

Place

Best Buy offers an in-store product selling approach. With the change in industrial dynamics of retailing, the majority of the retailers have been shifting their traditional selling method (in-store sales) to online selling through the development of an application. This provided both in-store experience and online shopping facility which provided the ability to compare the products’ prices with the similar products offered by other retailers in the market. Due to this reason, the distribution of the product had followed both product delivery to their customers'home as well as purchase from the physical stores.

Promotion

The product promotional strategic approaches mainly included the advertising of the products by increased spending on Television, print, and other media. The retailers were not allowed to advertise the product at a specific amount. Thus, the marketing campaign of Best Buy in response to the change in industrial dynamics mainly included eleven different commercials in which it featured celebrities like Maya Rudolph and Will Barnett bring improvement in the customers’ experience not only for offline sales but also for online sales.

STP:

Segmentation

Due to the high unemployment rate, slow recovery of the economic condition of the United States, the spending power of the buyer was relatively low, which led to the growth of online sales by around 5 percent. The introduction of price comparison applications by the different retailers had further influenced the consumer perception for shopping i.e. they tend to look for promotional deals and check for the best-discounted deals before making the purchase decision. Most of the customers prefer visiting stores for the in-person experience to make sure that the product is appropriate but they make a purchasing decision after comparing the products online.

Targeting

The target market for consumer electronics tends to be mainly based on the income status of the family, and family size. The target market of Best Buy is considered to be the middle and upper market segment because it does not offer products at low-price, which leads towards the elimination of the low-end market. Among these customers, potential customers tend to be more focused on purchasing a quality product at the best price. Like Amazon, it has launched a product delivery program, which does not require customers to pay for delivery each time they offer product, which results in cost saving.

Positioning

Like other retailers, the product portfolio of Best Buy is not differentiated as it mainly focused on the sales of customer electronics. The season in which the organization experiences increased sales mainly includes the holiday shopping season which had experienced increased spending of customers through online retailing i.e. spending of around $1.042 billion sales was recorded in 2012. Despite such increase in sales;there had been a significant decline in the sales growth of Best Buy even during the holiday season. For this reason, it changed its pricing policy to permanent price matching, and promotion of the products that were only available at Best Buy’s stores was through the involvement of celebrities.

Alternative Solutions

Alternative 1 – Reduction in operating cost

Pros:

It would bring improvement in the profit margin of the organization so that the money could be used in other activities to bring improvement such as improving the physical store layout.
It is known to bring an improvement in the standards of the processes since bringing improvement in the business processes positively influences the current business operations.
Consolidation of the stores as per their requirement, would bring a reduction in the expenses, allowing the organization to lower the product cost.

Cons:

It would negatively influence the quality of the product, which in return would bring a reduction in the brand’s value.
Installation of an efficient working system in order to reduce the cost,would require a one-time heavy cost investment.
It might negatively influence the perception of employees about the organization affecting the morale of the employees at work.

Alternative 2 – E-commerce

Pros:

It would provide the organization with the ability to reach the large target market i.e. increased probability of global sales like Amazon.
It would provide customer insights such as their likes, dislikes, needs, and demands, and their perception about a particular product through tracking and analytics.
Increased traffic of customers on the website would lead to an increased probability of sales.

Cons:

The use of an e-commerce platform creates concerns regarding the security of the system, reliability, and information security of customer's data.
Consistent evolution of the technological approaches by leading retailers like Amazon and Walmart would require the organization to make more investment in research and development to remain competitive in the market.
The dependency on online sales might cause issues of network bandwidth in some countries which might influence sales efficiency.

Alternative 3 – A product diversification

Pros:

It would assist in maximizing the utilization of potentially underutilized resources.
Product diversification brings a reduction in the probability of financial loss in all segments i.e. not all products industry experience declining growth at the same time.
It brings a reduction in the dependency on third-party providers providing the ability to manage the balance between different activities.
Product diversification would provide the customers with many purchasing options other than the seasonal purchase of consumer electronics.
Increased interest of customers to visit stores filled with diversified products would lead towards an increased probability of visitor conversion, resulting in an increased profit generation............
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Showrooming at Best Buy Harvard Case Solution & Analysis