Note: I collaborated on this piece with Paul Flanigan, a BestBuy Network veteran and digital signage consultant. It is also posted on his blog, Experiate. (Full disclosure: BestBuy is not an RDM customer.) This is a longer post than usual, but we hope it is worth the time. We also have it available in PDF format, with nifty callouts and pics. Let us know if you’d like a copy– KG
Retail has long been thought to be the Holy Grail of digital signage. Where else is there access to customers, proximity to product and direct relationships with potential advertisers? Certainly WalMart has been a poster child for the potential of digital signage in retail, despite the fact that no other retailer wields the same kind of power over its vendors. Other retailer-based networks have met with mixed success. Prior to CES in January of 2011, Best Buy announced that it has officially launched its own media network, Best Buy On. The digital signage community perked up and started talking because the core component of Best Buy On is the in-store network. It is worth examining how the in-store network has evolved to become the last mile of a carefully conceived path to purchase at Best Buy, and a network with clear upside and potential challenges for the retailer.
The majority of the products that Best Buy sells are easily researched, priced and purchased online. Often customers will use Best Buy’s resources for research then purchase at different locations. Best Buy knows this. They cannot compete with Walmart or Amazon on price or inventory. So Best Buy must engage consumers in deeper relationships through multi-channel marketing in order to effectively take on all of its competitors. That is the motivation behind Best Buy On. The goal is to partner with a customer from the time he’s thinking about a new TV until after it’s installed in his home, and then nurture an ongoing relationship so that the customer never thinks of going anywhere else in the future. Like all companies, Best Buy knows that maintaining mindshare is a key to survival. Best Buy’s CEO Brian Dunn is quoted as saying, “We know that 60% of our U.S. store sales are influenced by our customers’ experience on bestbuy.com and 40% of the products we sell online are picked up.” The network is now in a position to complement those experiences at almost every stage of the retailer-customer relationship.
It is encouraging to see that digital signage at Best Buy has become a strategic component of an overall customer engagement initiative, and not an island unto itself. The ability to create a consistent theme that can be honed for each communication channel and each stage of the path to purchase is invaluable. The in-store digital signage network is the last mile, the finisher. How well it closes the deal with a customer can have significant impact on the bottom line. That in turn can have impact on the stock price.
So where does this network fit in? Let’s take a step back.
Best Buy’s in-store network has been in existence for over a decade. During that time, Best Buy has tried unique methods to engage customers. The in-store network, in all its various formats, was integral to that strategy. At one time or another, the network comprised all of the screens in the store – the Home Theater Department and the Computer Department were the big kids on campus. There was also Best Buy Radio, an audio program that aired in the music section, and all the vendor-provided displays found around the store. All of these were part of the network, yet all were disparate. The single reason: Technology. Best Buy was well ahead of its time in understanding that optimal consumer engagement could be achieved through technology. Yet while Best Buy was always able to find great content to put in front of customers to enhance the brand value, the challenge was making sure it was hitting the target. Until capabilities advanced with a network refresh that took place in 2009, there was no ability to handle several channels of content, dayparting, and geo-location of content in order to optimize content for the customer. Now Best Buy’s media can be much more targeted, nimble, and relevant with its execution at the store level.
Best Buy also realized that it must become something completely new: A media network that leveraged its brand strength to create customized content in every location imaginable. More channels of engagement, including dedicated screens in every store (instead of just display models playing content) and online portals like BestBuy.com and BestBuyOn.com comprise the network and broaden the brand’s reach across channels.
The network had a soft launch in 2009 while Best Buy was working out the kinks, and the wraps came off in November of 2010 when upfronts with major advertisers were conducted. Prior to the just-completed CES in Las Vegas, Best Buy announced the official launch of the network. This will change how Best Buy relates with customers, vendors and competitors.
This is a potential boon for advertisers, brands, and manufacturers. The network enables them to partner more closely with Best Buy in customer engagement. Today’s retailer, whether click-and-order or brick-and-mortar, is predominantly a middleman. The better retailers are creating multiple points of engagement with the consumer, and the closer the partnership is between a brand and a retailer in that engagement, the better off both will be. John Swift, President of Integrated Communications at Omnicom Group’s OMD was quoted in a January 3 AdAge article about Best Buy’s network launch saying, “Strategically, it makes a lot of sense to me. We need to find different ways to connect our messages with consumers in different places.”
It should not be lost on anyone that this is indeed an ad-supported network. Any thoughts to the contrary, or doubts about the effectiveness of an ad-supported network of scale, are about to be put to the test. It may not seem this way because the noise about this network is coming from the retailer, not the brand. But, when non-endemic advertisers like Procter & Gamble buy time on Best Buy’s network, they are openly betting that they’ll get more bang for their ad buck by living on Best Buy’s network rather than other outlets. This calls to mind the 2009 Super Bowl, where Pepsi dropped out of advertising on the biggest TV event of the year to instead focus on other channels with higher returns on investment.
If Best Buy leverages their network to cater to the locality of the store, that may open a new market for regional and local advertisers. It is easy to see that Best Buy could quickly and effectively move into a national broadcast network model with affiliates (stores/regions) around the country. Each of those affiliates might, in turn, have a dedicated sales force to sell time on the network for the local and regional businesses – bringing Best Buy even closer to the customer on an individual level, and generating a substantial amount of revenue from advertising.
The goal of any non-traditional video network, whether it’s one screen in a golf course clubhouse or 200,000 screens across six continents, should be to behave as a media network – creating an experience that patrons cannot get anywhere else, an experience that keeps them coming back for more, an engagement mechanism that builds brand strength for the company, and differentiates the company from competitors. Best Buy has been moving toward this for years. But now they are getting it all together. And that’s a step forward. The potential benefits to both the customer and the brand are not measurable (at least at this point) in terms of hard dollars, but the aesthetic impact is already apparent. Utilizing offline and online channels, Best Buy can be a brand-of-choice for a mobile and busy lifestyle.
But there are deep challenges.
Simply calling Best Buy On a media network does not automatically make it one. By acting like a multi-channel media network Best Buy has officially decided to take on every single media network on the planet: MTV, NBC, CNN, CNET, YouTube, you name it. They are trying to leverage cultural behavior with a consumer mindset: trying to get Russell Crowe or Tom Cruise to help them sell TVs and movies, trying to get Justin Bieber or Kanye West to sell MP3 players and music. In a sense, Best Buy is primed to act less like an electronics retailer with cool videos and more like Access Hollywood with merchandise. When Best Buy puts a camera crew on the red carpet, they’ll be right next to all the other networks.
Best Buy wants to be the brand of choice for individuals, not segments. This is apparent with their shift from segmented customer centricity. In the past, every Best Buy customer was grouped into segments, and marketing efforts focused on those segments. Now, Best Buy wants to treat every customer as an individual. This strategic shift is enabled in part by the targetable nature of the network. But by conceiving a network that caters to consumers on an individual level, Best Buy may be challenged to develop local content consistently enough to keep visitors engaged. In other words, they’ll need to “feed the beast.”
It’s relatively easy to show content that the whole country can enjoy – a new movie or a great event. But will Best Buy be able to provide content and engagement at local levels? Will a customer in Casper, Wyoming get to see what’s going on in Wyoming, or will he have to see what’s happening in Montana? (Currently there is only one store in each state.) Will Green Bay get to see Packers football highlights or be subjected to Minnesota Vikings or Chicago Bears football (the two closest top 20 ad markets)? What about user generated content? Will Best Buy allow local stores to add content to their own store channel for their own customers? The ability to be locally relevant and nationally followed turns the old paradigm of “great content is easy, technology is hard” on its head. Now it will be incumbent upon the Best Buy On producers to figure out how to mix in enough local content with national content to make customers feel that they are shopping in or browsing the web site of “their” Best Buy while still reinforcing the national brand. Content, content management and network traffic will all become more critical if the “buy local, sell local” meme is to be successful for Best Buy. Since advertisers are becoming savvy about quality of impressions versus quantity of impressions, Best Buy On’s ability to create relevance will have a tremendous impact on advertisers’ perception of quality.
Research and data will determine the success of Best Buy On. The decision to leverage dedicated displays in targeted departments within the store indicates an investment that will require strong ROI to be justified. Intuitively and empirically, we know that well-executed digital signage provides lift at retail. At issue is whether it will also provide stickiness and loyalty. That is truly the end game here. Once Best Buy begins to partner with advertisers and brands, there is a tremendous opportunity to research and capitalize on customer behavior. In the past, Best Buy partnered with Nielsen to understand the behavior of the customer with regard to the in-store network. It is not clear whether Best Buy has invested in any in-store audience measurement technologies for Best Buy On. The resulting insights can have great impact on content decisions, promotion strategies and of course, pricing for ad slots. Will Best Buy’s partners have access to data on customers and engagement, giving advertisers the ability to compare POS data with traffic to understand conversion rates and ROI? Will audience metrics drive the placement of displays as the network evolves? Retailers are notorious for not sharing data due to competitive fears. If Best Buy wants to play the network game, they will be forced to share data in order to justify their advertising rates. Once advertisers get to see the value of their content in one retailer versus another, that will shift the power of placement into the hands of the brand, not the retailer.
One channel seems to be missing from a lot of the press around Best Buy’s network: Mobile. Will Best Buy leverage the mobile channel as part of the strategy? (To clarify, we mean phones and wireless, not screens in the store’s mobile department.) Will they develop a Best Buy On smartphone app? Tablet devices are fast emerging as a vital employee tool to assist customers. On the retail sales floor, it may make more sense for the “blue shirts” to carry tablets to assist them in assisting customers, bringing the network to them instead of vice versa. Will tablets be a channel, or part of the network? This will be critical to Best Buy’s network strategy, but it is easier said than done. The mobile industry is fragmented, with several options for consumer engagement across carriers and technologies. It will almost certainly require a series of tests, pilots and focus groups before the right approach to the mobile channel of Best Buy On is determined, but it will need to be addressed.
Based on the past few months, Best Buy is facing incredible and unrelenting competition from online retailers. This affects Best Buy’s business model and marketing strategy. They need to get people in the door (or online) and product in the customer’s hands. This affects the stock price, of course, as well. In a BrandWeek article describing Best Buy heading into upfronts in 2010, Keith Bryan, Senior Director, Media Strategy, in describing the goals of the network said, “The objective isn’t promotional, it’s around engagement with the product category or entertainment…our quid pro quo with advertisers isn’t about
[point-of-sale] lift. It’s a media placement.” In the article, retail analyst Joe Feldman was a bit baffled by that, which is understandable. Regardless of the strategy for execution, the goal for a retailer is to sell merchandise. Best Buy is a retailer, after all, and the more they sell, the more money they make. To pin hopes on monetizing the network solely on media placement may be a fool’s errand, so using the network to generate merchandise sales must be a strategic driver.
Customers will decide whether Best Buy gives them a better experience than all the other available channels. Loyalty aside, everyone surfs. Perhaps the single biggest factor the network will bring to the market is its ability to differentiate Best Buy from brick-and-mortar competitors like Target, HH Gregg, Radio Shack, and Walmart. Already they have taken a strong position by backing their media offerings with, well, media offerings. But now, whether by design or as an unintended consequence, they’re taking on the media outlets. That shift has both high risk and potentially handsome rewards. It is early in the evolution of the new approach, but Best Buy will need to learn and adapt quickly if Best Buy On is to make a meaningful impact. In short, will an engaging multi-channel approach enable Best Buy to leverage its physical presence and dial up incremental sales?
That’s the billion, yes BILLION, dollar question.