Marketing Lessons From Best Buy

By | February 9, 2006

Edition #22 – 02/09/2006

I recently picked up some MiniDV tapes from Best Buy for my new camcorder (yes you’ll be seeing me on video soon), and several things occured that inspired these marketing tips…

1) The One-Time-Offer. Also known as the OTO. I’m pretty sure that Best Buy doesn’t refer to it in these terms, but that’s essentially what it is. If you’ve ever bought any type of electronic equipment at Best Buy, you’ll know that they tried selling you an extra warranty (most electronics stores are doing it these days). When the cashier scans your item, a note pops up on their screen telling them what to sell to you.

Basically you can buy the extra warrantly RIGHT NOW or forever be at risk. I never buy the extra warranties, but I’ll admit the way they’ve smoothly integrated it into the sales process is really the right way to do it from a marketing standpoint.

Today I was presented with a different type of OTO during my purchase. Upon making the purchase, the cashier informed me that along with my purchase I would be receiving 8 free issues of a magazine of my choice. There were about 6 different magazines to choose from, and they were all laying right there on the counter in front of me. I politely declined, because I don’t typically read magazines for entertainment (other than Reader’s Digest in the bathroom). But again, the offer was well placed and probably effective for a large percentage of their customers.

Why would they do this? They make money of course. Usually when someone tries selling me a magazine subscription it’s over the phone, or after a knock at the door. Magazines pay good commissions for new subscribers, and they’re willing to give free trials to lure you in. There are also magazine affiliate programs where you can get paid for selling (and/or giving away free trials) on the web.

How much money is in it? A lot. I’m guessing the magazines are paying Best Buy a big fee to advertise their product at the counter, or else they’re paying them on a per-subscription basis. Either way, I’m sure it’s a good chunk of money for the company as a whole. Internet marketer Mike Filsaime recently stated that out of $800,000 he made last year, $400,000 was from OTO’s.

You’ll find OTO’s on the backside after you purchase most of my products, and I’ll attest that they absolutely do bring in extra profit. I’ll get more in-depth about OTO’s sometime in the near future so you can learn more about them…

2) List building and information gathering. In order to complete my purchase, the cashier required that I tell her my phone number. Of course I could have gotten away with giving a fake number, and a lot of people probably do, but then-again a lot of people are probably honest like me. I’m not sure exactly what they use it for, but they can retrieve a lot of info with someone’s phone number. I’m guessing that’s how they started sending me offers in the mail which seem to strategically correspond with my buying habits.

Beyond the phone number, they’re building their list through a survey as well. They’re giving away $500 gift cards to winners from the survey. The receipt has instructions for completing the survey, PLUS they gave me a small flyer with an ad for the $500 contest and survey on it! I went to the specified URL to complete the survey, and found that it was about 20 pages long. That’s a lot of data, but again very smart. The best way to sell something to a target market is to give them what they want. Surveys are one of the best ways to collect data to find out WHAT people want to buy. That’s why the paid-survey industry is such a big online phenomenon. Marketers are willing to pay for this kind of data.

Sure enough, at the end of the survey I had to give them all of my contact info in order to be eligible for the contest. They’re building targeted marketing lists, and building a huge database of their consumer’s habits. You can use the same approach…

Somewhere during your sales process, you should require your customer to enter their name and email address (like Best Buy asked for my phone number). If Best Buy had asked me for additional personal contact information it would have made me uncomfortable, so don’t go overboard. If you’re shipping a physical product, or if it’s a big-ticket sale, you can always get away with requiring more info, but for small info-products I just stick with name and email. You could also use an optional survey or bonus opt-in list to gather additional information on a voluntary basis.

What Best Buy did was all very smart, from a marketing standpoint. My only complaint is that the magazine OTO seemed a bit overkill for the situation. It really felt like they were trying to milk an extra dime out of every customer, rather than present them with a value-added bonus. The cashier was not high-pressured, and did a fine job, but it was the offer itself that struck a strange chord.

So I think the final lesson to be learned from this is to keep your OTO related to the original purchase (For example, if you’re selling an SEO-related product, try to make the OTO SEO-related too). Don’t present your customers with a meaningless product or a bunch of unrelated links after they make their purchase.

Well that’s all for today folks! I need to go start playing with that new camcorder.

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