Best Buy kicks off $15M rewards push

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Best Buy, hoping to coax shoppers away from price fixations, this week pumps $15 million into an ad campaign backing a new loyalty program.

The electronics retailer's multifaceted Reward Zone program breaks with a TV spot plugging a $25,000-a-day giveaway for 35 days through Aug. 23. In an unusual move, most customers will be required to pay $9.99 to join the program, while some current 375,000 "best customers" receive automatic enrollment.

In addition to awarding points for purchases, Reward Zone also will include "soft benefits," such as a chance to critique new music releases or attend movie sneak previews. "We are trying to create things customers can't get elsewhere," said Barry Judge, VP-consumer brand marketing, Best Buy.

Kevin Taylor, president, Alliance Data Systems' Frequency Marketing, Cincinnati, which created the program and handles print, said some customers pay to join the program. Those receiving free enrollment tend to be early adopters of new technologies such as HDTV and plasma screens. They also are likely to advise others on electronics purchases, Mr. Taylor said.

gift certificate

Mr. Taylor said most of Best Buy's electronics retailing competitors already have loyalty programs or are developing them. But few match the Best Buy effort, which offers a $5 gift certificate for every $125 purchase or a 4% rebate. The certificate must be spent on an item of $10 or more. "Most retailers don't have the margins to support that kind of [payout]," he said.

`deeper relationship'

Mr. Judge said Best Buy moved into loyalty programs after a yearlong test in the San Diego area to develop a "deeper relationship [with its customers] than mass media" affords. Data gathered through the program will be used to develop more customized sales and marketing approaches, pushing customers to "whole solutions" while de-emphasizing price and item sales where it goes head-on against Wal-Mart Stores, Circuit City, and others. "Price is always important, but we are getting more into bundles," said Mr. Judge.

In the spots, produced in-house, a Best Buy sales associate and a customer dream about winning the $25,000 prize. Spots are tagged "Thousands of possibilities. Get yours."

Best Buy has a 15% market s hare in consumer electronics, said Mr. Judge, and industry publications have pegged it as the nation's leading consumer electronics retailer behind Wal-Mart. In the first quarter, sales at stores open a year or longer rose 6%, while overall company profits were up 27%.

Best Buy spent $68.5 million on advertising from January through April 2003, and $301.7 million in 2002, according to TNS Media Intelligence/CMR.

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