Why Best Buy Is Reorganizing Its Marketing Team

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Fairfax, USA - November 25, 2016: Best Buy store facade with huge sign in downtown in Virginia city with people walking around entrance
Fairfax, USA - November 25, 2016: Best Buy store facade with huge sign in downtown in Virginia city with people walking around entrance Credit: ablokhin/iStock

Best Buy is reconfiguring its marketing team into a more streamlined division that costs less. The Richfield, Minn.-based retailer has parted ways with three top marketing executives—all hired within the last three years—and is folding marketing responsibilities into merchandising.

Best Buy's former Chief Marketing Officer Greg Revelle and Mary Lou Kelley, president of e-commerce, have both left the company—Revelle was appointed CMO of department store chain Kohl's last week. Tom Nowak, the former head of agency Peterson Milla Hooks, who was hired by Best Buy less than two years ago as the electronic brand's first-ever chief creative officer, has also left. News of the departures of Revelle and Kelley was first reported by the Star Tribune.

The new department is headed by Mike Mohan, Best Buy's chief merchandising officer, who also now handles marketing. Senior marketing executive Whit Alexander was promoted to the CMO role, but he reports to Mohan.

A Best Buy spokesman declined to speak about the personnel changes or the marketing strategy moving forward.

The retailer's need to lighten the load comes at a time when retail pressure is mounting and no compelling product launches are on the horizon. Electronics sales haven't been hammered nearly as hard as apparel -- electronics sales were down 2.3% in the category for the 12 months ending in March compared with the year-earlier period, according to market research firm NPD Group. But brick-and-mortar retailers like Best Buy are still grappling with the reality of an ever-advancing Amazon. Right now, the 51-year-old chain is the last man standing, following the bankruptcy earlier this year of consumer electronics chain hhgregg. In recent years, Best Buy has been able to hold its own by embracing the concept of showrooming and highlighting the need for consumers to touch, feel and test expensive electronics at its over 1,000 locations.

"Best Buy's done a good job of reinventing itself," said David Schick, lead retail analyst at Consumer Edge Research.

Yet that hold could be slipping.

For the fourth quarter ended Jan. 28, which included the crucial holiday period, Best Buy reported mixed earnings results including a 1% drop in sales over the year-earlier period to $13.5 billion, and a 0.7% decline in same-store sales. Net earnings, however, increased 26.7% over last year's fourth quarter to $607 million.

Meanwhile, Amazon's rumored move to open brick-and-mortar electronics stores could further erode the physical edge Best Buy has managed to maintain.

Combining marketing under the merchandising umbrella could make sense for a brand like Best Buy because most of its marketing dollars are paid for by vendors, brands like Samsung and Microsoft who want more of a shop-in-shop brand presence in stores. Schick said the moves are a natural continuation of the path Best Buy has already been on as a brand partner.

"In the old days, retailers bought a bunch of stuff to put on shelves, but now the shelves are endless and digital," he said. "The real reason for retailers to add value to a brand is provide an environment for these brands to really show consumers what they're about."

However, that means less creative control for Best Buy's marketing department—hence the short-lived chief creative officer role.

For the past two years, Best Buy has worked with Grey on its campaigns. The retailer, the 10th largest U.S. ad spender in retail according to Ad Age's Datacenter, spent around $114.6 million on measured media in the U.S. last year, a 21% decline from 2015, according to Kantar Media. Recent memorable campaigns include a humorous back-to-school integrated effort with Workaholic's Adam DeVine and a holiday push starring Bobby Flay and the late Don Rickles.

But such efforts weren't strong performers, judging by the tepid holiday sales and analysis from ad tracking firm Ace Metrix.

The latter found that Best Buy's ads perform better with consumers when they highlight a product—in fact, the Devine spots were polarizing with some consumer segments.

"Overall, Best Buy's back-to-school ads were middle of the pack — they didn't perform as strongly with all viewers as their product-oriented holiday ads," said Peter Daboll, chief executive of Ace Metrix. He said that the best-performing holiday ads for the retailer featured Apple products and appealed to younger men and women of all ages.

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