Best Buy Challenges Walmart on Employee Smarts

With Increasing Market Share, Electronics Retailer Gets Aggressive on Costs, Messaging

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NEW YORK ( -- Best Buy is picking up market share, thanks in part to the demise of rival Circuit City. But the electronics giant also has a formidable competitor in Walmart, which has been revamping its electronics departments and stocking more-sophisticated products. Now Best Buy is battling back with a spot that calls out Walmart by name.

In the TV spot titled "True Stories," a Best Buy associate relays a story about a customer who calls with some very specific questions about a TV. Turns out he's calling from a Walmart. Her response: "You're obviously calling us because we're knowledgeable. We've got the price match guarantee, so why don't you come on in?"

That, says Barry Judge, chief marketing officer, is a perfect illustration of Best Buy's point of differentiation. As the electronics retailer joins the ranks of those trying to convince consumers its prices are in line with Walmart's, highlighting the price match guarantee was deemed essential. Target has been fighting a similar battle for months, though it has yet to mention Walmart by name in any advertising.

"If you can't grow as easily because the markets are not necessarily going up, you've got to play for share, and when people are playing for share, they're getting more aggressive in their messaging," Mr. Judge said. "As it relates to us, landing why we're different is important. The other piece is ensuring that people understand that our prices are very competitive. ... In our own internal studies, we overlap with Walmart in about 90 SKUs in the electronics space. In 70 of those 90 SKUs, our prices are as good or lower."

Doing more with less
And, like the majority of retailers out there, Best Buy is left to communicate that message with a shrinking budget. In 2008, the retailer spent $295 million on measured media, according to TNS Media Intelligence, compared to $340 million in 2007. Measured media spending is down 8% in the first quarter of this year compared to the same period a year ago.

Mr. Judge said it's not the retailer's goal to return to pre-recession spending levels. In fact, "our goal is to drive it down, not drive it up," he said. "That's the old days, where marketers looked at dollars and said we're doing more or less based on dollars. [Best Buy] is looking at more or less [based] on the effectiveness. I don't look at absolute dollar and say that's our goal."

Barry Judge
Barry Judge
To become more efficient with his marketing budget, Mr. Judge said he is evaluating agency fees, cost of paper, cost of production and media rates. The retailer realized a reduction in agency fees when it shifted its advertising focus to its Geek Squad customer-support unit, handled by Crispin Porter & Bogusky, and eliminated some of the work handled by BBDO. The most recent "True Stories" ad was produced by Best Buy's internal team, Yellow Tag Productions.

Mr. Judge also said that the retailer is focusing its budget on new media, including digital and mobile. For example, next week's Sunday circular will for the first time include short-code text messages, allowing consumers to text message and receive more info about a product. There are also plans to enable customers to text their zip code to receive the location of the nearest store.

"We're thinking about mobile and its ability to be a response device, so essentially every ad can turn into a response ad, because everyone has a mobile phone in their pocket," Mr. Judge explained. "[The circular] is an interesting vehicle to look at because it's been around for so long. How can you reinvent a vehicle that you think you know so well?"

The goal is to help Best Buy to continue grabbing market share and sales. The marketer announced today that revenue rose 12% during the first quarter, despite a same-store sales dip of 6%. Best Buy also posted a 2% increase in domestic market share for the three months ending April 30.

"We're very bullish on both our industry long-term and how we're going to perform," said Mr. Judge. "We're out there fighting for every customer dollar."

Mr. Judge also commented on the upcoming CEO change, saying he expects there will be few measurable changes. Brian Dunn will replace retiring CEO Brad Anderson next week. He said Mr. Dunn is already "very involved" in marketing, pushing to highlight Best Buy employees, which he views as a differentiator.

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