Angels
& Devils
The Rest of the Story
by Tom Pryor
Brad
calls himself a "failed seminarian".
Brad attended Northwestern Seminary but dropped out after one year because
he disliked preaching class. He went to the state employment office for
help in finding a job. He was told "good luck" when they saw
a sociology degree and seminary education on his resume. He took a job
at a small store called Sound of Music "because I could listen to
music and get paid for it."
Brad worked his way up to manager but Sound of Music was in poor financial
health. The owner drove out to meet with Brad because he liked his ideas.
Over time, the ideas were implemented. Today, that company is named Best
Buy, the $25 billion electronics, technology and appliance retailer. And
that "failed seminarian" with the good ideas is Best Buy's CEO,
Brad Anderson.
Anderson openly shares and incorporates his Christian seminary values
into Best Buy's business practices. For example, he wants to separate
"angel" customers from the "devils". "The angels,
according to Best Buy, are customers who boost profits at the consumer-electronics
giant by snapping up HDTVs, portable electronics, and newly released DVDs
without waiting for markdowns or rebates. The devils are its worst customers.
They buy products, apply for rebates, return the purchases, then buy them
back at returned-goods discounts. They load up on 'loss leaders', severely
discounted merchandise designed to boost store traffic, then flip the
goods at a profit on eBay." [1]
Best Buy estimates that 20% of their 500 million customers are undesirable.
And CEO Brad Anderson wants to get rid of them to reduce employee workloads
and improve corporate profits. Users of ICMS' new Activity Based Management
Gross Margin Profiler (see an example on the www.ICMS.net
home page) have found results similar to Best Buy … 20% of the customers
result in 80% of pre-tax profit. Profiling shows that companies of all
types and sizes have a portfolio of customers, not just products.
True to the Biblical teaching of Isaiah 55:8, "For my thoughts are
not your thoughts, neither are your ways my ways, declares the Lord",
Brad Anderson's approach to increasing profitability upends standard practice
among mass merchants who typically seek to maximize customer traffic.
Best Buy's strategy advocates rating customers according to profitability,
then dumping the 20% who are unprofitable. To accomplish this objective,
store staff receives several hours of training on how to identify "angels"
and "devils" according to shopping behavior and preferences.
"Anderson understands that his job as a leader is to distill the
world's complexity and ambiguity --- and out of that comes the notion
that Best Buy will win because its frontline people are better."
[2] In a business world that has become too comfortable with compromising
shades of gray, Brad Anderson is a refreshing example of a person who
believes in black or white, right or wrong and angel or devil. And now
you know the rest of the story.
[1]
“The Customer Isn’t Always Right”, Gary McWilliams, The Classroom Edition
of The Wall Street Journal, January 2005.
[2] “The Clear Leader”, Bill Breen, FAST COMPANY magazine, March 2005.
Do you need to identify the profit "angels" and "devils" in your business?
If so, give ICMS a call 817-475-2945 or e-mail tompryor@icms.net.
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