Will Best Buy customers be okay with its rewards program changes?

Discussion
Source: Best Buy
Jan 12, 2023

The good news if you are a My Best Buy rewards program member is that you will no longer be required to make a minimum purchase to receive free standard shipping on online orders. The bad news is that you will no longer receive reward points for those purchases unless you pay with the retailer’s high interest credit card.

The consumer electronics chain began offering free shipping to members on January 9. The change in rewards points will go into effect on February 14.

Customers who hold the My Best Buy Credit Card will receive five percent back in rewards (2.5 points for every $1 spent). Card holders may also be eligible to receive one point for every $2 spent with companies identified as “Best Buy Partners.”

It’s interesting that Best Buy is extending free standard shipping on online purchases to all My Best Buy rewards program members since the program as currently configured is free to join. The move on the surface appears to be a response to Amazon.com’s Prime program and Walmart+. Those programs require annual subscription fees of $139 and $98 respectively. Walmart+ subscribers may add the retailer’s InHome delivery service to their memberships for a total cost of $138 a year.

Amazon Prime members receive free same-day, next-day and two-day shipping on select items. Walmart+ members get free same or next-day shipping on groceries from local stores and free standard shipping on other eligible items without a minimum purchase.

Best Buy in November reported a 10.4 decline in same-store sales for its third quarter year-over-year. Those numbers represent an eight percent increase over Best Buy’s third quarter performance prior to the pandemic, CEO Corie Barry said on the company’s last earnings call.

The retailer experienced sales declines across “most categories,” according to its CEO, with the biggest impact being felt in sales of computing and home theater products.

Ms. Barrie said that the chain’s $199.99 Totaltech subscription plan, which offers free two-day shipping along with around-the-clock tech support and added savings on product purchases and repairs, has resulted in net promoter scores that are “considerably higher” when compared to non-members. The retailer, she conceded, has not brought in the number of members it expected for the program.

DISCUSSION QUESTIONS: How do you expect Be​​st Buy customers to react to changes to its My Best Buy rewards program? What do you see as the major challenges and opportunities in front of Best Buy for 2023?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"These changes are short-sighted and will only drive a modest degree of incremental revenue for a smaller segment of customers."
"The leadership at BBY should call in the experts in loyalty to do an expert job, while they make a concerted effort to improve the overall look and feel of the store."
"If they are sentient, they will run from My Best Buy as quickly as possible. Punta. Full stop. Best Buy has some serious challenges."

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14 Comments on "Will Best Buy customers be okay with its rewards program changes?"


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Jenn McMillen
BrainTrust

Best Buy has spent a bunch of time and money on their customer database and, apparently, they think they don’t need the loyalty program to track customers anymore. Best Buy’s reward program used to be a 2 percent (rewards back) program, then moved to 1 percent. Now it’s not even that, unless you agree to be a credit cardholder. That alienates many who either can’t qualify or don’t want to. Not a win for consumers.

David Slavick
BrainTrust

Jenn — it was even better than 2% back when it launched as Reward Zone!

Chuck Ehredt
BrainTrust

These changes are short-sighted and will only drive a modest degree of incremental revenue for a smaller segment of customers. Most customers already have four credit cards and are not going to bother with a Best Buy card just to save a few percent on maybe hundreds of dollars per year in purchases. Best Buy has had a good business for many years because they helped make complex technology accessible to the mass market. They need to build on that legacy and not double down on a niche of customers.

Camille P. Schuster, PhD.
BrainTrust

Will this change encourage sales? It may encourage sales using the Best Buy credit card. However that does not necessarily increase overall sales. Seems like a problem of low sales is being addressed by changing the rewards program. How does changing the rewards program create more sales? A negative reaction to the rewards program change could result in a decrease in sales.

David Slavick
BrainTrust

Unless you are planning on a major appliance purchase and getting 0% financing, you are not applying for a BBY Mastercard. That is my take on pushing the co-brand card as the best value for a customer.

Back in the day, when credit didn’t matter, identifying the customer and giving them something back in value that could be used toward CDs, home electronics, upgrades with your car sound system or a flat screen tv — all good. Today, the store is a warehouse with zero fun factor and little reason to shop unless you need a flat screen or appliance. Let’s not forget they once had a catalog online that you could shop from, use your BBY Mastercard and get cash back savings. That dried up over time and is no longer.

Where is the TRUE innovation? Why can’t they bring in experts to advise them on how to do it right with the customer at the center and not play around with tricky tactics that are neither meaningful nor sustainable?

Doug Garnett
BrainTrust

This move will make the program only of value to the most dedicated of Best Buy customers. That might be a good thing.

Jenn McMillen
BrainTrust

But are there enough customers in the “dedicated” pool to move the needle?

Jeff Sward
BrainTrust

Proof yet again that not only is “free” not free, it’s one of the most expensive words in retail. I am a Totaltech subscriber and I have always gotten my money’s worth from that program. Best Buy has great in person and remote tech support. Free has often been thinly disguised as part of a subscription plan, but now flipping it into a high interest credit card is a bit much. I would have hoped for better from Best Buy.

Ryan Mathews
BrainTrust

If they are sentient, they will run from My Best Buy as quickly as possible. Punta. Full stop. Best Buy has some serious challenges. For one thing their business is more or less cyclical, that is once the average customer purchases a refrigerator or other appliance they are out of the market for a decade or so. Assuming people loaded up on home office and entertainment products during the most active COVID-19 period, it’s not surprising to see demand down across most categories. And, finally, I’m less and less convinced the idea of physical category killer stores still makes sense. So the real challenge ahead is to find a way – perhaps through services – to create new and/or larger revenue streams to offset the cyclical nature of the purchase. Mobile telephone providers have effectively shortened the use life of a phone from a lifetime to less than a year, so it can be done.

Scott Norris
Guest

I don’t even think about a loyalty program when considering appliance or electronics purchases because they are so infrequent – it’s all about the service, selection, and stock. I’m in the Apple ecosystem and they keep pricing level across channels, so no difference on that factor, and for a new washer or fridge, “you get what you pay for” so again I don’t want to go cheap. If I want points, I’ll just use my Delta AmEx card.

Shep Hyken
BrainTrust

Forcing someone to use a credit card means a company could lose many good customers. Charging a fee, such as the $199 for Totaltech mentioned in the article, or like Amazon and Walmart charge for their “memberships,” could help drive repeat business because customers want to get their money’s worth from the places they pay for perks.

Phil Rubin
BrainTrust

Even with a modest (generous) payback, Best Buy’s program in tandem with physical stores was worthy of consideration vs an online-only merchant. They have customer trackability and addressability so if they can be good in terms of relationship marketing, exiting the program might not hurt that much. However, it’s hard to see it helping much unless their loyalty economics were a challenge (technology costs?).

Disinvesting in customers when your business is in decline is always a great case study!

Craig Sundstrom
Guest

Based on George’s brief description, it sounds like it will reward “smart” consumers — who by paying their cc balance monthly (thus making the interest rate irrelevant) combined with the enhance free shipping, will come out ahead — and adversely affect the rest. I don’t know the balance between these groups, so I optimistically went with “neutral”; more realistically, though, since people don’t like change — unless they clearly benefit — the effect will probably be some degree of negative.

David Slavick
BrainTrust

I pitched BBY on loyalty, showed them the ropes for financial modeling and indeed they did launch Reward Zone as a PAID program. believe it or not. Well ahead of its time.

  • I dare say I’m likely one of the first members in the database! Every electronics, music component system, pc and music CD was purchased there.
  • The value for a customer who pays with their preferred (non BBY) tender is useless and if its free shipping you want — frankly I do not need it as the store is 4 miles down the road — well yippee.
  • So disappointing and yet they can build a rationale to promote and charge $199.99 for their TotalTech program — how ridiculous is that?

The leadership at BBY should call in the experts in loyalty to do an expert job, while they make a concerted effort to improve the overall look and feel of the store. It has become a warehouse vs. a cool, hip, attractive place to shop.

wpDiscuz
Braintrust
"These changes are short-sighted and will only drive a modest degree of incremental revenue for a smaller segment of customers."
"The leadership at BBY should call in the experts in loyalty to do an expert job, while they make a concerted effort to improve the overall look and feel of the store."
"If they are sentient, they will run from My Best Buy as quickly as possible. Punta. Full stop. Best Buy has some serious challenges."

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