Best Buy Thought Paper

Thought Paper: How Best Buy’s Value Proposition Overhaul Changed Their Destiny

In 2012, Best Buy (NYSE:BBY) was forced to take a long, hard look at their company’s value proposition.

Its profitability peaked seven years prior, and by December 2012, the stock price had bottomed to $11.29/share, the lowest price since 1997 when BBY first appeared on the New York Stock Exchange.

Brian Dunn’s resignation as CEO in April (after an internal investigation revealed allegations of personal misconduct from an inappropriate relationship with a female employee) certainly didn’t help matters. "Brian Dunn...there is really not a lot of great things to say," says Finkelstein. "You have a company that is in a virtual free fall. The stock is down something

Best Buy’s “big box” stores were once the answer to every customer’s dreams. Drive up, walk inside and stare wide-eyed at the world of electronics open before you. Everything electronic you could ever want was in this one place, and the Geek Squad helped the uninformed purchase whatever device was popular. One-stop shopping was the ultimate high.

This value proposition drove sales before the internet went from dial-up limping to the information superhighway promised by Al Gore. Suddenly, the old value proposition was obsolete—consumers found they liked sitting in their pajamas at home to shop.

Shoppers educated themselves with other purchasers’ honest feedback vs. the pressure tactics driven by a salesman’s looming commission. Best Buy employees “officially” do not earn commissions on their sales. Interestingly, it’s not true, a great example of a faulty value proposition at

In 2012, Best Buy decided to evolve. A study at Leading Strategic Initiatives summarized Best Buy’s new value proposition in the chart below. With the initiation of their new Value Proposition exemplified in their “Renew Blue” training, Best Buy became more customer-focused. The Best Buy Customer Promise now includes providing the newest, latest technology, knowledge, impartial advice, competitive prices, and the ability to shop when and where you want. Finally, they promise to support the customer for the life of the product.

Initially, the internet was not the primary focus, but Best Buy began to capitalize of the strengths of a 24-hour storefront. Customers browsed the site, then stopped in to “touch and feel” the products. The new value proposition evolved even more.

Apparently, this new approach is working. Based on today’s NYSE reports, Best Buy’s stock price has gone from $11.29/share to $56.06/share, almost a 400 percent increase in the past five years.

In July this year, Piper Jaffray analyst Peter Keith called Best Buy the "standout" in the group of box stores as its "connected home category" continued to be identified as a key driver of their sales growth. Keith adds that “Best Buy is surviving the retail reset.” The analyst concluded “Best Buy’s value proposition is better than Amazon's for Consumer