Best Buy's Online CRM Move: Focus On Why Conversion Rate Is Low

Best Buy (NYSE:BBY) is trying to push its substantial in-store CRM program to help its online conversions. Although a noble effort, it's a difficult challenge, trying to get shoppers to not merely change their behavior but also how they envision each channel.

At more than 40 million accounts, Best Buy has one of the largest CRM programs in retail. But many of those accounts, of course, are dormant and date from long before the chain's current challenges. They come from a time when the site was seen as little more than a digital directory of the physical stores' SKUs, a place to do some research before heading out to the store.

These days, it's just as likely for shoppers to use the Best Buy site as a way to explore products before buying them at another physical store or a rival's Web site. In effect, the Best Buy site is becoming a showroom for other e-tailers.

Best Buy's idea, according to a story in The Minneapolis Star-Tribune, is "to entice shoppers to write product reviews or post purchases on Facebook in exchange for points that can later be redeemed for perks and discounts. Currently, operates separately from the general website." The piece also tried to spell out the site's conversion headache: "Among major retailers, Best Buy has one of the worst online conversion rates. In fiscal year 2012, digital sales totaled $2.3 billion even though attracted 1 billion visits that year. By contrast, Best Buy’s stores generated $35 billion from the 600 million visits to its physical stores."

Actually, those numbers don't shed much light on conversion, at least not without knowing the average size of the typical Best Buy online purchase. This suggests an average of $2.30/site visit, which presumably includes an awful lot of shoppers buying nothing, compared with a comparable physical store average of $58.33. Those physical stats also includes a lot of null purchases, but most likely at a much lower rate of abandonment than online (given how much more effort is involved in visiting a physical store).

The problem with the loyalty point approach is that it doesn't address the core issue. Why are those shoppers not converting? It might be price, although product selection is a more likely cause. It might also be perceived lack of customer service, in that some shoppers think that returning to—or a local hardware store—might be much easier and hassle-free compared with returning to Best Buy. Whether that's a valid or fair shopper perception today is a different question, but there's plenty of indicator that the perception does indeed exist.

The CRM changes don't directly address any of the reasons shoppers are not converting. Even worse, the effort could undermine some good existing programs. Consider the first two suggestions.Consider the first two suggestions: "write product reviews or post purchases on Facebook in exchange for points."

The value of both programs—reviews on and Best Buy purchases mentioned on Facebook—resides in credibility, which directly speaks to how persuasive these posts will be to others. The best reviews come out of a strongly positive or negative experience the shopper had with the product. As an editor, it's easy to tell when a writer comes up with something to get it over with or to check off some box, as opposed to having something that the writer really wants to say, a specific point that she/he wants to make.

By offering points of other incentives, the retailer is just encouraging people to post when they have nothing to say. If a shopper buys a USB cable and it arrives and works as it should, there's likely little desire to write about it and probably no compelling points to make. By encouraging such posts, the chain is undermining the content quality of its own reviews section. It's self-destructive, given how extremely persuasive well-done review sections can be.

The same goes for Facebook posts. And the public nature of this program makes the problem even worse, to the extent that shoppers will start to ignore these forums as the number of passionless "did it just to get the points" posts start to dominate.

Another issue it the lack of immediacy. The story said the plan is for these activities to generate "points that can later be redeemed for perks and discounts." Why later? If said "use your loyalty number and enjoy an immediate XX percent discount at checkout," that could address both pricing and provide a realtime inducement.

If shoppers are exploring a site, they have no idea when—or if—they'll be back and whether they'll even remember that they have some reward pending. That means that the incentive is minimal. If the chain wants to boost CRM usage—and there are plenty of reasons to want to do so—make the reward immediate.