Best buy does it again: we finance during this financial crisis

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Some of you may  know how I admire the practices of Best Buy.

Again, an example of how an entrepeneur can benefit in hard times.

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Best Buy, Other Retailers Tap Tech To Boost Sales

February 10, 2009 7:11AM

Best Buy turned to software from analytics company Omniture.

In trials, Best Buy offered financing at different levels: $499, $699, or $999.

Every time a customer signed up for payments, Omniture tracked purchase details and homed in on the answer: $499. Within weeks, the software cranked out data the store’s own systems couldn’t have matched.

As the financial meltdown spiraled in September, spending

habits changed quickly. Many consumers stopped spending altogether. Those who were still hitting stores showed some disturbing patterns that weren’t lost on retailer Best Buy. The number of customers signing up for financing Relevant Products/Services on such
purchases as big-screen TVs and computers surged. At the same time, the number of shoppers spending $1,000 or more per trip plummeted.

In response, Best Buy began offering free financing for entire shopping carts full of items — rather than one product at a time.

“We realized that storewide financing could be a powerful differentiator in the marketplace,” says Best Buy Chief Marketing Officer Barry Judge.

That left just one question: At what dollar amount should Best Buy start offering the free financing?

To find its answer, Best Buy turned to software from analytics company Omniture.

In trials, Best Buy offered financing at different levels: $499, $699, or $999.

Every time a customer signed up for payments, Omniture tracked purchase details and homed in on the answer: $499. Within weeks, the software cranked out data that the store’s own systems, with their antiquated databases, couldn’t have matched.

Big Bang for the Buck

Omniture’s software is emblematic of a new breed of analytics that’s helping retailers capture as much as possible from the dwindling pool of dollars being spent by penny-pinching consumers.

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Even as retailers trim staff, curtail marketing, and close stores, they’re ramping up spending in one area: technologies that help them track customers’ behavior and purchase patterns. “A lot of retailers are looking for small technology investments that produce big results, and analytics is one of those things,” says Gartner researcher Hung LeHong.

U.S. retailers increased their overall IT budgets by 8 percent in 2008, after a 2 percent increase a year earlier, according to

a recent report from AMR Research and the National Retail Federation. Of more than 125 retailers surveyed last year, 59 percent invested in new systems or upgrades in customer relationship management, a category that includes analytics. Growth in spending on analytic software accelerated in the fourth quarter as drastic changes in shopper behavior sent many
retailers racing to adapt, says Janet Sherlock, research director of retail for AMR.

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