Was it actually better for Best Buy to lose a sale than to sell a laptop without an extended warranty, or was that just a case of bad incentives making the rank-and-file do things that hurt the company?
Bad incentives. Some items were low margin, but almost nothing was so low that it was actually worth losing the sale.
One of the things you were ranked on was PSP (extended warranty, but they beat it into your head never to call it that) attachment percentage. When a measure becomes a target...
Occasionally there was a loss leader sale item, and in those cases if someone wanted to by it without any attachments, it might have made short term financial sense to pretend we didn't have it, but I don't think the company could get away with that on a large scale.
Source: I also worked there during college. First in customer service, then as a Geek Squad supervisor at a new store, and I was sent to training at HQ up in Minnesota.
My favorite was when we started focusing heavily on close rate. Close rate was just the number of transactions divided by the number of people who walked in the door, so someone proposed that we start breaking up people's purchases into multiple transactions.
I proposed a counter solution--we just move the laser sensor on the door a bit higher, so that short people wouldn't trigger it.
I worked in an electronics store (regional, not Best Buy, and out of business now) in the mid-2000s that had this exact measure.
In my store, on busy days, the manager would occasionally "greet" customers at the door for 10 minutes at a time. Coincidentally, the spot he would choose to stand would block the sensor, so instead of 20 customers coming in in 10 minutes, it looked like only 1 had come in.
Sounds like when I worked at Radio Shack. Not so much with warranties but with names and addresses. We did get a bonus for each extended warranty we sold.
A lot of hardware was sold near cost. The accessories and service plans are where the margins are.
The “team meetings” before and after every shift showed you the numbers from the previous day and your goals for the current day.
If your department didn’t hit their numbers, you’d get your hours cut or manager would get canned. Promotions went by how well you could sell, but you weren’t on commission.
They pushed for us to sell 2 black and two color ink cartridges with ink jet printers. Plus two packs of photo paper and two packs of regular paper.
Yes, the profit on the laptop was minimal, but the extended warranty considerably boosted profits, as well as provided bonuses for management.
They had a folding table setup at the front of the store w/ a PC running Excel, and every 15 minutes over the PA, each departments percentage of sales with extended warranties were read aloud.
The CompUSA I worked in in college was like a scaled down Enron. Bonuses were paid for hitting those percentages, period. At the time (late 90s), BestBuy was better, mostly because they were more diversified.
For constrained product, it makes sense to play some games. You can 10x your margins with the right customer.
It would just depend. If you could close a laptop with a low margin but attach several high margin accessories management was happy. If the laptop was the only item, your department’s metrics would go down. They kept track of everything including number of items per transaction. Scanning the rewards points cards counted as an item so almost everyone walked away a member at one point.
