How much does it cost to get a house call from the Geek Squad? For 90 minutes, $49.99.
This helps explain the $199.99 price tag for Best Buy’s new annual membership program, in pilot mode now. The Best Buy Beta program, which includes perks such as 24/7 tech support and concierge service, free shipping, special pricing and extended warranties, is expanding to 60 stores in six states in April. It also is separate from Best Buy’s My Best Buy credit-card reward program, which gives members points for purchases and other perks, like birthday gifts.
So whose biting? These are good benefits when compared with other programs such as Amazon Prime AMZN +2% and Walmart+, and the fee is slightly lower – $179.99 – for My Best Buy members. Still, the membership is notably higher than Prime’s annual price tag of $119, and that of Walmart+, which is $98 a year. Further, when one considers how many people are paying for these memberships already (Amazon Prime counts 126 million U.S. members), it might appear the market size for Best Buy’s Beta is narrow.
Except for one lucrative market that has risen due to the pandemic: startups and, close behind, long-term (possibly permanent) work-from-home employees.
Quarantine Business Boomers
The number of U.S. startups boomed nearly 25% in 2020 – to 4.3 million from 3.5 million. In the third quarter alone, nearly 1.6 million applications were filed, more than in any other quarter since 2004, according to the U.S. Census Bureau. The surge is continuing this year, with more than 911,600 applications in January and February alone.
Many of these startups are climbing out from the dust of businesses that failed, also due to the pandemic, in a phenomenon economists call “creative destruction” – the emergence of a new economy from the destruction of the old.
And who is pioneering this economy in 2021? The people most likely to start their own businesses are those who have the resources to work online, are digitally literate – and techy.
Enter Best Buy Beta – Boom!
“This pilot offers premium service, complete with support aimed at anticipating our customers’ needs,” Best Buy’s chief customer officer, Allison Peterson, said in a company release.
Considering that small businesses spend nearly 7% of their revenue on information technology, and the surge in new businesses, the premium services to which Peterson refers suggest the most lucrative market for Beta is a business market:
Unlimited Geek Squad calls and visits. This service also is around the clock, which is as good as insurance for startups whose clients rely on their tech capabilities. It include free installation on most items (as well as car electronics installations and office furniture assembly) and a 20% discount on advanced services such as wire runs, data recovery and some smart phone repairs. Plus, Geek Squaders will clean the garbage disposal, install a treadmill and set up smart home services. Considering Best Buy charges $49.99 for one 90-minute Geek Squad visit, this service could quickly pay for itself.
A dedicated concierge team. These around-the-clock workers can provide expert tech support, advise on purchases and service and schedule repairs. This perk makes the most of the “experience” requirement of a membership program, and extends the real value of the program beyond any discounts. Benefit: Members can use Google GOOG +0.5% Assistant to connect with Best Buy. Many harried startups will pay a premium for peace of mind, so the onus is on Best Buy to ensure its concierge service is remarkably efficient, easy to use and, indeed, expert.
Free same-day delivery, and returns. Free delivery is pretty much expected today, so Best Buy Beta expands it to free same-day and next-day delivery when available. Returns, which can be a sore spot for electronics purchases, are extended to 60 days – a long time for high-use tech products. Further, there are no restocking fees, which typically run about 15% of the cost of an item. Figuring that would save a business owner $150 on a returned $1,000 computer, the annual fee is almost covered.
Special pricing. Best Buy promises Beta enrollees have access to special member-only pricing on certain products and services. These specials evidently become clear once a member signs in and shops BestBuy.com BBY -0.6% or the Best Buy app. The retailer also takes at least 10% off most subscriptions billed through Best Buy, such as Pandora music, Microsoft Office and internet security software. Many of these products also are business write-offs, compounding the value for Beta members.
Beta May Become Tech Support 2.0
With nearly 1 million new businesses filed in just the first two months of 2021, Best Buy Beta has a promising market base. If Best Buy can capture just 10% of them, plus the 4.3 million startups in 2020, that would deliver $106 million in membership fees.
That may not sound like a lot for a company that reported nearly $17 billion in fourth quarter sales, but remember Beta members also would more likely buy additional products from Best Buy, contributing further to those sales.
All Best Buy needs to do is get the experience right. If members – in particular business owners – feel confident they are taken care of, and that their investments are protected, $200 a year is a worthwhile cost of doing business. But one bad Geek experience? That can come at a high price.
Bryan Pearson is a Featured Contributor to The Wise Marketer and currently serves as a director and strategic advisor to a number of loyalty-related organizations. He is the former CEO of LoyaltyOne.