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Best Buy Hits 1M Subscribers for $199 Total Tech Support Program

Best Buy passes 1 million members for annual $199 Total Tech Support service in less than one year. BBY stock price skyrockets 17%.

Best Buy Hits 1M Subscribers for $199 Total Tech Support Program
Best Buy CEO Hubert Joly: "We continue to be pleased with the customer enrollment and ended the year with more than 1 million members.”

Jason Knott · February 28, 2019

Hey CE pros… do you still not believe your customers will pay you monthly for service? The recent Best Buy Q4 2019 numbers might change your mind on recurring monthly revenue (RMR).

Best Buy (NYSE: BBY) reports more than 1 million customers have signed up for its $199/year Total Tech Support program, which launched in May 2018.  Do the math... that equates to a $199 million annual line item. Not too shabby.

The news helped skyrocket the company to stronger sales numbers for Q4 and propel is stock price up 16 percent in one day to nearly $70/share.

Specifically, the CE Pro 100 company reports ending its FY2019 with $42.8 billion in revenue, up $6 billion from 2018, or 4.8 percent. For the quarter, Best Buy had revenues of $14.8 billion, up 9 percent in comparable sales growth (only a 3 percent YOY growth because 2018 had one additional week versus 2019).

Expansion of Total Tech Support Service

“We are very proud of the financial results we have just delivered,” says Hubert Joly, chairman and CEO. “Strategically, we've made progress in expanding what we do for our customers and how we interact with them. The first example is the launch of our Total Tech Support program.

"Having a service that provides members unlimited Geek Squad support for all their technology no matter where or when they brought it is a compelling and unique value proposition for our members. We continue to be pleased with the customer enrollment and ended the year with more than 1 million members.”

Best Buy plans to grow the member base of Total Tech Support by improving the experience by adding new capabilities around self-service and proactive support.

Related:  Best Buy to Focus on Total Tech Support as 'Giftable' Holiday Item

Joly also touted the company’s In-Home Advisor program, which grew from about 300 advisors to 530 and provided more than 175,000 free in-home consultations to customers across the nation.

“The revenue per order that we generate from these interactions continues to be much higher than in the store and online and it tends to have a higher gross profit rate... and higher attach rate of paid services,” he notes.

Best Buy Outlook: Digital Health a Big Focus

Joly says he expects Best Buy to continue to grow in 2019 and 2020, targeting 2.7 percent growth.

He cites smart home technology (led by in-home cameras), aging-in-place technology, and 4K, OLED and 8K TVs as strong growth drivers.

"We're currently in pilots with a number of managed care organizations." 
— Hubert Joly
Best Buy CEO

“Notably in existing categories like home theater, we see opportunities relating to increasing the penetration of large screen sizes 4K and OLED, and from the introduction of new technologies such as 8K,” he says.

Joly cited data that the smart home market will triple by 2025. He pinpointed in-home cameras as a key driver, expect to increase household penetration by more than 50 percent by 2022.

“We also believe that digital health is an exciting area with enormous opportunities from the use of technology to help customers with their health, fitness, sleep, etc., across multiple age groups from babies to seniors,” says Joly. Best Buy purchased GreatCall last year to serve the aging-in-place market.

“We will continue to expand our health business by scaling both the GreatCall consumer devices and services and the commercial monitoring service with a focus on the senior population,” notes Joly.

“As children of aging parents, many of us would appreciate the potential power of our health monitoring service that enables seniors to live longer in their homes, while reducing related healthcare costs. We're currently in pilots with a number of managed care organizations. And over time, we believe this could become a material growth opportunity for us.”



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  About the Author

Jason Knott is Chief Content Officer for Emerald Expositions Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California. Have a suggestion or a topic you want to read more about? Email Jason at jason.knott@emeraldexpo.com

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  Article Topics


Business · CEPro 100 · Service & Recurring Revenue · News · 4K · 8K · Best Buy · Health and Wellness · OLED · RMR · All Topics
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Comments

Posted by Joseph Kolchinsky on March 1, 2019

@iKnowTech - it sounds like you have a far better service experience than what Best Buy delivers - so why try to compete by charging the same amount?  What if I told you your clients would pay $100/month or more for unlimited, 24/7, high-quality tech support?  And then they would pay hourly for all your in-home support?

Here at OneVision we partner with integrators to manage their service departments and drive profitability through high-quality service.  We are seeing an average membership fee of $100/month across the country for high-quality, instant access to 24/7 remote tech support.  The client then pays per hour for any on-site support.  We’ve processed over $1 million in recurring revenue for our partners.

This industry has immense potential - to capitalize on it we have to see the value of our role, learn to do it sustainably, and then charge appropriately.  It’s exciting to watch this unfold for the integrators who are innovating in service.

Posted by iKnowTech on March 1, 2019

That’s an easier pill to swallow if it doesn’t include any onsite services, and I’m sure at the volume that Best Buy is doing they probably have a good balance of heavy users vs people that buy the service when they need it the first time, then sort of forget about it and rarely use it.  I’m sure they also pay bottom dollar for their labor force and outsource a lot of tech support overseas. 

Maybe it works for a big company like Best Buy, but really makes no sense for a smaller local businesses.  I wouldn’t want to offer a service like this to an existing customer that averages more than a couple of billable hours of my time in a year.  I definitely can’t see why I would want to advertise a program like this for potential new clients, as it would just attract the type of clients I have no interest in, people looking for bottom dollar cost service. 

At the end of the day, how Best Buy operates I’m sure has very little relevance on how a majority of the CE Pro subscribers operate.  Probably most CE Pro subscribers see these these sort of programs from major cooperation’s as threat to to their businesses, and frankly rightly so.

Its one thing to make recurring revenue on selling monitoring, or cloud services, its quite another to sell low cost subscriptions to your skilled labor force.

Posted by Joseph Kolchinsky on March 1, 2019

@iKnowTech - the TotalTech membership is for “unlimited remote, online, and in-store support”.  They are banking on “breakage”, which means the vast majority of people will not use the service while a few use it heavily.  At $17/month it’s an easy transaction to forget about (and that’s what Best Buy is hoping for).

However, listening to the earnings call the CEO went into detail on how they will be working to create more value so that people who don’t call often still renew the membership.

Best Buy is innovating…and they’re moving ahead as a result.  We as an industry could benefit from pausing just long enough to understand their perspective, learn from their progress, and internalize it productively for our businesses.

Posted by iKnowTech on March 1, 2019

$199/yr. for UNLIMITED Geek Squad Tech Support.  What they don’t state is how much are people actually using this service?  If the user is requesting more than 1 onsite service visit a year, or more than 3 hours of phone/remote support in a year, then this is a loss leader at best.    In my experience the people that look to buy these types of UNLIMITED plans are also the most needy, and they will milk it for everything its worth.  They see this as a great value, because they are probably used to paying way more than that in annual costs to a local tech provider for help with their computers and other technology needs. 

Email problem with my AOL account, call the Geek Squad.  Need to reset the Clock on the Oven, I bet the Geek Squad can help, why look up the instructions, I have a subscription for that. 

If you’re as big as the Geek Squad, you can afford to take on that sort of risk, and probably get enough volume to presumably make it profitable in the end.

My average customer spends way more than $199/yr with me on Tech related support, so would it be in my best interest to just slash my pricing and give them an all you can eat and take advantage of me plan for less than what I would make on a single 2 hour onsite trip?  I don’t think so. 

I’m all for recurring revenue, in places where it doesn’t require my time to make it!

Posted by Joseph Kolchinsky on February 28, 2019

The future is now!  The vast majority of this industry’s clients are willing to pay monthly for high-quality, reliable, 24/7 remote support.

Keywords: high quality and reliable.

We are seeing the same success with all our partners.  We’ve processed over $1mm in annual recurring revenue for our partners so far.

Posted by Joseph Kolchinsky on February 28, 2019

The future is now!  The vast majority of this industry’s clients are willing to pay monthly for high-quality, reliable, 24/7 remote support.

Keywords: high quality and reliable.

We are seeing the same success with all our partners.  We’ve processed over $1mm in annual recurring revenue for our partners so far.

Posted by iKnowTech on March 1, 2019

$199/yr. for UNLIMITED Geek Squad Tech Support.  What they don’t state is how much are people actually using this service?  If the user is requesting more than 1 onsite service visit a year, or more than 3 hours of phone/remote support in a year, then this is a loss leader at best.    In my experience the people that look to buy these types of UNLIMITED plans are also the most needy, and they will milk it for everything its worth.  They see this as a great value, because they are probably used to paying way more than that in annual costs to a local tech provider for help with their computers and other technology needs. 

Email problem with my AOL account, call the Geek Squad.  Need to reset the Clock on the Oven, I bet the Geek Squad can help, why look up the instructions, I have a subscription for that. 

If you’re as big as the Geek Squad, you can afford to take on that sort of risk, and probably get enough volume to presumably make it profitable in the end.

My average customer spends way more than $199/yr with me on Tech related support, so would it be in my best interest to just slash my pricing and give them an all you can eat and take advantage of me plan for less than what I would make on a single 2 hour onsite trip?  I don’t think so. 

I’m all for recurring revenue, in places where it doesn’t require my time to make it!

Posted by Joseph Kolchinsky on March 1, 2019

@iKnowTech - the TotalTech membership is for “unlimited remote, online, and in-store support”.  They are banking on “breakage”, which means the vast majority of people will not use the service while a few use it heavily.  At $17/month it’s an easy transaction to forget about (and that’s what Best Buy is hoping for).

However, listening to the earnings call the CEO went into detail on how they will be working to create more value so that people who don’t call often still renew the membership.

Best Buy is innovating…and they’re moving ahead as a result.  We as an industry could benefit from pausing just long enough to understand their perspective, learn from their progress, and internalize it productively for our businesses.

Posted by iKnowTech on March 1, 2019

That’s an easier pill to swallow if it doesn’t include any onsite services, and I’m sure at the volume that Best Buy is doing they probably have a good balance of heavy users vs people that buy the service when they need it the first time, then sort of forget about it and rarely use it.  I’m sure they also pay bottom dollar for their labor force and outsource a lot of tech support overseas. 

Maybe it works for a big company like Best Buy, but really makes no sense for a smaller local businesses.  I wouldn’t want to offer a service like this to an existing customer that averages more than a couple of billable hours of my time in a year.  I definitely can’t see why I would want to advertise a program like this for potential new clients, as it would just attract the type of clients I have no interest in, people looking for bottom dollar cost service. 

At the end of the day, how Best Buy operates I’m sure has very little relevance on how a majority of the CE Pro subscribers operate.  Probably most CE Pro subscribers see these these sort of programs from major cooperation’s as threat to to their businesses, and frankly rightly so.

Its one thing to make recurring revenue on selling monitoring, or cloud services, its quite another to sell low cost subscriptions to your skilled labor force.

Posted by Joseph Kolchinsky on March 1, 2019

@iKnowTech - it sounds like you have a far better service experience than what Best Buy delivers - so why try to compete by charging the same amount?  What if I told you your clients would pay $100/month or more for unlimited, 24/7, high-quality tech support?  And then they would pay hourly for all your in-home support?

Here at OneVision we partner with integrators to manage their service departments and drive profitability through high-quality service.  We are seeing an average membership fee of $100/month across the country for high-quality, instant access to 24/7 remote tech support.  The client then pays per hour for any on-site support.  We’ve processed over $1 million in recurring revenue for our partners.

This industry has immense potential - to capitalize on it we have to see the value of our role, learn to do it sustainably, and then charge appropriately.  It’s exciting to watch this unfold for the integrators who are innovating in service.