Profit from Product-Service Synergy

Geek Squad is Best Buy’s killer app. So wrote retailing writer Jackie Crosby of the Minneapolis Star Tribune newspaper. She’s describing the consumer electronics installation and repair service. Over the 7½ years that Geek Squad has been a part of Best Buy, annual revenue has grown from about $3 million to about $1.25 billion.
     But in a February 2008 San Francisco presentation, Geek Squad founder Robert Stephens warned that for a retail store operator, services by themselves aren’t sufficiently profitable. If your principal commodity is services, link up with a product. Spas and salons stock potions recommended by staff. Truck rental centers sell merchandise to people who are moving to a new home.
     From the other side, if you make your living from retailing products, consider how you can most fully use services as a profit center. Keep the product-service synergy and identity strong, though. Consumer psychology research verifies the importance of you projecting a consistent personality across products and services.
     For example, Geek Squad “agents” wear their white button-down shirts, black pants, and clip-on ties whether the agent is male or female. For making house calls, many of them drive a distinctive-looking “Geekmobile.” When Best Buy introduced the Magnolia Home Theatre line and mobile phones, they followed by folding the installers into the Geek Squad brand.
     Because of Best Buy’s store size and the technical expertise required, it works well to have a Geek Squad separate from sales staff. But for a smaller non-technical operation, keep in mind the perishability of services. If a day goes by that a service staff member’s help isn’t called for, you can’t store those hours for another day. You might be better off not following the Geek Squad model, instead having services staff who can also provide other functions, such as selling products.