Game Theory in Best Buy vs. Amazon, 2012
Source: https://www.inc.com/justin-bariso/amazon-almost-killed-best-buy-then-best-buy-did-something-completely-brilliant.html
In 2012, Best Buy seemed to be falling apart. Employee engagement was falling, but more importantly, Amazon was growing. Best Buy was losing money as customers would go to Best Buy to try out items, then go home and buy them for cheaper from Amazon. In this situation, Best Buy and Amazon were competing against each other for customers, and Amazon was winning. Things weren’t looking good for Best Buy, but if you fast forward to 2019, Best Buy was thriving. Best Buy, under new leadership, made a lot of changes to its marketing strategies that we can see relate to game theory, and under a “Renew Blue” program grew at an unexpected pace, at a time when everything seemed to be going wrong for Best Buy.
Best Buy and Amazon were each following their own strategy in 2012, and Amazon was doing better. Amazon offered cheaper prices, and Best Buy wasn’t making the most of its greatest asset: in-person customers. Best Buy decided to switch its strategy in search of a better payoff than it currently was getting, by changing up two major things: offering price match (which made it just as good as Amazon in terms of price), and improving the in-person shopping experience, through the Geek Squad (which offered personalized, friendly, and extremely useful in-person help for any problems with products and devices) and changing the layouts of the store to feature sections for specific retailers (like an Apple product only section). Best Buy also re-invested back into its employees, by restoring a beloved employee discount program, which also helped the in-person shopping experience. Best Buy was doing fine before Amazon blew up, but once it started growing, Best Buy had to change its strategy in order to maintain a good payoff. This shows how in real-world situations, changing times may change the payoffs of existing strategies (Best Buy was doing well before Amazon grew), and in response to new situations, Best Buy had to pivot strategies in order to stay on top of the game.