Best Buy Rewarded By HD DVD Gift Card

Washington, D.C. (June 18, 2008) -- Best Buy says its decision to give a $50 gift card to HD DVD owners has paid off because the owners decided to spend even more money in the store.

Best Buy last March offered a a $50 gift card to customers who purchased an HD DVD player from any Best Buy store.

The gift card promotion cost the company roughly $10 million. But the offer was designed to comfort HD DVD enthusiasts who were disappointed over picking the wrong format in the high-def war. (Toshiba pulled the plug on HD DVD in March, ceding victory to rival Blu-ray.).

Mike Vitelli, Best Buy's senior vice president for consumer electronics, said yesterday that the HD DVD owners expressed their thanks by increasing their in-store spending and allowing the store to recoup its investment.

"Our customers actually surprised us by spending 50 percent more than we normally get when they redeem a gift card, including an average basket significantly higher than norm, and all of that dramatically reducing the cost of offering the gift card," Vitelli said yesterday in a conference call with financial analysts.

Vitelli said HD DVD owners were feeling underappreciated after investing in the failed high-def format.

"We interpreted this behavior (increased spending) as the customers’ way of saying, hey thanks, Best Buy, for not leaving me hanging and valuing my relationship with you. And we expect that these customers will be more loyal than ever and likely telling others of their experience," Vitelli told the analysts.

The Best Buy executive said company research had indicated that HD DVD owners were early adopters who represented "some of our very best customers."

"Customers who are early adopters often make decisions like this knowing the inherent risks (but) ultimately we felt (the gift card) was the right thing to do...The story had a happy ending," Vitelli said.