Best Buy Business Lesson: Customers First

We all know the retail adage about the customer always being right. But meeting customer expectations requires a certain amount of guesswork: You can only cater to their demands if you can predict beforehand what those needs might be.

In the case of electronics giants Best Buy (BBY) and Circuit City (CC), customer satisfaction is a key difference that's keeping one company steady while the other one falters.

Do you understand your clients well enough to keep them from the competition?

No matter what you're selling, it's not the greatest time to be a retailer. Electronics have weathered the downtown reasonably well, thanks to steady demand for video-game systems such as Nintendo's (NTDOY) Wii and families investing in high-definition TVs in preparation for the upcoming digital conversion.

Still, analysts are carefully watching electronics chains Best Buy and Circuit City as bellwethers for consumer spending, especially leading up to the crucial holiday shopping season.

For now, Best Buy appears to be winning this particular race. Circuit City this week announced it would be closing 155 stores in the U.S. and cutting its workforce by almost 20%. With the company talking openly about restructuring, it may even consider filing for bankruptcy in the coming months.

While Best Buy has pulled back its growth strategy in response to the current economy, it's faring well compared to its main rival. So how did Best Buy set itself apart? And how can your small business do the same?