Cultivate loyalty at every level

BOB SAFIAN: Hi everyone, it’s Bob here. On today’s episode, I’ll be talking with two guests together: Sumit Singh, the CEO of Chewy, the online pet-goods retailer, and Sarah Robb O’Hagan, former head of Gatorade, Equinox, and, most recently, Exos, the high-performance fitness and corporate wellness firm. Our conversation focuses on building loyalty, an increasingly acute challenge in today’s marketplace. It was recorded live on stage at the Masters of Scale Summit in San Francisco. And you’ll hear a reference to a previous speaker, Bret. That’s Bret Taylor, the chairman of OpenAI, who just before us was talking about AI agents providing customer service. These leaders take a different emphasis, as one of them puts it: “It’s all about humans.” Let’s get to it. I’m Bob Safian, and this is Rapid Response.

[THEME MUSIC]

SAFIAN: Please join me in welcoming Sumit Singh and Sarah Robb O’Hagan. Great to have you guys here.

SUMIT SINGH: Great to be here..

SARAH ROBB O’HAGAN: Great to be here.

SAFIAN: Today we’re going to talk about building loyalty, building loyalty from your team, from your customers, from your investors. Our pets, of course, are our best friends because they are so loyal.

Sumit, I wanted to start with you. Listening to Bret talk about the future of potential customer service, Chewy has distinguished itself often by doing things that are very human and bespoke. These sort of moments of surprise and delight for customers like pet portraits and birthday cards. And I know that your healthcare business in pet services came from human interaction from your salespeople.

So I’m curious how you think about, kind of, surprise and delight, building customer loyalty, and the ROI of it relative to keeping those numbers good.

Copy LinkHow customer experience/service leads to loyalty

SINGH: Yeah, it’s great to be here. I’m here to postulate or appeal. So one, I think what’s well understood is good service, good experience costs less over time. If you start from that mentality, what I’m here to appeal to you is ultimately, it’s good experience that builds loyalty. And if you agree with the postulate on the purpose of a brand is to acquire and retain customers, then retention and loyalty building is the closest correlation — I’d argue whether it’s causation or correlation — to building loyalty.

So you can buy dog food from anywhere. We’re in the business of selling dog food. But that’s not what makes the job fun. What makes the job fun is to recognize how empathetic this category is and how customers in this particular category treat their furry members as family.

And how do you build that empathetic connection? It’s unfortunate that over the last many years, customer service has become so bad that we’re actually excited by the prospect of talking to an AI chat agent.

SAFIAN: Right, that seems like an improvement.

SINGH: And I’m not saying that it doesn’t have a place. It does, and I’m going to come to that because it’s not just in the mentality; it’s in your culture. As you build companies, I want to appeal to you that customer experience or customer service can build loyalty that can create a defensive and offensive moat around your brand that allows you to compete against the larger stalwarts of the world, which we’ve been competing with for the last many years.

When I joined Chewy, it was a billion-dollar brand. This was seven years ago. Today, we clock 25 percent of North American households shopping at Chewy, and we’re a $12 billion brand. This is top line only, not market cap.

SAFIAN: And how much of that was about, like, humans?

Copy LinkThe art of extraordinary personalized service

SINGH: So, it’s all about humans, in my opinion.

Because the concentric circle of what’s the mission that we go to market with? To be the most trusted and convenient destination for pet parents and partners everywhere. So what you should hear there is trust and convenience are important; building a marketplace for customers, but also partners that serve within the pet space is important.

The brand extensibility is also super important. But what we’re really standing for is delivering the scale and convenience of e-commerce, which you would get from large companies like Amazon, but at the personalized care and service that you would expect at a local neighborhood pet store.

We use this word surprise and delight, and you’re led by pet portraits. Yes, that is good. That is going beyond the ordinary, but customer service today is so poor that we have to first start with making the ordinary extraordinary.

So how do you do that? One, courtesy is more important than process or efficiency. Number two, we pick up the phone. Brett was talking about the metric “cost per contact.” Yes, it’s a real metric. At the same time, you may be surprised to know that is not a metric prevalent in the Chewy Customer Call Center.

We do not measure agents by productive metrics like these.

We measure by the amount of resolutions that you conducted, no matter how long you talked to the customer. We measure statistically accurate results on how quickly we picked up the phone. He was talking about IVRs. He’s exactly right. We hate IVRs. We’re likely one of the only companies in North America, maybe in the world, that has 24/7 live human customer service.

We pick up the phone in four seconds or less. That is two rings or less. And so when customers call with an issue, that itself disarms them because they’re not expecting it. They’re expecting what happens when they’ve called an airline company, a cable company, or any other normal company that wants to provide good service but has been brought up in this culture of IVR or cost-cutting. Customer service doesn’t have to be a cost center.

SAFIAN: Well, I just want to note that not everyone may know this. So during the pandemic, when things were really tight and it was hard to get folks, Sumit was under a lot of pressure — like maybe you use more bots.

He was like, no, we’re going with the humans. And his human folks brought him insights that said, “hey, maybe we should start like veterinary care for pets,” and it spawned a whole new business. The things that humans bring to you sometimes are not what you expect.

Copy LinkHow Chewy elevates customer service beyond the basics

SINGH: Why do you want to talk through the IVR and figure it out for the first one minute, wait five minutes, and then get in queue for us to call you back? That’s ordinary. So we’ve gotten our arms around it. Now, a customer calls, and in the conversation, the agent essentially says, “How did you name your dog Becky?”

The customer says, “It goes back to the Beyoncé song, Becky with the hair.” The call progresses normally. A few days later, the customer receives a custom-painted Beyoncé CD with her pet’s portrait painted on it. This is going above and beyond. What does that do? It creates conversations.

You’ll talk about this story. It gets talked about at dinner reservations, posted on social media: 250,000 reposts, 700,000 likes, etc., etc.

This traditional science of customer relationship marketing starts with doing the basics right. The basic was courtesy over process and efficiency, then making the ordinary extraordinary, and then truly going above and beyond what customers are expecting, right?

SAFIAN: Because it’s just dog food…

Copy LinkEmbedding values into company culture

Sarah, you’ve worked with brands that engender a lot of loyalty at Exos, Equinox, JetBlue, where you’re on the board. You also worked at Nike. I’m curious about how the relationship you have and loyalty among your staff, your team impacts how your loyalty builds with your customers.

O’HAGAN: Yeah, no, I love this question, Bob, because I think it’s so important. Like my early days in my career, I actually started at Virgin, the early Richard Branson days.

And then Nike, where in the days at Nike, we would just bleed the Swoosh, like people had tattoos who worked there, and we would shame anyone who worked with us who didn’t wear the product. Whereas I remember when I began to lead Gatorade globally, which was part of PepsiCo at the time, it was financially struggling, and there were a ton of new employees coming on board. You were given a shopping list of PepsiCo products that you had to buy, and people hated it because they felt forced to do something as opposed to passionately believing they wanted to.

So I think there’s a huge correlation. When a team is so fired up about the culture you’ve built at Chewy, they’re going to have those moments where they want to delight the customer. It’s massive. In the business I’m in now, Exos, we are a human performance coaching company. We coach people just like you.

It’s interesting, going through the last years of the pandemic, everyone has been suffering from burnout and all these sorts of things. We spend as much time tracking how well our coaches are rated by their clients as we do on how they are feeling. Are they feeling like they are up for the job today? Because if they’re feeling awesome and great about the company, they are going to, in turn, want to deliver.

Copy LinkScaling customer-centric strategies

SAFIAN: I mean, they’re your coaches, like they spend hours a week with their clients, almost like therapists, right?

But there’s only so much influence you can get. You’re not in that room. So how do you make sure they’re having the right engagement and that the relationship works the right way?

O’HAGAN: Yeah. And that’s where I bet it’s the same at Chewy. We spent a lot of time early in the pandemic, like many companies, going through really tough experiences like furloughs and layoffs, then new people joining the company.

We spent tons of time reinvigorating the company’s values. If we are all really clear that we’re living by those values, there’s a much better shot that when they’re in the room with the client, they will deliver on that expectation. Some of our values aren’t for everyone.

One of our values is actually, we savor the struggle. Being at Exos means it’s going to be hard, and your client is going to have a hard day. Do you feel comfortable that that’s part of the culture we’re in?

SAFIAN: Because you got to push them. Which means you got to push yourself. And not everybody wants to push themselves all the time.

O’HAGAN: Yeah. Totally.

SINGH: Let me just add to that. So, it can be easy to lean in and have these tenets of standing for the customer when you’re a $10 million brand. But when you’re $12 billion, serving 25 million customers, to do it in a manner that has been scaled, sustained, and hardened, where you’re not present there, but your agent or team member is leading with brand forwardness, is the challenge.

So how do you scale customer centricity is the bottom line.

The core message, which is kind of plus one to what Sarah just said, is the philosophy to our team members: You are always right when satisfying a customer. That line conveys so much because it empowers them. It frees them from retribution or judgment. It empowers them to make decisions that are right for the customer and, therefore, the company and shareholder.

SAFIAN: Let me double-click on a phrase Sumit used earlier: “the extraordinary in the ordinary.” This, to me, is the key to scaling brand loyalty. Between scaled efficiency and high-touch surprise and delight, making humdrum moments special can really distinguish a business. After the break, Sarah unpacks team loyalty through the employee lifecycle, and Sumit shares his thoughts on investor loyalty. Stay with us.

[AD BREAK]

SAFIAN: Before the break, we heard Chewy’s Sumit Singh and Exos’ Sarah Robb O’Hagan talk about the human side of building customer loyalty. Now we dig into team loyalty, investor loyalty, and bringing your business’s values to life. Plus, Sumit gives us a live demonstration of eliciting customer joy. Let’s jump back in.

Copy LinkIntegrating values amongst your team

I guess I feel like a lot of companies, well, they all have values. Enron had values, but how do you make sure as a leader that those values are being lived? Are there things you have to do yourself?

O’HAGAN: Yeah. You can do it in every part of the employee lifecycle. I think about the employee lifecycle just as I do a customer lifecycle.

By the way, I’m dating myself here, Bob, but when I was in college, we learned about the innovation adoption curve — the early adopters and the laggards. Employee culture is the same. You have to know who the mayors are, those engaged who spread the word for you. They are important in value and living the values.

Throughout the employee lifecycle, when hiring someone, I go through our values and ask them to give examples from their life where the value came to life. Talk to me about how you perceive this at Exos. You’re truly making it a living document, not just something on the wall.

SAFIAN: You have to bring it.

SINGH: 100%. You have to hire for that. Identify the evangelists within those you try to hire, and lead by example. You have to put your money where your mouth is. I’ll give you an example: When you call us and have bought food or medication, we will say, “Don’t worry about returning it.”

Sometimes food doesn’t work out, or when your pet’s passed away. When food doesn’t work out, we say, “Go donate it to a shelter.” We’re putting our values of surprising and delighting you into practice. It’s also sometimes economically beneficial to do these things.

We’re building this connection by catching you off guard by allowing a donation to a shelter, refunding money. Yes, and you’ll talk about that. We have a 365-day return policy. No questions asked. It’s the most generous refund and return policy in the industry. Yes, we could reap tens of millions and float to the bottom line if we matched Amazon’s policy, but we don’t.

Copy LinkBuilding loyalty among investors

SAFIAN: I’m curious for both of you, how do you think about building loyalty among investors? Do you think about it the same way, the same priority as customers and team members? Some say you get the investors you deserve. Curious how you think about that.

O’HAGAN: Funny you mention. I was having this conversation; I used to be on the board of Strava with one of the founders, who teaches a business school case study. The students always assume the answer is going for the best financial deal, but he emphasizes values. Getting the investors you want is about the same mission and values, as you’re in this for a long, long time.

SINGH: Chewy went from two billion in revenue in 2017 to 12 billion this year. Profitability improved from negative 12 percent EBITDA to positive 4%.

Free cash flow has gone from negative 100 million to positive 700 million, with no debt. Why I state these facts is because it’s not okay to do one or the other. We have a responsibility towards customers, team members, and shareholders. Shareholders understand that personalized customer care is a strength of ours that builds loyalty, fueling repeat purchases, driving top-line growth, and creating efficiency to enhance revenue.

We’ve done both. If we were a 12 billion company still at negative profit and cash, we’d need to ensure it works.

SAFIAN: It’s got to work.

SINGH: That’s a leader’s responsibility to make it work.

SAFIAN: Yeah. Creating loyalty from investors to — listen, those numbers are great. Your stock price hasn’t always been a straight line; it moves around. It’s hard to balance investor loyalty and maintain patience through it all.

O’HAGAN: Absolutely. Totally.

SAFIAN: We’re almost out of time. You’ve talked about surprise and delight moments. I understand you have a surprise for Sarah.

SINGH: I do. Yes.

O’HAGAN: Oh!

SINGH: Unexpected moments creating joy.

O’HAGAN: Eddie! Say hi to Eddie! 

SINGH: That’s not a photo. It’s a hand-drawn portrait by a local artist working with Chewy. They pick up pictures from social media profiles.

O’HAGAN: Amazing! Isn’t he handsome?

SINGH: We drop it to you as a surprise and delight.

O’HAGAN: You’re the best! Oh my God, Thank you so much. Thank you.

SAFIAN: You can’t fake the joy Sarah expresses when Sumit presents her with a portrait of her dog, just like you can’t fake good customer service. That’s Sumit’s point when he discusses AI agents falling short compared to humans.

Do I think AI agents will become increasingly ubiquitous in customer service? Yes, it’s inevitable. But that doesn’t mean human agents will go away. Companies investing in people and prioritizing engagement, like Chewy, will continue to stand out. Sarah talks about bringing values to life; it’s easier said than done. But ultimately, the hard things matter. Isn’t that what loyalty is really about? I’m Bob Safian. Thanks for listening.