American Express Company (AXP) Earnings Call Transcript & Summary

Welcome, everybody, to our session today, which is the future of loyalty, leveraging digital innovation to help retain and grow customers. I'm Erin Frankcombe. I'm the VP and General Manager of American Express, Amex Offers and Business Insights, and really excited to be here with you today. I have 3 very esteemed panel guests with me today. I'll start here at my left, which is Lin Dai, he's the Co-Founder and CEO of Superlogic. Superlogic is a revolutionary technology company, building the next-gen loyalty and connected commerce solutions for the world's most innovative brands. Next down, I have is Dawn Fichot, Brompton Bikes, Head of Marketing for North America. Brompton is a maker of one of the world's most iconic folding bikes. And then last but not least, I have Jason John, who's the Chief Marketing Officer at 1-800-Flowers.com. 1-800-Flowers.com, for those that don't know, is one of the leading gifting destinations. It has a portfolio of brands, including Harry & David, 1-800-Flowers, Personalization Mall, Shari's Berries and Cheryl's Cookies and many, many more. So please join me in welcoming this esteemed panel today.

Okay. Let's kick things off and start with consumers becoming digitally savvy. So Jason and Dawn, you are both heritage brands, both of your companies have been around for over 50 years. So how has your customer engagement and loyalty strategies evolve to support how this exceptional level of personalization has occurred? And then how are you staying true to the value proposition as part of that?

All right. So how's everybody doing? Can you hear me back there? Awesome. So 1-800-Flowers was started back in 1976. Our founder, Jim McCann, who's our current CEO, started as a floral shop here in Manhattan. And those values that he started the company with back in those days, very family-centered, relationship centered, and really being the core DNA is relationships and how we can help our customers develop more and better relationships. So that has existed back then. And now there were 17 brands in our portfolio. Some of you've probably tried some of our brands outside of 1-800-Flowers, like Harry & David, and Cheryl's Cookies, and I apologize if you haven't eaten lunch and are hungry. But we have tried to keep that core DNA as far as relationship is alive as we scale. Right now, one of the biggest tools that we've implemented is our Passport program, our Celebrations Passport program. It's our loyalty program. For anywhere between $20 and $40, you can join the program and get free shipping for all your gifting needs across all the portfolio. So we're trying to keep -- even though we have 17 different brands to try and keep them all linked, not only internally in our corporate communications and strategy, but also for the customer, so they could start to feel value out of all that acquisition that we have done to grow the company over the years.

Yes. And I would say, just to say, I think we've got you beat by 1 year. So Brompton was founded in 1975. So Andrew Ritchie was a young engineer, and he had just moved to London and was looking for a way to solve the problem of getting around a pretty massive city. And he realized he needed a bike that he could fold up, bring up, carry up his 4 flights of stairs to his flat, take into his office, so it wouldn't get stolen on the street, and he used his engineering brain, his curiosity and his ingenuity to really make this design icon of a bicycle. And I would say, as we think about loyalty, that DNA is baked into how we approach it today. So we consider ourselves just incredibly curious about who our customers are and engaging with them and really trying to solve problems for them. And what that's led to is a massive community of Brompton riders around the world. We produced our 1 millionth bicycle last year. And that's amazing, but the thing that's even more amazing to me is that 500,000 people have registered to our community. So that means with 1 million bikes, 50% of those people have committed to being -- sorry, converted to being community members, which is truly amazing when you think about engagement rates. So what we need to do, as a brand, is really lean into that community as a megaphone, give them the tools that they need to be our biggest advocates, which they're already doing, but make it even easier for them. And that's where digital really comes in. And then I think about how we scale this. So again, it goes back to giving people the tools that they need to make it super simple for them to share their love and joy of Brompton. But beyond that, we are working on our path to purchase. So when you think about bicycles, there are big IRL products. People want to try them, they want to ride them. So you can't always solve that with a digital solution, but we can definitely make that journey much more connected and much more enabled. So the way we're approaching it this is through our retail strategies. So we're expanding our footprint. We're opening in D.C. this spring, which is great. West Coast store will follow on shortly after. We're also making it really easy to subscribe. So with a product like Brompton, where it's a slightly higher price point, accessibility is a big issue. So we're completely knocking down that barrier. People can subscribe month-to-month to a Brompton, get it sent to them in the mail, keep it as long as they want. And we've also opened our first ever micro store, which is in Brooklyn. So if you want to drop by, you can stop-in, in Dumbo and -- but we're, again, integrating that trial, so getting people on bicycles and then using digital tools to make sure that they've got the best of customer service across in-person and online.

I love that. That's fantastic. And Lin, would you have anything to add here given your company enables loyalty software? And as you think about customization at scale that Dawn and Jason both spoke to?

Yes, absolutely. Compared to my fellow panelists, we're a relatively new company. But since 2018, our technology being used by really heritage and legendary brands, like Warner Music Group and most recently, American Express. So what we built is, what we think is, we call it next-generation reward system. So our technology basically supports, leverages kind of both traditional points and miles based rewards currency, but also introduces a new type of rewards that's represented by a digital badge system. A digital badge can literally represent any type of redeemable physical products, benefits even within your ecosystem or even outside of your program. So you can see an example on the screen is the Warner Music Rewards program. You can -- the digital badges are anything from [ box sets ], limited edition box sets to tickets, to representing you have won a sweepstakes or digital or any type of social media behavior from watching the video to retweeting content. And on the right, you can see kind of example of challenges. One of the benefit of digitally representing your rewards is actually gamifying them and creating an experience where you're leading the consumer down a path, completing a series of 2 or 3 different activity, unlock bigger rewards. So from the bigger rewards could be $20 discount to your credit for merch purchases or actual unlocked tickets and backstage passes and meet and greets with your favorite artists. So -- and one of the other amazing benefits of actually digitally representing the benefits and products in your program is a user can actually -- the brands can actually send the rules for the users to trade these programs peer to peer in your own brands, your branded loyalty marketplace. And also with the right rules, brands can engage with other partner programs and potentially allow user to trade program to program. Now imagine your retail rewards program can actually unlock and be traded for another music fans tickets to their favorite artists. Now that's really about personalization, not only personalization for the users, but actually so much more user acquisition and data for the brands that runs these programs.

Yes, the scale is bigger than what yours is. I love that. So Jason, I'm going to kind of shift to you a little bit. You touched a little bit about the plethora of brands that sit under the 1-800.com umbrella. I'd love to hear a little bit more about that strategy, a bit more on what some of the tried and true strategies that you have to retain and attract customers.

Yes, definitely it can get very complex when you layer in sort of a brand view and an enterprise view. And the other layer of complexity that we have that a lot of other retailers don't have is the relationship between the consumer and then the recipient that they're buying the gift for. So for us, our customers are primarily not buying for themselves, they're buying for someone else. So when you talk about scale, personalization or scale personalized experiences, it's going to be very situational. So whether you're buying a gift for a newborn baby or you're buying a gift for a sympathy event, it's going to be 2 totally different things that you're looking for. One commonality that we found is really in that gift purchasing experience, there's the anxiety around what gift to get, but then there's also the anxiety and how to express yourself through words after you purchase that gift. So what we've tried to do is obviously scale and advance our technology and our understanding around those 2 key areas and moments. One way that we did that is through content. So building a content strategy around those anxiety moments on how to express yourself in many different situations has led us to bring in our own editorial team in-house, create a lot of content. We now have millions of customers to interacting with our content outside of the commerce experience, which has really helped not only add credibility and expertise to our brand, but obviously scale our reach and what our customer is using us for and the touch points of our brand that they have during the year outside of that gifting process. So I think it's really key for yourselves to understand what are the core strategies and core areas that the customer interacts with you and then understanding those layers that you can build on top of that for the scale personalized experience.

That's great. So Lin, I'm going to shift to you. So as a company that really focuses on the loyalty software and obviously enabling what's happening in retail today. How do you see your loyalty solutions in the kind of gamification and social media environment? And how are they complementing some of these retail trends that we're seeing?

Yes. I mean I think one of the things Jason just said really resonate with me about all the activity the consumer take outside of your program, right? So about -- the stats is 61% -- more than 61% of activities that actually leads to purchase decision actually happens outside of your platform. And we know that social media is a big part of that. 80% of Gen Z and 74% of millennial says, like, the social media influence their purchase decision. And -- but all of these activities are happening outside of your traditional website, commerce platform, loyalty program, how do you really incentivize that. You could say, like, hey, we're going to reward you with points for retweeting our brand video or one of our promotions. But that's -- accounting-wise, that's actually really expensive, using points as the instrument because of the accounting liability that comes with points. So one of the ideas we had is how do we really gamify the experience. So digital badge is kind of our new innovative way to allow brands to incentivize not just purchase activities, but also non-purchase activity that's really important to the brand. So we could in -- the example we had, I don't know if we can put the slide back up, a consumer can earn a badge for a combination of activity. So if I retweet it, if I watched Lizzo's video, I can unlock a badge. The badge -- individual badge has no accounting value, right? So it's just a kind of a badge of honor to show off. And if I retweeted the brand's message 10 times, I unlock another badge, and if I made a small purchase, I unlock third badge. But if I collect those 3 activity, I complete those 3 activities, the right combination unlocks a bigger reward. So that incentivize the consumer to actually take more actions than they normally would in as a passive purchaser. So what we end up with is a highly engaged program. And a traditional program, typically, a consumer may interact with it twice or maybe 3 times a month. In our program, we see -- across multiple programs, we see like, on average, about 20 -- over 27 interaction with a program per user per month. That's like an 800% levying engagement. So those engagement actually, eventually, if you design these challenge as well, it's not just kind of the 3 social media actions, you can basically also weave in purchase actions. We see those actually drive up to about 14% increase in purchases. So this is kind of the new frontier where gamification drives love and engagement and advocacy for your brand, but also drive purchases, right? So we love for everyone to try to sell, actually a little tease at the -- if you see at the end of the panel, there is American Express and Superlogic is going to let you claim a free digital badge, which can be redeemed for a really awesome gift at the Amex lounge here.

Awesome. You've done my job for me. So Dawn, your team has done a really nice job of in brand store and obviously building a community around that. And I know one of the areas that you're branching into from a digital standpoint is with Amex Offers. Can you share a little bit about how that's going and how that works for you and how you think about digital loyalty?

Absolutely. Before I answer, can I just ask, can you raise your hand if you were aware of Brompton before this? Yes. So very sparse. And my guess is that half of you may be don't consider the U.S. your home base either because we're much more popular out of the U.S. than in the U.S. So for us, what we really need to do to grow the brand is lean into partnerships and lean into our community and making sure that we're aligning with companies that have the same values as us, but bring in completely different audiences. So when Erin and her team approached me about potentially joining this Amex Offers platform, I was really thrilled because it felt like we were getting the -- invited into the special club at Amex and getting the blessing of something that comes with a little bit of shine to it, which is always what you want when you're an emerging brand and needing to build this awareness. So I will say it's early days in the program we launched in October, but -- and I wrote this down because I didn't want to get it wrong. We have 130,000 people already enrolled in the program in the offer, which is incredible. We -- 90% of those are completely new to Brompton. So they've never been on our website before they've never engaged with us. And 64% of them are under the age of 45, and Brompton historically has trended older. So we're introducing our product and our brand to a new audience. And again, we're doing it in that sort of like warm, fuzzy Amex environment that comes with that level of shine around it. And this isn't even talking about the millions of people who were exposed to the brand and probably for the first time through Amex Offers. So we launched it heading into winter, which is probably not the best time for people to buy bikes, but we expect to see in the spring, a lot of this work pay off. But that 130,000 people who have already enrolled is pretty impressive. And then we also work with a group called Mention Me for a referral program, and this is also fairly new for us in the U.S. But what we've seen is people who are referred are 6x more likely to refer someone else. So we know that having that personal connection at the beginning of your experience with the brand is really important, and it's more likely to lead you to share from there. And I actually thought it was really interesting what you were saying as well about loyalty and how we think about it moving forward because loyalty for a company where your least expensive product is over $1,100 and your product is built to last. We have bikes that say, in circulation for decades. Loyalty isn't -- are you buying the newest color of the newest model every year. It's how are you engaging in these other activities. So I'm actually really interested to learn more about your projects, your platform that you're working on and how we can maybe lean into some of those tools. But I think these referral platforms, we need to look beyond just purchase and into more activities as well.

So as a follow-on to that, as you think about as an industry leader, some of those innovations and new ways of working, like how do you think about that? Like what motivates you to explore some of these parts less traveled?

Yes. Well, I think we know that when people learn about Brompton, when they try Brompton, they tend to buy a Brompton. So we have 30% conversion from test rides into ownership, and that's not just at our stores, that's across events, that's across conferences, seminars at any time people get on a bike. We know we can convert 30% of them to owners, which is pretty incredible. So I think that's at the heart of all of these decisions is, the metric is can we get people to actually try a bike, and that is how we know if this program is right for us, or if we should wait for the next sort of technological innovation to come on.