Rapid Response: Cultivate loyalty at every level, with Chewy’s Sumit Singh and former Exos CEO Sarah Robb O’Hagan

0:00Scaling a business in the US can feel like a maze. Each state has its own payroll, benefits, and compliance rules, pulling your focus away from growth, which is why founders use Deal. Deal is the professional employer organization, or PEO, that gives you a dedicated HR expert, plus Fortune 500-level benefits for your team. The National Association of PEOs says businesses can grow twice as fast if they use one. So, if you're scaling, make it simple with Deal. Go to deel.com. slash MOS and get up to three months free. One of the patterns I've seen over and over and speaking with successful founders is this.

0:40They don't wait for HR problems to show up. They build solid systems early on so their company can grow without tripping over itself. JustWorks is one of those systems. JustWorks is the human resources platform that helps you scale without sacrificing your team's needs. It handles automated payroll, benefits, compliance, even international hiring, so you can scale your team without slowing your momentum. JustWorks secures your hiring systems so they don't cost you time, money, or people, which is how you scale with confidence. JustWorks for your people.

1:22Hi, 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 Robbo-Hagan, former head of Gatorade, Equinox, and most recently Exos, the high-performance fitness and corporate wellness firm. Our conversation focuses on building loyalty. 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, Brett. That's Brett Taylor, the chairman of OpenAI, who just before us was talking about AI agents providing customer service. These two leaders take a different emphasis.

2:03As one of them puts it, it's all about humans. So let's get to it. I'm Bob Safian, and this is Rapid Response.

2:17Join me in welcoming Smith Singh and Sarah Rob O 'Hagan. Great to have you guys here. Great to be here. Great to be here. So what we're going to talk about today is 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, right? Sumit, I wanted to start with you listening to Brett 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, you know, for customers like pet portraits and birthday cards.

3:01And I know that your healthcare business in pet sort of came from human interaction from your salespeople. So I'm curious how you think about kind of surprise and delight, building customer loyalty and kind of the ROI of it relative to sort of keeping everything, you know, keep those numbers good? Yeah, it's great to be here. Thank you. You know, I'm here to postulate or appeal. So one, I think what's well understood is good service, good experience costs less over the long term. So if you start from that mentality, what I'm here to appeal to you is, you know, Ultimately, it's good experience that builds loyalty.

3:42And 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. In fact, you'd argue whether it's correlation or causation to building loyalty. So you can buy dog food from anywhere. Yes, 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, you know, in this particular category, treat their foreign members as family. And how do you build that empathetic connection? So it is unfortunate that over the last many number of years, customer service has come to be, it's become so bad that we're actually excited by the prospect of talking to an AI chat agent.

4:48Right. That seems like an improvement. Yeah. And I'm not saying that doesn't have a place. It does. And I'm going to come to that because it's not like we run, it's in a mentality. It's in your culture. And as you build companies, I want to appeal to you that customer experience or customer service can build loyalty that can build a defensive and offensive moat around your brand that allows you to compete against the large stalwarts of the world, which we've been competing for the last many years. So when I joined Chewy, it was a billion-dollar brand. This was seven years ago. Today, we clock 25 % of North American households shop at Chewy, and we're a$12 billion brand.

5:31This is top-line only. It's not market cap. Yeah. So, you know. And how much of that, though, is about, like, humans? Yeah. So it's, you know, 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, convenient destination for pet parents and partners everywhere. So what you should hear there is, you know, trust and convenience is important. Building a marketplace for customers, but also partners that serve in the pet space is important. And then the brand extensibility is super important. But alongside that, 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.

6:19Right? Yeah. And so we use this word surprise and delight, and you're led by pet portraits. Yes, 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, you know, we pick up the phone. Brett was talking about the metric cost per contact. Yes, it's a real metric. At the same time, maybe you would be surprised to know that that is not a metric that is prevalent in the Chewy customer call center or within our company. We do not measure agents by productive any metrics like these.

7:07We measure by the amount of resolutions that you conducted no matter how long you were able to talk 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. Hate IVRs. we're likely one of the only companies in North America, maybe in the world, that has 24-7 live human, right, customer service, and we pick up the phone in four seconds or less. That is two rings or less. And so that itself, when customers call with an issue, that itself disarms them because they're not expecting it. They're expecting to call an airline company or a cable company or any other normal company that wants to provide good service but kind of has been brought up in this culture of IVR or cost cutting.

7:53Customer service doesn't have to be a cost center. Well, I just want to note that not everyone may know this. During the pandemic, when things were really tight and it was hard to get folks, and Sumit was under a lot of pressure, like, maybe you use more bots? He was like, no, we're going with the humans. And they brought him, 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, which is, you know, the things that humans bring to you sometimes are not what you expect. That's exactly, let me just finish one thought.

8:27So what do you do when you go beyond the ordinary, right? So we're picking up the phone in two seconds. The crowd's like, wow, that's amazing. You guys don't have IVRs. Wow, that's amazing. Wait, but that should be the basic expectation. Why do you want to talk with IVR and figure out for the first one minute and wait five minutes and then get in queue for us to call you back. So that's the ordinary. So we've gotten our arms around that. Now, you know, a customer calls. And in the conversation, the agent essentially says, how did you name your dog Becky? And so the customer says, well, it goes back to the Beyonce song, Becky with the hair.

8:59And so the call progresses, you know, normally. And a few days later, the customer receives a custom-painted Beyonce CD with her pet's portrait painted on it. that is going above and beyond. What does that do? That creates conversations. You'll talk about this story. That story got talked about at dinner reservations. It got posted on social media, got 250 ,000 reposts, 700 ,000 likes, et cetera, et cetera. So this traditional science of customer relationship marketing, it starts with doing the basics right. And the basic was courtesy over process and efficiency. than the extraordinary in the ordinary, and then truly going above and beyond what customers are expecting, right?

9:48It's time to raise the bar. Because it's just dog food. Because it's just dog food. Sarah, you've worked with brands that engender a lot of loyalty at Exos, at Equinox, at JetBlue, where you're on the board. You also worked at Nike. And I'm curious about how the relationship you have and loyalty among your staff, your team, impacts how your loyalty builds with your customers? Yeah. No, I love this question, Bob, because I think it's so important. And like my early days in my career, I actually started at Virgin, like the days, the early Richard Branson days, and then Nike, in the days at Nike, where we were just bleeding the swoosh.

10:31Like people had tattoos who worked there, you know. and we would like shame anyone who worked with us who didn't wear the product whereas I remember actually when I began I led Gatorade globally which was part of PepsiCo at the time when it was financially struggling and there was tons of new employees coming on board and you were given a shopping list of stuff that you had to buy that were PepsiCo products and people hated it like because they're like they're forcing me to do something as opposed to I passionately believe if I want to. And so I think there's a huge correlation. Like when a team is so fired up about the culture you've built at Chewy, that they're going to have those moments that they want to delight the customer.

11:13It's massive. And business I'm in now, Exos, we are a human performance coaching company. We coach people just like you. And it's interesting going through the last years of the pandemic, everyone, as we all know, has been suffering with burnout and all sorts of things. And we spend as much time tracking how well our coaches are rated by their client as we do, how are they feeling? How's their well-being? Are they feeling like they are up for the job today? Because if they're feeling awesome and they're feeling great about the company, they are going to in turn want to deliver a really great...

11:50I mean, they're your coaches. They spend hours a week with their clients, almost like therapists. Totally. But there's almost only so much influence you can, like you're not in that room. Correct. So how do you make sure that they're having the right engagement and that that relationship works the right way? Yeah. And that's where I bet you it's the same at Chewy. Like we spent a lot of time early in the pandemic, like many companies, I'm sure, where we had to go through a really tough experience of furloughs and layoffs and then new people joining the company. and so we spent tons of time on really reinvigorating the company's values because if we are all really clear that we're living by the values then there's a much better shot when they're in the room with the client that they are going to deliver on that expectation and you know some of our values aren't for everyone one of our values is actually we savor the struggle like part of being at Exos is that it's going to be hard and your client is going to have a hard day.

12:54And do you feel comfortable that that's part of the culture we're in? Because you've got to push them. Yeah, exactly. Which means you've got to push yourself. Yeah. And not everybody wants to push themselves all the time. Let me just add to that. So it'll be easy to do. You can lean in and have these tenets of saying, yes, we stand for the customer when you're$10 million, a brand. When you're$12 billion and serving 25 million customers, to be able to do it in a manner that has been scaled, sustained, hardened, where you're not present there, but your agent or your team member, whether it's the corporate team member or the fulfillment team member or the customer care, is leading with brand forwardness is kind of the challenge that we have to get to.

13:35So how do you scale customer centricity is the bottom line. And the core message, which is kind of plus one to what Sarah just said, is the philosophy that we have to lead with is to say to our team members, you are always right when satisfying a customer. That line conveys so much because it empowers them. It frees them off retribution or judgment. It empowers them to make decisions that are right for the company, for the customer. And decisions that are right for the customer have to be right for the company and therefore the shareholder. I want to double click on a phrase Sumit used a bit earlier, the extraordinary in the ordinary.

14:19I love this phrase. This to me is the key to scaling brand loyalty. You know, between scaled efficiency at one end and high touch surprise and delight at the other, it's making what might be humdrum moments into something special that can really distinguish a business. After the break, Sarah unpacks how to build team loyalty through the employee life cycle, and Sumit shares how he thinks about investor loyalty. Stay with us.

14:55Real leaders don't back down when the stakes are high. They innovate, they push forward, and then they take the stage at the Masters of Scale Summit. Join us in San Francisco, October 7th to 9th, to hear from the CEO of the New York Times, scientists using cutting-edge technology to find cures, the leader of crypto powerhouse Coinbase, a retired four-star general, and many, many more. Apply now at mastersofscale.com slash apply25. That's mastersofscale.com slash apply25. If you're ready to take your startup from idea to impact, then AWS is your launchpad. From data storage to machine learning to secure app hosting, AWS gives you the tech trusted by the world's fastest scaling startups.

15:45And here's the best part. Join AWS Activate today and you could score up to$100 ,000 in AWS credits tailored to your stage and network. Go to aws.amazon.com slash activate and start building. Expanding your business in the U.S. can feel like a maze. Every state has its own payroll, benefits, and compliance rules, which can pull your focus away from growth. That's why founders use Deal. Deal is the professional employer organization, or PEO, that gives you a dedicated HR expert plus Fortune 500 level benefits for your team. The National Association of PEOs says businesses can grow twice as fast if they use one.

16:28So if you're scaling, make it simple with Deal. Go to deel.com slash mos and get up to three months free.

17:02let's jump back in. I mean, I guess I feel like a lot of companies, they all have values. Enron had values, you know, but like how do you make sure as a leader that those values are actually being lived? Are there things you have to do yourself? Definitely. Yeah. It's actually like even you can do it in every part of the employee life cycle. Like I actually think about the employee life cycle, just like I do a customer life cycle. And by the way, like I'm so dating myself, Bob, but like when I was in college, we learned about the innovation adoption curve. Remember how there was like the people up front who get a new idea first and then the laggards at the end.

17:44Employee culture is the same thing. So you have to understand whether it's within your brand or in your culture, who are the mayors, you know, the people who are so engaged that they are going to spread the word for you. And so they are so important in value. Do they live the values? Do they show the values? But we in the entire employee life cycle, when we're hiring someone, like I will sit and go through our values and say, give me examples from your life, where this value came to life and talk me through it and talk to me about how you perceive this plays out at Exos. So you're actually truly like making it a living document, not just something on the wall.

18:22Yeah, you have to bring it. 100%. You have to hire for that. You have to identify the people who are true evangelists within those you try to hire for. But then you have to really lead by example as a leader. You have to put your money where your mouth is. I'll give you an example. When you call us and you've bought food or medication from us, we will say, don't worry about returning. Food doesn't work out sometime or even worse when your pets, let's say passed away. When your food doesn't work out, we say, you know what, go donate it to a shelter. So what we're doing there is putting our values off surprising and delighting you.

19:01It is also economically beneficial sometimes to do these things. But for the most part, we're building this connection. We're totally catching you off guard where you're going, wait, I can donate this to a shelter and you'll refund my money back? Yes. That's awesome. And you'll talk about that. In another state, same thing. We have a 365-day return policy. And no questions asked. It's the most generous refund and return policy in the industry. And yes, we could reap tens of millions of dollars and float to the bottom line if we just matched what an Amazon policy is. But we don't. So I'm curious.

19:40I know we don't have too much more time. but I'm curious for both of you, how you think about building loyalty among investors? I mean, do you think about it the same way, same kind of priority as customers and team members? You know, some people say you get the investors you deserve, you know, and I'm just curious how you think about that. Yeah, I mean, it's funny. I was actually having this exact conversation. I used to be on the board of Strava with one of the founders, and he actually teaches a business a school case study on this. And the students always assume that the answer is to go for the best financial deal.

20:16And he always says, actually, it was about values. And it was about, when you say you get the investors that you want, that it is in the end about, do you truly believe in the same mission? Do you truly believe in the same values? Because you are going to be in this relationship for a long, long, long time. I mean, that's what you want. You hope you're going to be, right? Chewy has gone from billion, two billion in revenue in 2017 to 12 billion this year. Profitability has gone from negative 12 % EBITDA to positive 4%. Free cash flow has gone from negative$100 million to positive$700 million, and we have no debt.

20:57And so why I cite these facts is because it's not okay to do one or the other. Yes, we will get the investors that we deserve. At the same time, we have a responsibility as leaders. We have a responsibility towards customers, team members, and shareholders. And in this particular case, shareholders have come to understand that leaned in customer care, personalized customer care, is a strength of ours that builds loyalty, that fuels the repeat purchase cycle for a brand like ours, that drives the top line and creates incremental opportunity or efficiency to drop that revenue to the bottom line.

21:38And so we've done both, right? Had we been a$12 billion company that was still negative 12 % in profit or burning$200 million of cash a year? It's got to work. It's got to work. And so that's your responsibility as a leader to make it work. Yeah. I mean, I think also, you know, if you engender the right loyalty from investors, too, listen, those numbers you cite are great. Your stock price has not always gone exactly in that straight line, though. You know, it moves around. Totally. And your investors move in and out. And it's really hard to keep those balance and keep your patience through all of it.

22:12Yep, totally. We are almost out of time, and it happens too fast. But, Samit, you've talked about surprise and delight moments through here, but I understand you have a surprise for Sarah. I do. Yes. Okay. It's so fun! Oh my God! Oh my God! Unexpected moments creating joy. You are amazing! Everyone, this is Eddie. Say hi to Eddie! And that is not a photo. That is a hand-drawn portrait by a local artist. Thousands of who work with the Chewy brand who pick up pictures from social media profiles or pet profiles. Isn't he handsome? We dropped the key in the surprise of the light. You're the best. Oh, my God.

23:02Thank you. Congratulations. Thank you. Thank you, guys. Thanks so much. Thank you. Thank you.

23:11You cannot fake the kind of joy that Sarah expresses when Sumit presents her with a portrait of her dog. Just like you can't fake good customer service, which I guess is Sumit's point when he talks about AI agents falling short compared with humans. Now, do I think AI agents will become increasingly ubiquitous in customer service? Yeah, I think it's inevitable. But that doesn't mean human agents go away. Those companies that decide to invest in people and prioritize engagement like Chewy has, I think they're going to continue to stand out. Sarah talks about bringing values to life, and it is so much easier said than done.

23:50But ultimately, it's the hard things that matter. After all, isn't that what loyalty is really all about? I'm Bob Safian. Thanks for listening.

24:06This is Emily Warden, Capital One Business customer and owner of Emily Warden Designs, a bespoke fine jewelry store that quickly gained buzz after opening its doors in Richmond, Virginia. My customer base grew exponentially once we had a storefront. We had one engagement ring case at the time, and we had lines out the door every weekend. As her storefront continued to have record sales, Emily knew it was time to up-level production. We normally just purchase diamonds in very small batches or per order. So we wanted to invest in not just one or two pieces, but a collection of natural diamonds. Emily knew creating a collection would be a big investment, But with the help of her Capital One business card, she was ready to bet on herself and bet big.

24:53It was about$40 ,000,$45 ,000 all in up front. Having the Capital One card was definitely reassuring to be able to make such a large investment purchase. And of course, to get the cash back that came with it. To learn more, go to CapitalOne.com slash business cards. Rapid Response is a Wait What original. I'm Bob Safian. Our executive producer is Eve Trow. Our producer is Alex Morris. Assistant producer is Masha Makutonina. Mixing and mastering by Aaron Bastinelli. Theme music by Ryan Holiday. Our head of podcasts is Lital Malad. For more, visit RapidResponseShow.com.