Latest / Leaders in Customer Loyalty, Powered by Loyalty360 / #538: Leaders in Customer Loyalty: Brand Stories | How Catalyst Brands Is Building a Connected Retail Ecosystem Through Customer Loyalty

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#538: Leaders in Customer Loyalty: Brand Stories | How Catalyst Brands Is Building a Connected Retail Ecosystem Through Customer Loyalty · Leaders in Customer Loyalty, Powered by Loyalty360

0:02
SPEAKER_01: What happens when you bring together some of retail's most recognizable brands into one organization?
0:10
SPEAKER_01: How do you create greater value for customers while preserving the unique identity of each brand?
0:18
SPEAKER_01: In this edition of our Leaders in Customer Loyalty podcast, the Brand Stories edition, we're joined by Marika Baylor.
0:24
SPEAKER_01: She is the vice president of a customer growth strategy at Catalyst Brands, and she is going to discuss the evolving role of customer loyalty in driving enterprise growth.
0:36
SPEAKER_01: Marika is going to share how Catalyst Brands is building centers of excellence across the portfolio, turning customer insights into action, and creating new opportunities for the brands to work together.
0:48
SPEAKER_01: We're also going to explore the strategy behind connecting loyalty experiences of JC Pennington and AeroPostell.
0:57
SPEAKER_01: While not every brand belongs in the same loyalty program, and how thoughtful partnerships can create more value for both the customers and the business.
1:06
SPEAKER_01: From cross-border brand collaboration and customer growth to customer loyalty innovation and organizational alignment, this conversation offers practical insights to any leader in customer loyalty who wants to elevate the role of customer experience and customer loyalty within that enterprise.
1:24
SPEAKER_01: Marika, thank you very much for taking the time to join us today.
1:26
SPEAKER_01: How are you?
1:27
SPEAKER_00: I'm doing great.
1:28
SPEAKER_00: Excited to talk to you, Mark.
1:30
SPEAKER_01: Great, great, uh great to meet you.
1:32
SPEAKER_01: First off, for those who may not be familiar, can you give us a brief introduction to Catalyst Brands?
1:38
SPEAKER_01: You know, what is it?
1:39
SPEAKER_01: How is it born?
1:40
SPEAKER_01: What do you guys do?
1:42
SPEAKER_00: Absolutely.
1:43
SPEAKER_00: So Catalyst Brands is comprised of five different brands.
1:48
SPEAKER_00: The first and the biggest is JCPenney.
1:51
SPEAKER_00: Then we also have Aero Postal, Brooks Brothers, Lucky, and Nautica as well.
1:58
SPEAKER_00: So a bit of a mix.
2:00
SPEAKER_00: Um, it was formed by a merger at the beginning of 2025.
2:06
SPEAKER_00: So we've been a combined portfolio company for about 18 months now.
2:12
SPEAKER_00: Um, different history, different background for all the brands, but really what um unites them all together is they kind of all have like storied brand equity, whether the younger brands like an Aero Postal or some of the much older brands like a JCPenney or a Brooks Brothers.
2:30
SPEAKER_01: Okay.
2:30
SPEAKER_01: I'm glad you uh corrected uh the pronunciation.
2:34
SPEAKER_01: I would say Aeropostel, but Aero Postal, that's good.
2:36
SPEAKER_01: I know that now.
2:37
SPEAKER_01: So when you look at the kind of the brand equity that you talked about and bringing five brands together, you know, what's led to that success and and uh and talk maybe a little bit about that journey.
2:50
SPEAKER_01: How has that journey been?
2:52
SPEAKER_01: What was their kind of an initial brand that started everything?
2:55
SPEAKER_01: And as you add them, you know, what look you know continues to lead to the success that you see within them?
3:02
SPEAKER_00: Yeah, so it's definitely a very unique combination of brands.
3:06
SPEAKER_00: I used to be a partner at Boston Consulting Group and I left to join uh JCPenney at the time.
3:13
SPEAKER_00: And all the old partners at BCG and McKinsey that I know are like, this is a very unique combination.
3:19
SPEAKER_00: And it's unique because it's a department store, and then it's a bunch of specialty retailers that also sell to other department stores, right?
3:28
SPEAKER_00: So it's a bit of a unique combination in the retail space, and then also it's a bunch of different um customers that we're serving.
3:38
SPEAKER_00: JCPenney serves a very classic department store customer.
3:44
SPEAKER_00: Brooks Brothers, fun fact, has dressed all but two US presidents in its history.
3:50
SPEAKER_00: Um, but that's a different brand.
3:52
SPEAKER_00: And then we have our teen brand and our apostle, and then Lucky is obviously a very denim focused brand, and then Nautica obviously like has the um on the water um aesthetic.
4:07
SPEAKER_00: So, first of all, like what combined it?
4:10
SPEAKER_00: Like, it seems a bit random at start, right?
4:12
SPEAKER_00: You have different places in the market, you have different brand equity, but what's making it work is we have figured out on the less sexy side how to like get some true synergies from it.
4:27
SPEAKER_00: Like, hate to use the word, but there are some synergies you can find from building a portfolio company.
4:34
SPEAKER_00: And we've been able to build some interesting centers of excellence that can serve all those different brands.
4:40
SPEAKER_00: But I think what's more exciting, and you know, we're just starting to dip our toes in the water on this, starting with the loyalty program is how do we grow from having a combined company, not just on the cost side, but how do we really grow?
4:57
SPEAKER_00: And this new loyalty program is one of our first ways to do it.
5:02
SPEAKER_00: So, what we have recently launched, which I know we're gonna get into today, is one of our ways to try and say, like, let's make shopping fun, let's make shopping easier for our customers, and let's try and find ways for to give value back to a broad customer set as well.
5:20
SPEAKER_01: Okay.
5:21
SPEAKER_01: So let's talk about the new loyalty program.
5:23
SPEAKER_01: I know recently JCPenney and Arrow Postel.
5:26
SPEAKER_01: Arrow did I do that right?
5:28
SPEAKER_00: Yeah, I have to correct myself sometimes too.
5:30
SPEAKER_00: It's hard.
5:31
SPEAKER_01: That's good.
5:32
SPEAKER_01: Uh and so I know you linked your loyalty reward programs together.
5:36
SPEAKER_01: Uh, are other brands uh linked as well, or is it going to be eventually that you link them all together?
5:41
SPEAKER_01: Because as you mentioned, there's some pretty unique synergies in bringing them together from a customer perspective, from a preferences, attitudes, opinions, interests.
5:49
SPEAKER_01: Uh, you know, there's a lot you can do with uh, you know, the disparate data sets uh and engagement paradigm.
5:55
SPEAKER_01: You know, tell me a little about the programs.
5:56
SPEAKER_01: Just two, is it more?
5:58
SPEAKER_01: What's it look like?
5:59
SPEAKER_00: Yeah, so right now it's just two loyalty programs.
6:04
SPEAKER_00: We also have a separate loyalty program for Brooks Brothers right now.
6:08
SPEAKER_00: But right now, we've only combined two.
6:10
SPEAKER_00: So what we did is we combined JCPenney's massive loyalty program.
6:16
SPEAKER_00: So there's over 20 million active members in JCPenney's loyalty program.
6:23
SPEAKER_00: We do see a lot of success currently in JCPenney's program.
6:27
SPEAKER_00: So the average customer shops like almost three, the average loyalty customer shops almost three times more than someone not in the loyalty program.
6:36
SPEAKER_00: And about 80% of our sales go through a loyalty member.
6:42
SPEAKER_00: So it's massive and it's a big driver for JCPenney.
6:45
SPEAKER_00: But what we wanted to do, we wanted to change the program, modernize it, do something different than what we currently had, which was just a spend X get Y.
6:57
SPEAKER_00: And we wanted to make it more fun, make it truly like a loyalty program.
7:02
SPEAKER_00: And given the merger, we did combine it with Arrow.
7:06
SPEAKER_00: So I'll just say Arrow so we both pronounce it correctly.
7:10
SPEAKER_00: Um Arrow did not have a loyalty program.
7:16
SPEAKER_00: A lot of Arrow's competitive set do currently have loyalty programs.
7:21
SPEAKER_00: Pac Sun has one, Hollister has one, American Eagle has one.
7:25
SPEAKER_00: Um, so we knew we wanted to give Arrow a program as well.
7:29
SPEAKER_00: The big question was do we combine them or not?
7:32
SPEAKER_00: On its face, it seemed it seemed not logical to combine Arrow and JCPenney.
7:39
SPEAKER_00: Totally get that.
7:40
SPEAKER_00: But as we got more and more into the data, we actually saw a lot of great opportunity in combining it.
7:47
SPEAKER_00: And so currently it's just Arrow and JCPenney, and why we think that works, and why two weeks in we're already seeing that it works, is first of all, there's a lot of co-location between the two brands.
8:01
SPEAKER_00: So about um half of Arrows have a JCPenney in the mall, and about a third of JCPennies have an arrow in the mall.
8:09
SPEAKER_00: So it's a lot easier to get someone to like once they're in the mall to go from one store to the other than to get them off the couch.
8:16
SPEAKER_00: That's the first one.
8:17
SPEAKER_00: But the second one is Arrow really can help fill out the assortment for JCPenney and vice versa.
8:26
SPEAKER_00: And really, like the idea here is we want to be giving value back to our working families, right?
8:32
SPEAKER_00: We want to be giving fashion a good deal.
8:35
SPEAKER_00: JCPenney doesn't have the breadth of a junior's department that Arrow has.
8:41
SPEAKER_00: And Arrow doesn't have beauty, they don't have Nike, they don't have dorm supplies, all the things that JCPenney has.
8:50
SPEAKER_00: And so that was kind of how we came up with the idea of combining the two of them, even if at its face it seemed a bit illogical.
9:00
SPEAKER_01: No, it's interesting.
9:02
SPEAKER_01: Uh, we run a couple of different conferences.
9:04
SPEAKER_01: We had uh our loyalty conference in the spring, and uh Simon Mall, Simon Properties talked about their program and the benefit of trying to create or creating Simon Plus, uh, which is I think on its second or third iteration, that will allow for a kind of a more holistic mall-based program.
9:20
SPEAKER_01: But would the uh getting everyone to kind of buy in to be behind it um can be challenging.
9:26
SPEAKER_01: But I think when you step back, like you mentioned, and look at the synergies between them, um, it can be very uh you know beneficial.
9:34
SPEAKER_01: But getting uh people that have been in the local JC Penny program to maybe open up to that, it can be a challenge as well, right?
9:41
SPEAKER_01: Because uh I know a number of people have been at pennies over the years, uh the they've made enhances of the program, but this actually can be beneficial, as you mentioned, because it gives you a junior's department, it gives you uh kind of a not sorry, a one-stop shop, but maybe a one and a half stop shop, especially where they're co-located.
10:00
SPEAKER_01: They're where you can bounce back, do some unique things with the offers, um, you know, create more personalized messages based on past behaviors.
10:08
SPEAKER_01: There should be potential for unique synergies, correct?
10:12
SPEAKER_00: Exactly.
10:13
SPEAKER_00: I think you totally nailed it.
10:14
SPEAKER_00: That's what we're really hoping to see, is that it is surprising.
10:20
SPEAKER_00: You're totally right.
10:21
SPEAKER_00: Like it is gonna be a hurdle to get some of the um legacy JCPenney people to maybe see, like, oh hey, arrow could be something I'd try.
10:30
SPEAKER_00: And frankly, vice versa.
10:32
SPEAKER_00: But I I think you totally nailed it.
10:34
SPEAKER_00: I think there's a good opportunity to see some synergies between the two.
10:39
SPEAKER_00: And also, frankly, like bring back the fun, like similar to what Simon is doing.
10:44
SPEAKER_00: Say, like, let's make shopping fun, let's make the malls fun again, like, let's make it more of a you know, a one and a half stop shop to your point.
10:53
SPEAKER_00: Like, make shopping fun for the whole family, which is really what we're leaning into at JCPenney, especially is saying, like, we want to be fun to shop for the family again, which is what department stores used to be.
11:08
SPEAKER_01: That's interesting.
11:09
SPEAKER_01: So, talk a little bit about your role, the company.
11:11
SPEAKER_01: You mentioned your BG BCG for a while.
11:13
SPEAKER_01: Um, you know, uh, what do you currently do for Catalyst brands?
11:18
SPEAKER_01: What's uh kind of your what your day-to-day look like?
11:20
SPEAKER_01: What do you do?
11:21
SPEAKER_00: Yeah, well, first of all, it looks a little chaotic managing five different brands for like that go up and down with the different things, but so what do I do?
11:30
SPEAKER_00: I know cus I feel like customer titles are getting more and more prevalent, but what do I do currently?
11:37
SPEAKER_00: Like I sit in the center of excellence for all five brands, so I do serve all five brands.
11:43
SPEAKER_00: I manage the loyalty programs, so I manage the new one for Arrow and JCPenney as well as the Brooks Brothers one.
11:51
SPEAKER_00: I also do all of our customer analytics and consumer insights.
11:56
SPEAKER_00: So looking at our first party data, looking for trends.
12:00
SPEAKER_00: Um, and then also we manage things like consumer panels.
12:04
SPEAKER_00: We ask, we've already asked customers for feedback on what they think of our new loyalty program, for example.
12:10
SPEAKER_00: So we manage like internal panels for all of them.
12:14
SPEAKER_00: Um, I also manage our CRM.
12:17
SPEAKER_00: So that means all of our email and mobile communications um runs through me.
12:23
SPEAKER_00: So really it's analytics, loyalty, and CRM.
12:28
SPEAKER_00: And the interesting part about customer analytics and having all this together is really like a good retailer, their strategy is centered around the customer.
12:39
SPEAKER_00: Where like what kind of customer you want to focus on?
12:42
SPEAKER_00: Do you want to focus on frequency or acquisition?
12:45
SPEAKER_00: So get to be in a lot of the really big strategic conversations, especially as we start looking for more cross-shot between these brands.
12:55
SPEAKER_01: That's interesting.
12:55
SPEAKER_01: You mentioned centers of excellence.
12:57
SPEAKER_01: Um, you know, before COVID, many brands were building out centers of excellence within their organizations, right?
13:02
SPEAKER_01: They uh kind of understood the value of customer experience, customer loyalty.
13:07
SPEAKER_01: They were building teams around it.
13:09
SPEAKER_01: Um it kind of took like a backseat for a while, but we're starting to see more of that, especially with AI and some of the disruption that that creates, is having a community internally that can touch different parts of the organization.
13:23
SPEAKER_01: Uh, you know, we we have a couple different research studies we have.
13:25
SPEAKER_01: We have kind of a new uh enterprise customer loyalty uh index, which is looks at the confidence around customer loyalty.
13:32
SPEAKER_01: We just launched, uh, like a good housekeeping field of approval.
13:36
SPEAKER_01: Because oftentimes brands will talk about customer loyalty or customer experience, but it's not really aligned like yours is, right?
13:41
SPEAKER_01: You're having center of excellence uh which is a brand that share, right?
13:45
SPEAKER_01: That they can cohabitate or meet periodically.
13:47
SPEAKER_01: You talked about uh having line of sight into CRM and also the digital side.
13:52
SPEAKER_01: Um, you know, it's it's it's a very unique construct you have.
13:56
SPEAKER_01: I think it's a very advantageous construct.
13:58
SPEAKER_01: Um, but when you look at kind of sitting up or standing up a center of excellence, what's involved in that?
14:05
SPEAKER_00: Yeah, I mean, look, center of excellences aren't easy to build, especially in a company like ours, where, as we've talked about, like there's a lot of brand personality that comes with each of these different ones.
14:21
SPEAKER_00: But what I like, I think you really touched on what's working for specifically the customer one right now.
14:28
SPEAKER_00: It's being able to see and execute on the signals we're getting from our customer and having that like really in one spot.
14:38
SPEAKER_00: So when we see a trend in the customer data or we hear something from our customer panels, we can operationalize that either via the loyalty programs or by, you know, sending personalized emails, things like that.
14:52
SPEAKER_00: So I think for a COE to really work, like you have to actually have a benefit of putting different functions together.
15:02
SPEAKER_00: Otherwise, it just gets a bit ignored by the brands, right?
15:09
SPEAKER_00: You also need to have the trust of the brands.
15:11
SPEAKER_00: You need to be able to be comfortable in a matrix environment, which any portfolio company, I think, has to deal with when they set up any of these kind of COEs.
15:20
SPEAKER_00: So I really think it's like, is there a benefit to putting all the functionality together?
15:25
SPEAKER_00: I think we see that with the customer org because you can follow like the signal through to the action, either via loyalty or CRM, but also have to be flexible if you know we're trying to do something different in Brooks Brothers, for example, we might not like act on a signal we're seeing, or we might pull back on loyalty or go bigger on loyalty for things that we're not seeing in the customer data, for example.
15:56
SPEAKER_01: That makes perfect sense.
15:57
SPEAKER_01: So uh you talked a little bit about the combining of standing up.
16:01
SPEAKER_01: Uh one of the things that we always like to know too is you know, what's the biggest challenge you have?
16:05
SPEAKER_01: Uh you know, running brand, running the customer loyalty program, setting up these customer uh centers of excellence, you know, from a day-to-day, what's the biggest challenge, or maybe even what's the biggest opportunity you see in your role?
16:19
SPEAKER_00: Yeah.
16:20
SPEAKER_00: So I think the biggest challenge is, I mean, managing five different brands is hard because macros impact each of our different companies differently, right?
16:32
SPEAKER_00: Like recently JCPenney has had a little more pressure than Brooks Brothers, for example, which I think is indicative of what's happening in the market overall.
16:43
SPEAKER_00: So there's never like a peaceful day because these brands uh oscillate differently, basically.
16:51
SPEAKER_00: So I think that's one that is certainly difficult.
16:55
SPEAKER_00: I think the second one is sort of what we touched on with a COE, with what is just natural in a portfolio company's decision rights, processes, things like that.
17:08
SPEAKER_00: It is really hard still on a day-to-day.
17:10
SPEAKER_00: We're only 18 months into the integration.
17:13
SPEAKER_00: I think we've done a fantastic job, but there's still stuff every day that we're working through, especially given that most of these brands are brands that are in transformation or turnaround.
17:27
SPEAKER_00: These brands aren't um not having a lot of activity around them.
17:32
SPEAKER_00: So process is always gonna be difficult.
17:36
SPEAKER_00: And I, you know, putting my BCG hat on, I think the organization has done a really great job getting to where we've gotten in 18 months, but there's still room to grow, I think, there.
17:48
SPEAKER_00: Um, and then I think you know, what what would I do differently?
17:54
SPEAKER_00: I'm excited about what we're doing with loyalty to try and get cross shop because I think one of the great assets of catalyst brands is we have a lot of customers, right?
18:10
SPEAKER_00: Between all the brands, it's between 50 and 60 million customers shop us.
18:15
SPEAKER_00: That's a lot of consumers.
18:18
SPEAKER_00: And I think what we're doing right now on the loyalty program is a great first step to try and leverage cross shop.
18:27
SPEAKER_00: I think there's still a lot more we can do.
18:29
SPEAKER_00: And I think, you know, to your original question on how many brands are in it, like I would love to add more brands in it.
18:37
SPEAKER_00: I would love to look to, I don't even know, like a Marriott as a potential North Star to say, do you combine all your properties together and have people gamify the loyalty program a little bit like they gamify, you know, staying at a Sheridan or something to cash in on a Ritz or whatever it is.
19:00
SPEAKER_00: So I think there's still a lot more we can do with the customers we have, especially via the loyalty program.
19:08
SPEAKER_01: Yeah, absolutely.
19:10
SPEAKER_01: So uh when you look at um the success you've had, uh you know, uh how much of that is dependent on the mall itself, right?
19:18
SPEAKER_01: Is that, I mean, because the the the it seems the JCPenney brand is stabilized, uh the traffic seems to be up based on what I read uh in in kind of the Wall Street or The Economist.
19:29
SPEAKER_01: But malls are kind of going through a strange process as well.
19:33
SPEAKER_01: But you know, the younger generation seems to be kind of enjoying or kind of going back to the malls, doing shopping, right?
19:40
SPEAKER_01: They like kind of the the kind of the amalgamated stores, right?
19:44
SPEAKER_01: Uh, where they can get kind of different discounts.
19:46
SPEAKER_01: So I think um, but it is the mall itself, the positioning, the location, how important is that to success, or can the loyalty program maybe assuage some of that?
19:58
SPEAKER_00: It's a great question.
19:59
SPEAKER_00: Like uh I think malls are so central to on-mall department stores, right?
20:06
SPEAKER_00: So I think it, you know, it would be flippant to say that we're not very dependent on the mall trends.
20:13
SPEAKER_00: And absolutely, I think you totally nailed it.
20:16
SPEAKER_00: We are seeing an upswing, particularly in younger customers going to malls.
20:22
SPEAKER_00: Like Arrow has had a great last year in particular.
20:27
SPEAKER_00: Our juniors business and JCPenney is certainly on the upswing as well.
20:31
SPEAKER_00: All these things indicate exactly what you're saying.
20:34
SPEAKER_00: And obviously, we've all seen all the articles that you know the younger consumer is coming back to the mall.
20:41
SPEAKER_00: Um, so the mall is critical for us.
20:45
SPEAKER_00: I think it is easier to get someone to come to the mall than come to a specific store, particularly a department store.
20:54
SPEAKER_00: So absolutely, I think we ride the wave of that.
20:58
SPEAKER_00: But we do still, um, we are still working on building back up, in particular for JCPenney, like the brand equity that JCPenney has had historically, and you know, we're getting ourselves back to over time, right?
21:15
SPEAKER_00: So, yes, we love the, we we will ride the wave of the malls for sure, but we also are, you know, in the last year, particularly really focusing on building the brand as it's like a standalone, as like a reason for people to get off the couch and come to the mall to be the destination.
21:35
SPEAKER_01: And you mentioned uh the young generation's engaging with the Aero program pretty significantly.
21:40
SPEAKER_01: Many brands can have challenges of kind of understanding the preferences, uh, interests of kind of the Gen Z or millennials, even often sometimes.
21:49
SPEAKER_01: Uh, you know, how are you doing such an effective job of engaging the younger generation?
21:53
SPEAKER_01: You said that uh Aero's done very well for the last year, the kind of the younger uh products within JC Penny.
22:00
SPEAKER_01: Seem to be doing so well.
22:01
SPEAKER_01: You know, are there specific uh things that you're doing uh that that that help you reach this audience?
22:09
SPEAKER_00: Yeah, so I think for loyalty specifically, like we're two and a half weeks into the program and we have 400,000 signups from Aero already, which I like is higher than what we expected two and a half weeks in for sure.
22:26
SPEAKER_00: So we're definitely seeing the engagement on that side.
22:28
SPEAKER_00: How do I think we're doing it?
22:31
SPEAKER_00: Like none of it, I nothing I think we're doing is revolutionary, but we did make it very app centric.
22:38
SPEAKER_00: I think we made it fun, not like um corporate reporting looking, which I think sometimes rewards programs look very, very corporate.
22:49
SPEAKER_00: We made it look fun.
22:50
SPEAKER_00: Like I when you go in the stores, the reward sign up, it looks fun, it looks engaging.
22:56
SPEAKER_00: And we've also added some really early stages of gamification.
23:01
SPEAKER_00: We're certainly not at the forefront of gamifying loyalty programs, but we've added this concept of challenges, where if you buy a certain number of jeans between the two brands, you can earn a reward.
23:17
SPEAKER_00: If you shop online and in store, you can earn a reward.
23:20
SPEAKER_00: So we did just try and make it more fun, especially on the arrow side, not to be like spend this, get that, right?
23:29
SPEAKER_00: Like we tried to truly make it a bit more of an emotional connection and you know, met the Gen Zers where they are, which is online, right?
23:38
SPEAKER_00: We didn't try and make it a more desktop centric experience.
23:43
SPEAKER_00: And I think that certainly helps on that side for the program.
23:48
SPEAKER_00: I think in general, like why is Aero doing well?
23:52
SPEAKER_00: I think the prices are good, the quality is good, and the fashion is on it.
23:58
SPEAKER_00: I don't think um I think we just kind of really nailed all three at the same time, which is very hard, especially to your point, uh, with the Gen Z crowd.
24:09
SPEAKER_00: I think a lot of people are going after Gen Z, and frankly, millennials as well.
24:15
SPEAKER_00: Um, it's kind of hard to get all three right, and I think arrows really nailed that.
24:20
SPEAKER_01: That makes perfect sense.
24:22
SPEAKER_01: So, how important is the customer loyalty program into kind of your vision you have for you know all five brands?
24:31
SPEAKER_00: It's a great question.
24:32
SPEAKER_00: Like, I think it's critical.
24:34
SPEAKER_00: I think as we've talked about, we want we're never gonna be just catalyst brands, right?
24:42
SPEAKER_00: We have so much brand equity in each of these.
24:45
SPEAKER_00: But do we want our customers to try each of the different brands and to benefit from them?
24:52
SPEAKER_00: Absolutely.
24:53
SPEAKER_00: So I do think loyalty is going to continue to be a critical way for us to get customers to experiment with the other brands that we have.
25:01
SPEAKER_00: And we like do want to reward customers for spending their hard-earned dollars with us overall.
25:09
SPEAKER_00: And we like, like any company, we want to be able to say, like, you bought exit this brand, maybe try this.
25:17
SPEAKER_00: Like, personalization is still a thing.
25:19
SPEAKER_00: I don't, I think people killed the word a couple of years ago by like overusing it.
25:25
SPEAKER_00: But I still think it's still, it still is a concept, it still is something we want to do across the brands.
25:32
SPEAKER_00: And frankly, like with the brands that we do have with loyalty programs, so Brooks and JCPenney, and when we did do the original merger, uh, we did have Eddie Bauer as part of the company, but we've since sold that.
25:47
SPEAKER_00: But loyalty was a critical part of Eddie Bauer too, right?
25:51
SPEAKER_00: So we've seen three great examples of loyalty programs really working.
25:56
SPEAKER_00: And I know, again, putting my BCG hat on, not all loyalty programs are profitable, right?
26:02
SPEAKER_00: Like we I know that, you know that, we all know that, but I think we've seen them really work for this part of the retail space.
26:10
SPEAKER_00: And I think leadership believes in it as well.
26:13
SPEAKER_00: So I think it is gonna be a critical part going forward.
26:17
SPEAKER_01: Okay.
26:17
SPEAKER_01: And you mentioned something that's interesting.
26:19
SPEAKER_01: I think that you know there can be challenges with regard to uh loyalty programs being profitable.
26:24
SPEAKER_01: A lot of that's metrics, a lot of the having the right data or alignment can be a challenge as well.
26:29
SPEAKER_01: And that's one of the reasons that we were bringing out this new metric to help assuage some of that.
26:34
SPEAKER_01: But oftentimes uh the brands are committed to it, that they can be very, very profitable.
26:39
SPEAKER_01: But sometimes uh, you know, the CFO comes in and says, ah, we need to cut back a little bit.
26:44
SPEAKER_01: We need to devalue the program or change the program, right?
26:47
SPEAKER_01: And then you value it in under the auspices of change and it it doesn't hit with the customers, right?
26:53
SPEAKER_01: So do you think the programs that may or may not be or may not be six uh profitable, is it more of an organization thing or having the right data or being able to do with it?
27:04
SPEAKER_01: Because the all programs should have the potential to be uh fairly profitable, correct?
27:11
SPEAKER_00: Yeah, it's it's so funny you say that because I just had that debate with our CFO while we were doing this.
27:17
SPEAKER_00: He out also happens to be ex BCG.
27:20
SPEAKER_00: So he was challenging on the same thing.
27:24
SPEAKER_00: And I I think you're absolutely right.
27:26
SPEAKER_00: Some of it is how you measure it, right?
27:28
SPEAKER_00: It's the same as no, like the quest to measure the return on marketing investment will be like a forever thing to be able to do exactly.
27:38
SPEAKER_00: I think in some ways a loyalty program is similar, right?
27:42
SPEAKER_00: Would they have come back without whatever reward, yes or no?
27:46
SPEAKER_00: It's impossible to be able to quantify.
27:49
SPEAKER_00: So I think you're absolutely right.
27:51
SPEAKER_00: How you measure it, critical.
27:53
SPEAKER_00: But a great example, I would say, of that, which is almost the opposite of it, is we actually did revamp the JCPenney loyalty program back in 2024.
28:06
SPEAKER_00: What we did in 2024 was we uh increased the earn rate.
28:12
SPEAKER_00: We did a couple things, but really we increased the earn rate for the rewards program.
28:18
SPEAKER_00: It was a huge success.
28:19
SPEAKER_00: We saw almost a 25% increase in enrollments at that time.
28:25
SPEAKER_00: We got new customers through it and frequency went up.
28:28
SPEAKER_00: Why do I think that worked?
28:31
SPEAKER_00: Less than 20% of our customers prior to that change were in the money based on the way the program was set up.
28:39
SPEAKER_00: So I'm actually like not talking, I'm talking the other side of it, but we did not, the program was not set up for maximum like frequency driving at the time.
28:49
SPEAKER_00: Customers had to spend too much to get a reward.
28:53
SPEAKER_00: So we weren't really seeing an increase in frequency at that time.
28:57
SPEAKER_00: And we've seen a great change since then.
29:00
SPEAKER_00: And we've had a lot of debates on profitability, but I we do believe it was a profitable change.
29:06
SPEAKER_00: But it is a great example on it.
29:08
SPEAKER_00: Yeah.
29:09
SPEAKER_01: That's kind of the the what the market's going.
29:10
SPEAKER_01: It's almost a clarion call for the industry right now is that the data you get, the engagement you get, if you don't have that engagement, you can't continue to devalue the program.
29:18
SPEAKER_01: You truly have to listen to and understand your customers because invariably many brands that they speak to listening to and understanding the customers.
29:26
SPEAKER_01: They're actually not.
29:26
SPEAKER_01: What they're doing is creating dissonance, right?
29:29
SPEAKER_01: It's creating acrimony with within the customer base, it's creating separation.
29:34
SPEAKER_01: You've talked about personalization, high personalization.
29:36
SPEAKER_01: It doesn't allow you to do that, right?
29:38
SPEAKER_01: So the goal of the multi-programming is that incremental spend, right?
29:40
SPEAKER_01: As you mentioned, especially if you have an arrow and a JCPenney, you know, 100 yards apart, is the incrementality of that and being able to action on data, right?
29:50
SPEAKER_01: So make them uh and getting that first reward too.
29:54
SPEAKER_01: It's often, you know, it's everyone's talking about right now.
29:56
SPEAKER_01: It's like, oh, we need to get in that first reward faster.
29:58
SPEAKER_01: Well, it's only the first, second, third, and fourth, right?
30:01
SPEAKER_01: Easier, you create what?
30:03
SPEAKER_01: You create a behavior.
30:04
SPEAKER_01: It's the whole habit loop uh reward uh you know process from behavioral science.
30:09
SPEAKER_01: But so many people are like, oh well, this great program, right?
30:12
SPEAKER_01: It's at 90 or 80% that you mentioned, 90% of transactions go through, but then they devalue it and they see again.
30:19
SPEAKER_01: And one of the reasons we create this metric is it drops.
30:22
SPEAKER_01: And people are like, uh look, rate's down to 70%, and sales are down like 5% or 3% or 2%.
30:29
SPEAKER_01: But we still believe in the program.
30:30
SPEAKER_01: Well, no, actually, you don't believe in the program, right?
30:33
SPEAKER_01: And you're not fooling the customers.
30:34
SPEAKER_01: I mean, you look at the the uh the blowback against Delta last year and you know the blowback against Starbucks, right?
30:40
SPEAKER_01: I mean, right or wrong, you're hacking off a lot of customers and you're not fooling them.
30:45
SPEAKER_01: So it's probably because you hold that at goodwill, right?
30:48
SPEAKER_01: The the goodwill part of the brand can be substantial.
30:51
SPEAKER_01: And you couldn't be blowing that out the door uh when you start to kind of screw with the customer, mess with the customer, correct?
30:58
SPEAKER_00: Exactly.
30:58
SPEAKER_00: You totally nailed it.
31:00
SPEAKER_00: And um that's what I think we saw with the old program when we switched it, right?
31:05
SPEAKER_00: Like you actually have to be giving value back.
31:08
SPEAKER_00: And I think what I'm excited about this program that we're doing is we are encouraging trial, trial of both brands, trial around JCPenney itself.
31:23
SPEAKER_00: Like, so some of the challenges that we have up there are buying a certain amount of beauty products.
31:30
SPEAKER_00: The reason we want to do that, not everyone knows we have a beauty department at JCPenney anymore since we Sephora left um a few years ago.
31:39
SPEAKER_00: We want to encourage people to try it.
31:41
SPEAKER_00: Our highest tier at JCPenney that you can get to now, one of the benefits of that, you get one free service.
31:49
SPEAKER_00: A service is either a blowout or the portrait session, right?
31:53
SPEAKER_00: Not everyone knows JCPenney has a salon there where you can get an Olaplex blowout.
31:59
SPEAKER_00: Our portrait studio people love, like it's all over Instagram, stuff like that.
32:05
SPEAKER_00: So we want people to, everything you're saying, to be emotionally engaged in the program.
32:10
SPEAKER_00: And we want, and obviously on our side, we want people to try more of our within JCPenney, but also between the two brands.
32:17
SPEAKER_00: So we're excited about that as well.
32:19
SPEAKER_01: That's awesome.
32:19
SPEAKER_01: So, what's the next big thing for the program?
32:21
SPEAKER_01: Bringing uh the other brands into it, uh, leveraging AI potentially to create some synergies there.
32:27
SPEAKER_01: You have great success to this point in a short period of time.
32:30
SPEAKER_01: You know, what's next?
32:32
SPEAKER_01: What's on the horizon?
32:33
SPEAKER_00: So, yeah, so I think first, like we definitely want to expand the partnership ecosystem, whether that is within our family of brands or with external partners.
32:46
SPEAKER_00: So we're actively in talks and thinking about how to do that.
32:50
SPEAKER_00: And again, like keeping back to how we truly reward our customers, we want to expand.
32:58
SPEAKER_00: So whether that's internal or external is to be determined, but hopefully you'll keep seeing more news about us.
33:05
SPEAKER_00: On the AI front, um, you know, we've talked a bit about the one of the great benefits of a loyalty program internally is the data you can get so you can serve your customer better.
33:19
SPEAKER_00: And I think AI is a way to do that for us at scale in a way that we were not set up to do prior.
33:26
SPEAKER_00: So certainly AI is going to be part of the personalization journey as we go forward.
33:33
SPEAKER_00: AI is also something that the company more broadly is obviously focused on.
33:39
SPEAKER_00: Um, we're focusing it on in customer experience.
33:43
SPEAKER_00: Um, throughout our processes, we're working it in.
33:47
SPEAKER_00: We're working it in to help associates most importantly, like serve the customer better.
33:54
SPEAKER_00: I think like many companies of our size, we're at the stage where it's taking like 30 minutes to an hour out of people's weeks.
34:01
SPEAKER_00: It's not totally transforming people's uh weeks yet.
34:05
SPEAKER_01: Okay, awesome.
34:06
SPEAKER_01: So when you step back and you look at it uh from a you know a 30,000 feet view, what are you most proud about when you look at the program, the process, the the kind of day the everything that you built?
34:18
SPEAKER_00: I mean, first of all, I'm proud we got it done.
34:20
SPEAKER_00: Like the complexity of launching a program and combining the programs, you know, we had to get POSs up to date, we had to totally change a lot with Aero, and we had to make sure the systems could talk to each other.
34:38
SPEAKER_00: That was a feat in itself, and you know, it took us eight months, but it it was a lot of work for those eight months, and so um we relied a lot on our loyalty partner, Epsilon, which was great.
34:52
SPEAKER_00: But I think the our tech teams actually getting this across the line, I think, is huge.
34:59
SPEAKER_00: So I'm proud we did it.
35:01
SPEAKER_00: I'm also really excited about the strategy.
35:05
SPEAKER_00: I think we took a risk connecting Aero with JCPenney, and I think it's proving true so far.
35:13
SPEAKER_00: So I'm actually like excited we didn't make an obvious choice, but we made a choice that's proving to be really thoughtful connecting the two brands.
35:23
SPEAKER_00: And the fact that we've seen the success again two weeks in um is really exciting to me.
35:30
SPEAKER_01: That's awesome.
35:30
SPEAKER_01: And last question.
35:31
SPEAKER_01: Uh, I'm not sure if you were familiar with loyalty beforehand, but in knowing kind of what you do know, you know, what uh can we do or how do you think we can help you with your customer loyalty journey?
35:41
SPEAKER_00: Well, I mean, I loved what you're saying about like measurement and benchmarking.
35:45
SPEAKER_00: I think that's a really valuable thing to have a partner, a program that you could go to and say, like, am I doing well?
35:56
SPEAKER_00: Am I thinking about things the right way?
35:58
SPEAKER_00: Like, how am I doing versus other loyalty programs and helping us think that through, I think it would be amazing.
36:05
SPEAKER_00: Like, even this conversation has made me like think through things differently.
36:10
SPEAKER_00: Um, so I think, yeah, being a great thought partner and a resource for where the industry is going.
36:18
SPEAKER_01: Rika, thank you very much for taking the time to speak with us today.
36:20
SPEAKER_01: It was great getting to know a little bit more about you and everything that you're doing at Catalyst Brands.
36:25
SPEAKER_01: It's great to hear uh the focus, the dedication, and the passion you have for the program.
36:30
SPEAKER_01: Very unique journey, uh, how you are spinning up the centers of excellence and also bringing two different brands together that are providing very distinct value for one another.
36:40
SPEAKER_00: Thanks, Mark.
36:41
SPEAKER_00: Have a good one.
36:42
SPEAKER_01: Also, wanted to thank everyone else for taking the time to listen today.
36:45
SPEAKER_01: Make sure you join us back every Thursday for a new episode of our Leaders in Customer Loyalty Podcast, the Brand Stories Edition.
36:51
SPEAKER_01: And don't forget to subscribe and follow us on YouTube and across other social media channels that are listed below.
36:57
SPEAKER_01: Until then, have a wonderful day.