#410: Sam's Club Shows Success with Subscriptions
Today’s episode features another leading US retailer that leverages loyalty to grow its business, in this case, to a whopping $84 billion in revenue in their most recent financial year!
“Sam’s Club” is a warehouse club with 597 locations across the U.S. and Puerto Rico, that leverages the power of subscriptions since 1983 – way before subscription-based loyalty was so globally recognised as a cool and clever idea!
Our guest is Scott Ludwig, Vice President of Membership for Sam’s Club, and he joins us today to share some of the compelling reasons for their business success, which includes renewal rates in excess of 90% for their mature subscribers.
Scott explains the importance of their expanding partner proposition based on card-linked offers, and some examples of how they are achieving true personalization in ways that are delivering NPS scores that will amaze you!
Listen to enjoy this fascinating conversation with Scott Ludwig from Sam’s Club.
Paula: Welcome to Let’s Talk Loyalty, an industry podcast for loyalty marketing professionals. I’m your host, Paula Thomas, and if you work in loyalty marketing, join me every week to learn the latest ideas from loyalty specialists around the world.
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Hello and welcome to today’s episode, which features another leading US retailer that leverages loyalty to grow its business, in this case to a whopping 84 billion dollars in revenue in their most recent financial year. Sam’s Club is a warehouse club with almost 600 locations across the US and Puerto Rico. And they’ve been leveraging the power of subscriptions since 1983, way before subscription-based loyalty was so globally recognized as a cool and clever idea.
Our guest is Scott Ludwig, Vice President of Membership for Sam’s Club. And he joins me today to share some of the compelling reasons for their business success, which include renewal rates in excess of 90% for their mature subscribers. Scott explains the importance of their expanding partner proposition based on card-linked offers and some examples of how they’re achieving true personalization in ways that are delivering NPS scores that will amaze you.
Please enjoy my conversation with Scott Ludwig from Sam’s Club.
So Scott, welcome to Let’s Talk Loyalty.
Scott: Nice to be here. Thanks for having me.
Paula: Oh, I’m super excited, Scott. I know you work for an incredible brand that is growing at a phenomenal rate. So I feel like there’s gonna be a bit of a masterclass in membership if nothing else that’s happening today, no pressure on the show.
But, no. In all seriousness, we’ve been waiting a long time to have this conversation because obviously Sam’s Club is incredibly well respected and very successful in the US market.
But before we get into talking about the day job, as you know Scott, I love to kick off my show by getting a sense of what you as a loyalty professional typically admire and enjoy in the loyalty industry.
So why don’t I kick us off by asking you, what is your favorite loyalty program?
Scott: Yeah, sure. So clearly I prepared for this question, but what jumps to my mind is actually Domino’s Pizza and maybe for a different reason than normal. You know, they do have a core loyalty program and structure, points based, give free pizzas.
But that’s not what I love about Domino’s Pizza, it is their innovation engine. Both that they know how to findreally great consumer insights. They understand their consumers, they understand little things like when you go pick up a pizza and you’ve, and you accidentally dropped it. They had insurance for that. They had emoji ordering.
They are now, I think I heard delivering to people on a pinpoint placement instead of an address. Like all these unique ways they’re differentiating themselves to consumers. And I think they’re realizing that doing that on a consistent basis is gonna drive just as much loyalty by just being fresh and new and having your customers always wonder what’s next.
Paula: Amazing. It’s a brilliant example, Scott, and thank you for thinking outside of the box because you know, there are so many classic answers of course, to that question. But I share your love of Domino’s, and you know, one of the reasons is exactly what you’ve talked about.
So for example, I’ve heard Domino’s describe themselves not as a restaurant business, but actually as a technology company. And, that to me is exactly what you’re experiencing. It’s absolutely incredible the power of everything other than the loyalty program, dare I say it, that’s actually driving loyal behavior.
And that’s exactly the reason, like on this show, you know, I didn’t call it Let’s Talk loyalty programs. I called it Let’s Talk Loyalty, because of course it’s the behavior change that we’re here to understand and explore in detail. So it’s a brilliant example. And from memory, now I haven’t tried the emoji ordering. I dunno if it’s available in the UAE, but I’m gonna have to order pizza now for dinner to go and check it out. But I do remember I used to write a lot of articles about Domino’s as well, Scott. And the last time I did write, which is probably maybe three or four years ago, there was about 12 different ways you could order. Now I’m sure that has grown with, for example, the pinpoints you’re talking about. I’ve heard for example, people talking about trying to order here on the beach.
You know, so that kind of extraordinary capability is something that I think people not only respect if they are, you know, lucky enough, I suppose, to be educated enough to be aware of the business challenges that all of that innovation brings. But I think as a consumer, it’s just cool and people just wanna do business with them.
Scott: You know, I think it’s interesting. It almost reminds me that not every initiative has to be perfect for every single part of your customer base, right? So 12 different ways of ordering. Some of those probably have one or 2% penetration, but you know what, for that one or 2%, it is their hook.
Paula: Absolutely. And it drives advocacy. You know? Because I think one of them, and I remember kind of going, oh, how would that work? And again, just off the top of my head from memory, it was, I think they called it zero, zero click ordering, where, you know, when we all think about the likes of Amazon, for example, of course, we’re all super impressed with one click. And I’m like, how can you order without even clicking?
And again, just from memory, it was as simple as you do open the app. So that is the behavior. But then assuming you’ve previously ordered, assuming your payment details are there, and assuming of course, all of those things are in place, I believe it was literally a case of by opening the app, you could literally do a zero click order. So there you go. Super cool.
Now I cannot go any further without really geeking out about where you were last week, Scott, because you really made me super envious before we came on air telling me about this incredible experience you had, which I’m guessing is a career highlight, Scott. So, kick us off with the conversation and tell us where you were last week and all about this incredible festival.
Scott: Yeah, so I actually just returned last week from Cannes, the Creative Festival, Creative Awards. It was an incredible experience. So as while I was there, I actually joined a CMO Accelerator Program hosted by Jim Stengel. And really, it was fascinating to learn and hear from so many of the just best players in the world of marketing. You know, I found myself geeking out to Les Benet was there long and short of it, hearing all the latest he’s thinking of. And really just, actually my manager said it best one of the ways is to, we always want to be the best. Well, to be the best, you gotta learn from the best. And, it was really that type of opportunity for me. It was just a great experience.
Paula: Wow. Wow. And again, I’m guessing, you know, we might have to continue the conversation off air, but you know, it’s funny, like, I think, you know now as a content creator, but that’s a very recent part of my career.
To me, creativity was always something that kind of sat in the, you know, the advertising department the, you know, the drawing department. I think it’s often referred to in a derogatory way, but, I wouldn’t have considered myself somebody in the creative world, but the more I get into this, the more I realize that creativity is something as business owners, we absolutely need.
So we don’t just need our left brain and to understand, you know, finances or loyalty programs or whatever. We need to be thinking creatively. So would you say that that’s a fair expectation if I was to get myself to Cannes next year?
Scott: A hundred percent. You know, my career came up through more of the numbers, analytics space is kind how I got to where I am today. And one of the things I’ve always said is there is creativity through numbers.How you use numbers to drive business decisions and understand how consumers behave. There is actually a lot of creativity in there despite it coming across as so left brain.
Paula: I’m definitely, my brain is a bit confused by that now because me and numbers don’t really, well, I just don’t enjoy them. It’s not that I can’t do them, but interesting.
So, do tell us then about your career, Scott. The analytics comes through in your LinkedIn profile very clearly, so it’s obviously an amazing skill set to have for any loyalty or membership, I suppose, role. So tell us, yeah how did you get to where you are?
Scott: So I’ve always been, yeah, to that point, a numbers person. It started as a career in finance and very quickly in that career I learned, I enjoyed the modeling. I enjoyed the numbers as expected. But I didn’t necessarily enjoy taking a $7 billion forecast and making sure it ties to our accounting by a penny.
I found that I really wanted to turn this into more of my other, the other half of my passion was just how people behave. You know, getting into behavioral Psychology and those types of worlds, and so that eventually led me to Southwest Airlines, and switching to the marketing side of the world.
So I was in their marketing department. Marketing planning is what we called it. So it was a lot around pricing and sales and how do we convince more and more people to buy Southwest Airlines tickets. And really have thrived since then. So that was my first hint of loyalty. While I was there was when Southwest actually transformed their loyalty program from an eight flight to get one free into one of the first points based systems in travel. So it’s fun to be there during that. And really just my first hint of how great it is.
From there I went back to business school, so I went to University of Texas. Spent some time at Deloitte in the consulting world, a very similar space. Right. So marketing, pricing, loyalty. I did tech, retail, customer products. Actually had a project at Sam’s Club as a little foreshadowing.
And then, yeah, I spent six years at hotels.com from there. and three of those years, about half of that time actually led the loyalty program itself. So hotels.com rewards, 10 nights and you get one free reward night. Aprogram that’s transforming soon, but it was exciting to be a part of that..
Paula: Interesting, okay.
Scott: And then, yeah, I’ve spent the last, approaching two years at Sam’s Club, shifting a little bit into this subscription space, right? Yeah, so going from a lot of areas where it was free program rewarded once you are making a lot of purchases into this space of paying upfront, but then providing incredible service to those members so they keep renewing each year.
Paula: Amazing. Amazing. And, maybe actually Scott, if you don’t mind, because we do have a very global audience, and whereas Sam’s Club is so well known, you know, in the US market, would you mind just giving an introduction to the whole proposition? Because I don’t think many countries around the world have such established businesses in this with this type of model, and maybe it takes a certain amount of scale. So I’d love if you would just give maybe, maybe the history of Sam’s Club, kind of where it came from. And the sense of the scale.
Scott: So, Sam’s Club is a division of Walmart. We are almost a hidden secret within Walmart. So we have 84 billion dollars of sales. If we were standalone, we would be fortune 39 is the last estimate I’ve heard. But because we’re still part of Walmart, it’s sort of hidden. We’ve been around for 40 years. So we were founded in 1983. Sam Walton founded us, really targeting small businesses.
At the time, so it was bulk levels of items. So bulk purchases at wholesale prices. And that was the model to save. Like I said, we just celebrate our 40th birthday and have been doing it in a big way. So, the way we work is a membership fee entitles you to shop at Sam’s Club. And you get those wholesale prices, name brand, often high-end merchandise. That surprises a lot of people. Right.
So we are limited, skewed environment, which means we curate only the very best. Instead of having 30 brands of variations of toothpaste on the shelf, you have one, maybe two. Because we’ve highlight, we have curated the very best, at the very best value.
Paula: It is compelling and counterintuitive at the same time. Like I can totally imagine. You know, like we talk about, you know, being convenient, you know, reducing friction and here’s Sam’s Club kind of going, no, we want your money before you get in the door. So, but it sounds like it’s working. Am I right?
Scott: It’s working really well. So we’ve been on a bit of a renaissance, if you will. So Sam’s Club has grown over 30%. Our member base has grown 30% in the last three years. We had 12 straight quarters of double digit revenue growth.
So really have a, you know, and doing all that without adding any new stores. So really a bit of just a big growth trajectory as we’ve changed and transformed a lot over the last, call it three to five years.
Paula: Amazing. And do you take personal responsibility for all those results?
Scott: Not in the slightest. We have an incredible leadership team and incredible team across it all.
Paula: Amazing. Of course. I’m only kidding with you. No. And congratulations. I mean, 40 years old Scott is a testament to that business model. And if I’m not mistaken, you know, just as a you know, I suppose as a proposition, my understanding is that those kind of wholesale prices are absolutely, obviously guaranteed in that there is no margin or profit that’s expected from the business in terms of the actual product sales. It’s all the membership revenue in terms of where the business opportunity comes from.
Scott: Broadly speaking. You know, and without divulging exact pieces of it, I mean the Costco is a, for example, made this the model very famous, and we’re not necessarily different that. We effectively break even on the core operation of the business and our growing membership and membership income is how we make our profit.
Paula: Wow. And, it’s also not expensive of course, in preparation today. I was just checking. So $50 for your entry level, $110 then for the premium one. And I know you can’t give away numbers, Scott, either of the tiers or anything like that, but give us a sense, I suppose, of what are you doing to justify that fee?
So, you know, wholesale prices of course is a no-brainer. And I do think once people experience that, but again, you know, they can’t get in the door to prove that for themselves, I guess, until they pay their membership fee. So give us a sense of what Sam’s Club promises at those two different tier levels.
Scott: So, I’ll start with two pieces. Which number one, you’re right, the lower tier membership. It gets you access to the club. And I sort of say and, and not a lot more. Now I say not a lot more with a caveat. Like at the end of the day, we, our members, why do they renew with us? It is, they trust us and they find incredible value and incredible quality, and they’re able to do it with convenience.
They’re able to save some time while doing it by getting everything they need all in one place. So, in that base tier membership, you have access to a brand new level of value at quality that you don’t necessarily have elsewhere. To your point though, plus membership is really where it begins to unlock.
So our Plus members get free shipping on all of their items that they wanna buy. And remember, this is some of the bulk items. So you get free shipping. They get to access to our club at early operating hours, so they get to avoid some of the times where it’s a bit more busy.
They also get, with our credit, paired with our credit card, so they get 2% cash back on all of their purchases paired with our credit card. They’re getting 5% cash back on all of our purchases. And really that ladder there is, now in the form of what we call Sam’s Cash. So we’ve taken all of the ways that members can earn their cash back rewards and put ’em into one currency that we call Sam’s Cash.
And given them, really given our members an unprecedented level of access to it. These used to be separate programs that would accrue your rewards annually. You’d get it as one big lump sum. We’ve completely transformed that. Where it is every single month you get your Sam’s cash into your account.
You can access it and redeem it when you’re in the club, when you’re using the app where, really everywhere you want to do, including your membership fee. And just an unprecedented level of convenience and transparency too. The start of really a loyalty currency in a subscription model. Right. Sort of melding those two worlds.
Paula: And that is a rich reward rate, Scott, certainly, as you mentioned, 5% back with your credit card.
Scott: Yeah, absolutely. And I, and I will add too, that includes gas. So, Sam’s Club and this model is known for some of the best gas prices you can have. With the credit card, additional 5% back, both at Sam’s Club and really any gas station.
Paula: Amazing. Amazing. Well, tell us a bit then about card-linked offers, because I know that’s another huge evolution of the program recently. It’s one I’m very passionate about. It’s just been launched here in a couple of programs in the UAE. And again, actually, if you don’t mind, Scott, just in case anyone’s not familiar with the terminology, wouldn’t you just explain how card-linked offers and why you felt it was an important piece ofadding to the value of your memberships?
Scott: So, so yeah, Sam’s Club, we’re always looking for ways to find, and deliver more value to our members. As we implemented this Sam’s Cash that I just referenced, we started wanting to figure out some ways to provide even more value to our members when they’re shopping even outside of Sam’s Club.
And that’s where card linked offers came in. So we call it bonus offers, or our bonus offers program. And all a member has to do is link any of their credit cards. And so very important distinction. This is not specific to the Sam’s Club branded credit card. Link any of their credit cards that they have that they want to use, we’ve seen members link up to like 30 credit cards.
And it gives them the ability to then earn Sam’s cash on their purchases with some of our partners. Somepartners we’ve had there, we do have on there is like your H.B.O. Max or your Peacock subscriptions, when you go buy food at Panera, Burger King. So we’ve allowed this seamless ability and really such low friction, right?
All you do is click yes on your credit card. And members are able to earn that Sam’s cash that they can then bring back and use at Sam’s Club to buy merchandise. And then to our partners, right? It’s access to millions of members. That they can get more eyeballs in front of and really start to grow themselves.
Paula: It is. I mean, my background in loyalty, you might know just from hearing, you know, over the, over the years on the show is in partnerships. And certainly when I was doing it, it was 2010 actually, so very long time ago. But it has obviously come on a leaps and bounds.
Am I right in understanding then, in terms of the model, Scott? The particular partners you bring on essentially fund those rewards for Sam’s Club, is that the model?
Scott: Absolutely, yes. And then the nice thing with card-linked offers is the level of efforts needed to put in on those partners’ part is relatively small, right? Like we’re all a part of card networks, we have merchant IDs that we can align to.
Paula: Got it.
Scott: It sort of avoids that whole worry of technology and APIs and developers having to connect to each other.
Paula: Okay. So yes, the card is the link, at the risk of stating the obvious. But, but what I.
Scott: But it makes a difference.
Paula: It totally makes a difference. But it also eliminates, I know for a lot of programs, the need to issue, for example, a plastic loyalty card, you know?
Paula: Because the payment card, of course, becomes the identifier. So, actually, to that point, Scott, do you guys, as you know, as Sam’s Club, do you issue cards? I’m guessing you do because it is a membershipprogram. So do you have a physical card I guess, that you use at the point of sale?
Scott: Yeah, we have a physical card. I will say it is going the way of the dodo in many ways.
Scott: So yes, we have a physical card from our legacy and members that want a physical card can have it. But we have actually focused much more on integrating into the app. So there is an easy card in the app. It’s more secure. You could also use your physical credit card if you have a science club credit card. So multiple ways for our members to identify themselves.
And to your point on, or where I’m going with the app too, is, you know, we’ve really leaned in on this. You know, if your podcast was a decade ago, we’d be talking a lot about the future of retail is omnichannel. Well,omnichannel’s here, right? So shopping with your app while you’re in the store is just a regular part of the experience now.
Paula: And am I right also Scott, in understanding? So if somebody does use the Sam’s Club credit card, which I think is a Mastercard, am I right?
Paula: Okay. So if I use my Sam’s Club Mastercard in, the card-linked offers environment, for example, H.B.O., which you’ve given as an example, then essentially I double dip. Is that fair to say?
Scott: Absolutely sure are. I know loyalty people love their double dipping.
Paula: It’s totally compulsive, honestly. I do worry sometimes, but well done. us. Great, great. The other bit, I love that you launched as well, Scott, is this idea of scan and walk out so that you let your members avoid the queue.
I love by the way, sorry, I didn’t realize that they had, in the Plus membership, they had those early opening hours. So again, it’s like, you know, blindingly obvious once you see it, but actually I never thought about it before. So what a beautiful way to go shopping. So tell us about scan and walk out. Where did that idea come from?
Scott: So, yes, we have a part of our app, a feature within our app called Scan and Go. And it is the ability where a member pulls up the Sam’s Club app and as they’re in the physical club as they’re in our Sam’s Club, every item that they want, they just can scan it themselves.
So it is self-checkout to a next level. So you can imagine as you’re walking throughout the club, put in these strawberries, grab this item, you scan it right there, put it in your cart. And then you can just walk out. You can skip the line entirely. You can imagine the days, especially when the store’s a little more busy.
Members love using the convenience. They have everything in their own hands. And it, yeah, just for some context. So we’re a, and we’ll probably talk about this more, we are certainly a company who’s obsessed with MPS, making sure our members are just thrilled with every experience.
The MBS of that is 90. You just to put that in context, right, that means the promoters minus the detractors are still at the 90 rate. I mean, just our members love that ability to have it in their own hands. Skip that line. And there’s something thrilling about skipping the line.
Paula: If a little terrifying. I mean, how did you guys as a business manage the risk of fraud? Dare I ask?
Scott: So it is an ongoing thing we watch clearly. And it certainly did increase some of it, right? Like the shrink certainly is a piece of the puzzle we have to think about. We have seen that members love it.
The value of members loving this is just so much larger than that shrink risk that it was worth us continuing to monitor that. You know, so for example, and this is common in the warehouse club model, we do actually have an exit associate who is scanning just a random couple of items.
Right. So there’s some sort of probabilistic pieces going on there where we’ve managed shrink to an acceptable level while just being able to let members do shop how they please.
Paula: Amazing. Amazing. Yeah, I love ideas like that, Scott. It has been in place actually in the Irish market in a traditional grocery store, in fact. But yeah, I think it did kind of take time for people to get comfortable with this idea. And I know you’ve mentioned it to me offline as well, where sometimes the members actually feel like, they are actually stealing the stuff because they haven’t been kept honest by some associates. So I guess you probably had experiences like that as well. Do you get that feedback from your customers?
Scott: Yeah, occasionally. You know, I think you mentioned adoption, right? I think one of the things that I think that having abilities like this and really just focusing so heavily on innovation is probably why I shouted out to Domino’s at the start.
It makes a big difference. So one of the things we’ve seen is the always hard and always elusive millennials and Gen Zs are actually growing at unprecedented rates for us. So we’re growing, we’ve grown 65% for millennials, 120% over the last two years in those, just those two categories. Just those two groups alone. Excuse me.
They’re the highest sales group, but as you can imagine, they’re the ones digitally engaged. They’re the ones that are using this Scan and Go, they’re the ones buying on the app and doing the pickup at the club right outside the door. They’re the ones buying online.
And so making sure that the way that they’re wanting to adopt to the next way to shop that we’re at the forefront of. That has been a really nice boost for us.
Paula: Incredible. That’s a great insight, Scott, because so many times, you know, people talk about the fact that, you know, younger demographics are just not engaging, there’s just nothing in it for them. I think airlines definitely suffer with this particular cohort as well, because, you know, if you’re not flying on business or if you’re not flying frequently, then what’s the point?
You know? So clearly innovation is part of the secret. I, I don’t think anybody’s totally nailed it as yet, but sounds like, sounds like it’s probably the single best reason for you guys to keep that focus on innovation, to attract that emerging segment.
Scott: Yeah, absolutely.
Paula: Amazing. And then NPS, of course, Scott, first of all, off the charts, well done 90. And I always like to remind our listeners that it is, you know, on a scale of minus 100 to plus 100 is the scale.
Scott: That’s a fair point.
Paula: Yeah, because I learned that, you know, with great joy when I first discovered NPS. So tell me, that sounds like it is your kind of north star as a business. Is that fair to say?
Scott: Absolutely. I mean, to give you a little bit of context, every single week, our leadership team all the way through the CEO we have a Monday meeting where we go through the business and one of the very first things we look at is our NPS. And not just one NPS across dozens of different touch points that we have with our members. And every statistically significant movement, every change, every emerging theme is talked about all the way through the CEO of our company.
And this, that’s just this, this constant focus and obsession for our members is what we call it. We actually purposely call it, we’re member obsessed company who is making sure those members who have decided to pay the fee, the $50 or $110 are getting nothing but the very best experience.
Paula: I remember writing an article actually just about subscription in general, Scott, obviously not Sam’sClub specifically, but you know, I remember just kind of in my mind, kind of going, subscription models to me mean extreme loyalty. Like, if somebody’s, it’s one thing we can all sign up to free programs, give our data and then never engage. But if I’m actually giving you my credit card and I’ve, you know, got an expectation now, well then first and foremost, you better deliver. You know, I need to get my minimum of $50 back.
And I think after that, like I feel like I’m winning. Like there’s almost this, you know, you used I think, some terminology earlier about enjoying understanding the psychology of human behavior. So I’m guessing that you actually do experience that, that people kind of feel like they’re almost beating the system once they get past.
Scott: Absolutely. Yeah, one of the things we like to call is that in a lot of ways Sam’s Club is a bit of a treasure hunt. You know, we’re not just paper towels and toilet paper. Which is kind of what you think of when you think of bulk, right? Yeah, but no, we have this incredible private brand and member’s, mark that is, that is benchmarked against the best products that the best retailers out there and consistently is beating on quality and on value.
We have this curated assortment that like you walk into a club and you’re almost surprised at some of thebrands that are available, some of the items that you would’ve never thought of. And it’s a whole different experience and it’s those surprise factors. It’s those delight factors. It’s that incredible value that you can’t believe that is what drives the loyalty.
Paula: Totally. And actually like when I think about, you know, anytime I’ve been in a traditional supermarket like you know, your colleagues in Walmart, for example, to me there’s actually sometimes a sense of being overwhelmed with the fact that I have 30 toothpaste to choose from.
Like, it actually, I don’t feel like I need that much choice now. Maybe sometimes. But the fact that actually Sam’s Club reduces that, I think it’s called cognitive overload and simplifies the skews, I think that in itself would drive my loyalty.
Scott: Absolutely. I mean for context, right? Your typical Walmart, any of those type of retailers gonna have a hundred thousand, 150,000 SKUs. We’re in the range, about 5,000. Right. So it’s just, it is a much more limited environment.
Paula: Love it.
Scott: And really it comes down to trust, right? Like we are building that trust in the member where they know when there’s an item at Sam’s, that is the best item, that the best value. I don’t need to think about it.
Paula: Yeah, absolutely. And I do think we are all a bit exhausted with them. So much choice in the world. And again, when it comes to something like toothpaste, personally, I don’t have a lot of loyalty, dare I say, to any brand. It’s pretty functional. So just get the job done.
So with all this focus on value, Scott, and NPS, of course, that’s amazing to hear that you’ve got that depth of commitment, and obsession. I think he used the words in terms of how the business thinks. So, the renewal, of course, is the ultimate guidepost I can tell in terms of, as you said, that’s your entire kind of opportunity for profits.
So, you know, we often hear about subscription. So many people are evaluating it. Again, most people listening to this show are probably running free programs and are probably evaluating, you know, whether they can build a paid loyalty model. So I would love to get any insights or advice that you might have on success factors, I guess, for subscription.
I know offline, for example, you mentioned that you do know some of the behaviors that will lead to a member renewal, for example. So, anything you can kind of share. Again, that’s not too confidential, of course, in that we can learn from as an industry, because I’m a firm believer in, you know, copy with pride, which I think is a very nice, I mean, like, none of us have new ideas.
Scott: Yeah, that’s true.
Paula: Like we’re here to kind of educate each other and inspire each other. So tell us about what you’ve learned about paid loyalty.
Scott: I mean, I would, I don’t think I’m giving away too much secret sauce by saying that the math is actually relatively simple. Right. So step one is you’ve gotta get people to try the hurdle, to your point, paying upfront is a very real hurdle. And you’ve got to know and believe that you’ve got to do something to incentivize that trial. Often that is in the form of free trials. Often it’s the form of discounts, those sort of things. But the key point there is, once you’ve convinced someone to try and lowered that hurdle, you’ve gotta wow them.
Right. Like the, that next step is a true behavior habit change. You’re mentioning some of the Psychology things, right? Like we all have our habits. And every new subscription, every new thing is a habit change. So you’ve gotta onboard them incredibly, and you’ve gotta wow them once they’re there.
And then you have to be obsessed with that renewal. And that’s where we, I think, have really thrived. So when you take a look at our member base, those that have some tenure with us, so those that are past their first year of membership, they’re renewing in the low 90% range. And as you start talking about plus members, as you start talking about those who use Scan and Go, those who are buying things online, those who have the credit card, those who use club pickup, all these extra services and the realization of value, those are the people who are renewing every single time, over and over again.
And it’s an important point that you made. And, and I’ll reiterate, like I don’t just say those items, out of intuition, we have the data to show that those are the ways that members shop with us, those the activities they do. That they love it so much. They’re the ones who are renewing.
Paula: Yeah, they’re incredible statistics. Scott, thank you for sharing. 90% retention for, if I use a loose term of mature members, like if they’ve gotten past the first year, that gives us all a sense of what’s possible. Because again, I do think, you know, as a business, you know, I’m also like loving the fact that you have a hundred percent member ID of course, by definition.
You know, every single member, I think I was celebrating with, I think it was PetSmart recently. You know, I think they were talking about like 80% penetration of sales. And we were, you know, really agreeing that that was probably a market leading statistic. But of course now I’m like, actually no, there’s a hundred percent, you know.
Scott: A hundred percent is out there.
Paula: A hundred percent is out there. And 90% renewal is out there for mature customers at scale.
Scott: Yeah, absolutely. And there’s some really fascinating ways that that can be unlocked, right? I’ll give you an example. Speaking more industry side, right? Like retail media. Speaking of Cannes, retail media was certainly a big topic.
One of the ways that Sam’s Club is used to your point by definition. Every single purchase is from a member, so we have a hundred percent. One of the ways we’ve done that is through our retail media group. We call MAP Member Access Platform. They recently released an ability if our CPG partners are buying on search ads online.
We actually now can do the attribution to an In Club purchase. So we’ve combined the digital and physical to show the incremental lift of search. Sometimes happens in the club and we’ve already seen 30% or more increase in ROI to our partners. I’m doing that.
Paula: That’s incredibly impressive, Scott. You know, I think there’s a lot of appetite and interest in how webecome a media business potentially as a loyalty program. And it’s, it’s controversial for a lot of brands, I think because, you know, first of all, they may not have captured the permissions explicitly upfront, and there’s all the legal aspects of it.
But I think there’s also some resistance to the sacredness of loyalty and rewarding behavior where media feels a little bit. I don’t know what the appropriate word is because it’s an essential part of life. And to your point earlier, like omnichannel retail is, is here to stay. And I think loyalty programs have a unique opportunity to be of service, either to external partners or to their internal businesses by leveraging that data that they’ve got in a way that members will probably enjoy as long as they’re aware that it’s happening.
Scott: Yeah, I mean, I think one example that we, you know, personalization is obviously a big focus for us and we have a long ways to go. But I’ll tell you one great example or one of my favorite examples, to the point earlier of now we have our Scan and Go app connected to the physical experience of being in the store.
One of the ways that we’ve utilized personalization is as you’re finishing up your Scan and Go order getting ready to skip the line. We actually have a popup that says, hey, did you forget some of these items? And those items are personalized to you. Like we see you always pick up bananas and blueberries, but you for don’t, aren’t in your cart today. Did you, are you sure you didn’t forget those?
And really that’s the difference in personalization is for the members. Not for us. That’s a real value that we’ve seen in focus groups. Remember like, oh, I did forget that. I love that you told me. And so really providing that value is great.
Paula: Do they ever get freaked out? I mean, have you had any resistance to that?
Scott: Very rarely. You know, personalization can easily get into that creepy space, if you will. And, and this is an example of the feedback we’ve heard unanimously is that’s value add. We expect you to know that about us versus the more creepy type of personalization.
Paula: I guess it’s in a safe space and you used the terminology earlier around, you know, that you’ve earned basically the trust of your members. So, I think it would be different if it was an external, for example, advertiser who was trying to, you know, maybe target in a different way or again, maybe that’s also totally cool.
Once again, the awareness is there. They’re in your club. They’re using that online data. They’re in your offline world and obviously wanna make sure they get their bananas.
So much fun. My goodness, Scott. Wow. So 40 years in, the business is growing. You used an incredible figure. I saw it published as well, 84 billion dollars worth of sales to the last year end in January. So lots to celebrate both in terms of your renewal rates. The growth, the appeal of new demographics, I think is also good indicators of course for future proofing the business. And of course, your laser focus on NPS. So, sounds like you’re doing everything super well, and honestly, I have no other questions. I’m just amazed and super impressed with your story.
Scott: Well, thank you. I appreciate it. It has been a really fun company and a really fun team to be a part of.There’s just a lot of momentum in the business and continue to learn a lot.
Paula: Amazing. Amazing. And again, I suppose the objective of this show, Scott, is learning exactly that. So if you’re comfortable, I would love to just put your LinkedIn profile in the show notes for anyone who is, you know, full of admiration of course, as well in terms of what’s being achieved with Sam’s Club and what you’re doing. So if that’s okay, we’ll put your profile in the show notes and yeah.
Scott: Absolutely. We’ll encourage you. I love to connect. I love connecting with more people in this space. anyone who has passion in this, I’m all about it.
Paula: Amazing. And I’m going to make an intention and hold that space that I’m gonna be at the Cannes film, pardon me, the Cannes Festival of Creativity next year, maybe the film festival as well. But, yes, please, God will sit down, get a chance to grab a cup of coffee or a cocktail.
Scott: Yeah, I was gonna say, we’ll have to meet in person there. That sounds awesome. That’d be amazing.
Paula: Wonderful. So listen, Scott, that’s all my questions from my side. Is there anything else you wanted to mention for our listeners before we wrap up?
Scott: You know, I would just say, a little bit of a call to action for anyone out there who has not tried Sam’s Club or hasn’t been to a Sam’s Club in 10 or 15 years. It is not your parents’ Sam’s Club.
This is the company that has reinvested in its associates, and we have shined up our clubs. We have modernized, we have added so much convenience and technology that I think anyone who hasn’t tried us will be really surprised at the experience you can get. And, to your point, the experience is what drives that loyalty.
Paula: Amazing. Okay. Well, listen, I hope to get to the US as well next year, Scott, so I’ll make sure to pop into a Sam’s Club. It sounds like a wonderful experience. So with all of that said, I just wanna say, first of all, congratulations on all of your success, and thank you so much from Let’s Talk Loyalty. Scott Ludwig, Vice President of Membership at Sam’s Club. Thank you so much.
Scott: All right, thank you.
Paula: This show is sponsored by The Loyalty People. A global strategic consultancy with a laser focus on loyalty, CRM and customer engagement. The Loyalty People work with clients in lots of different ways, whether it’s the strategic design of your loyalty program or a full service, including loyalty project execution.
And they can also advise you on choosing the right technology and service partners. On their website, The Loyalty People also runs a free global community for loyalty practitioners, and they also publish their own loyalty expert insights.
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