Chicos Fashions a New Plan

Retailer uses CRM to reconnect with customers.

Its an all-too-common fashion faux pas: Lured by the latest trend, some of us sometimes give in to the temptation to buy and wear items that dont quite fit our image or our age. Earrings on 50-year-old men. Hip-hugging pants on certain middle-aged women. Its not pretty.

Not long ago, marketing officials at apparel retailer Chicos FAS Inc. fell into the same kind of fashion trap. Although the 18-year-old, 245-store chain had, from Day One, targeted a specific customer set—females between the ages of 40 and 60 who like loose, comfortable clothes—a few years ago the company began to stray. Lured by the newest fashions and lacking any detailed information about customer preferences or behavior, Chicos began to stock items meant for a younger, more trendy—not to mention more slightly built—clientele. Not surprisingly, sales fell.

So Chicos launched a CRM (customer relationship management) initiative and revitalized a failing frequent-shopper loyalty program to reconnect to its regulars. Now, most merchandising, marketing and promotional efforts are directed squarely at Chicos best customers. The result has been fewer fashion errors in Chicos stores and more activity at the cash register.

"We werent talking directly to [our core customer] anymore, and by not doing that, we lost focus," said Bari Horton, director of direct marketing for Chicos, in Fort Myers, Fla. "Had we had the [CRM] data at the time, we never would have strayed."

A growing number of retailers and companies across many industry segments are using CRM technology to not only get in touch—or in Chicos case, back in touch—with their best customers but also to drive increased sales. Through initiatives such as loyalty clubs—which reward customers meeting certain purchasing criteria with discounts, special gift offers or personalized one-on-one service—experts say companies such as Chicos are trying to boost the buying frequencies of their best customers.

In Chicos case, the strategy appears to be working. Since it went live 16 months ago with a CRM package, MarketWorks, from STS Systems Inc., of Montreal, the company has increased the number of customers eligible for its Passport loyalty program from 30,000 to 260,000, and that group now accounts for more than 58 percent of Chicos total sales, up from around 8 percent in the early 1990s. And all this volume has pumped up Chicos financial performance: Revenues soared 45 percent to $155 million in fiscal 2000, then climbed 65 percent to $186 million in the first nine months of fiscal 2001.

Prior to launching the CRM effort, Chicos did make some less-than-effective efforts at connecting with core customers and gauging their buying preferences. The company first launched the Passport loyalty program in the early 1990s, initially offering a 5 percent discount to women who spent more than $500 annually.

Besides pleasing those customers, however, the original Passport system was of marginal use. That was because, using flat files running on an AS/400 to manage data, it didnt allow Chicos to drill into its rich transaction detail to learn how many or what kinds of items were sold to which customers and which locations. Not surprisingly, Chicos let the original Passport program atrophy during the mid-90s.

That all changed, however, when top management launched a major growth initiative, including plans in 1998 to open new stores at a clip of 60 annually. Horton and other Chicos officials decided to revive Passport and launch a CRM initiative to reconnect with the companys core customers. "We knew we needed to find more of our better customers to help with the growth," Horton said.

Using MarketWorks as the customer data warehouse underlying the reborn Passport effort, Chicos is able to segment its customer base to find its best clients; identify buying trends among them to create cross-selling opportunities; and launch direct marketing campaigns, some via e-mail.

Chicos started its customer database with the 30,000 members of the original Passport program. Since going live in February, the retailer has tripled the size of the data warehouse to 1.7 million customers, including those in the expanded Passport program. Chicos has begun collecting customer information from multiple channels, not just in-store sales. Last May, Chicos added a customer call center to its channel mix and began selling products online at Transaction data from these new touch points is also fed into MarketWorks so Chicos has a complete view of its best customers regardless of where they shop.

Using that customer warehouse, Chicos has run 22 targeted promotional campaigns designed to increase the buying frequency of its best customers as well as incite customers close to Passport status and new prospects to shop more. These clients and prospects are mailed glossy, 24- to 62-page catalogs that showcase new Chicos fashions each month, along with coupons offering 50 percent off any item as long as customers spend $100.

But Chicos hasnt been using the CRM and customer loyalty programs data just to improve marketing. The company also uses the systems to help determine where to locate new stores and which merchandise to stock in which locations based on purchasing patterns in each geographic area.

Bottom line, Horton said, Chicos merchandise and marketing are now a better fit for the companys best customers. "Our numbers show that were talking to the right customer at the right time. And the fact that we know a little more about her has helped us across all departments," he said.