Ancient Branding Secret
Have you seen this tweet?
I first recommended Chewy (NASDAQ: CHWY) back in October 2019, at $26.50 a share. My reasoning for recommending the stock was based on branding – Chewy was emerging as the go-to brand for pet owners. But the timing of that recommendation is what really stands out…
Of course I didn’t know that a pandemic was about to sweep the globe, or that Chewy would become one of the pandemic darlings and the share price would run from $26.50 to $110 over the next 12 months.
Chewy wasn’t the only pandemic darling my subscribers nailed. We were also holding Teledoc (NASDAQ: TDOC) from August 2019, at $60 a share. We booked a nice gain, selling Teledoc at $200 in October 2021.
The reason for selling Teledoc is probably fairly obvious. There’s no particular reason that one platform for remote conferences with one’s physician should be any better than any other one. It’s a video platform just like Zoom or Google Meet. There’s no value-add, choosing one or the other is simply a matter of convenience…
Forgive me, but, “I guess I’ll just use this one” is not a very compelling business model.
Chewy is a different animal. Yes, $26.50 to $110 is a pretty nice run. And yes, I suppose booking a 315% gain might’ve been a good idea…
But, you saw that tweet…
Lifetime Value
Investing for the long-term is about, well, the long term.
Do you have any doubt that the customer above, who posted that tweet about Chewy, will ever consider buying dog food anyplace else? Or pet toys? Or pet meds? Or pet insurance?
And do you thing the 692,000 people who “liked” that tweet might think favorably enough abut Chewy to give the service a try?
A great company understands the value of its customers. And a great brand attracts customers for life.
Americans will spend something like $75 billion on their pets this year. Probably $80 billion next year….
If you can lock in a customer who will spend let’s say $1200 a year with you, with a 15% margin…a customer who will spread the word to their kids or neighbors or coworkers…who will post a tweet telling 692,000 people how awesome you are…who will be your customer, your apostle, for the next 20, 30 or 50 years… and all it costs you is a bag of dog food and bunch of flowers…well, you might be onto something.
Or let’s look at it from the customer service person’s point of view. Imagine working for a company where you’re given, trusted, with the power to comp a sack of kibble and then send 12 peonies to a grieving pet owner, just to make them feel better? You go to your boss and say, “nah, I didn’t upsell them to flea and tick meds, in fact, I just cost the company 85 bucks” and your boss says “wow, great job…”
I bet it’s pretty good for employee retention when employees leave work at the end of the day and feel good about their contribution…
One of the big reasons I recommended Chewy was because of the customer service stories I heard.
From the very start, Chewy’s management ignored the conventional wisdom about customer service, that any interaction should be short and focused on upselling.Chewy never put quotas on their customer service reps, never imposed the 2 minute face time allotment for a customer. Instead Chewy’s managemenet said, go ahead and talk to the crazy cat lady about how Socks likes fishy cat food better than chicken and Whiskers likes to play with fake mice but not birds, for an hour or more, well, I knew that Chewy was a company that gets it.
And in the consumer discretionary space, a company that gets it is a company that gets lifetime customers.
Investing vs. Speculating
I know I talk a lot about the hot stocks of the day, or the upstart companies that I think have some upside coming or the macro scene and what it means for making some loot…
Because I like to speculate. I like to anticipate and then bet on events that I think will affect a stock’s price.
But at heart, I’m an investor too. And investing and speculating are very, very different things.
This is something — the difference between speculating and investing — that the financial media doesn’t talk about enough. Truth be told, most of what passes as investment advice in the financial media is really speculation advice. Because it’s always about what’s happening now and what will happen over the next week or month…
And speaking of, I got back on that Fisker (NYSE: FSR) horse on Monday, and this time it’s paying off…
Also on Monday, I finally bought some Lemonade (NASDAQ: LMND) calls — a stock I recently recommended — cuz I figured, or “speculated,” that if AI stocks are hot, and Lemonade is an AI driven insurance company, well then it should get caught up in all this AI frenzy…
It did, and I took a nice gain yesterday.
But that’s not investing…
Investing is more like, if you’re gonna take $100 out of every paycheck, and you wanna in grow that money by owning an asset that 1, will do better than the S&P 500’s 8% average annual gain, and 2, is likely to be around in 20 years, well, maybe that’s Lemonade…or Fisker…
But I guaran-goddamn-tee you that Chewy will be around in 20 years. Unless pets are outlawed, there’s gonna be pet owners that are happy to be lifelong Chewy customers because Chewy – from the CEO right on down to the call center rep – actually cares that your ding-dong Doodle likes to chew on purple dragon toys more than green alligator toys…
Lifetime value.
Ok, that’s it for me today, take care and I’ll talk to on Friday…
Briton Ryle
Chief Investment Strategist
brit.ryle@protradertoday.com
Facebook: https://www.facebook.com/ProTraderToday
Twitter: https://twitter.com/BritonRyle
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