Q&A   //   December 12, 2022

Petco CCO Darren MacDonald on what it takes to grow a customer base

Since taking on the newly created role of Chief Customer Officer in August, Darren MacDonald has been on a mission to provide an improved and personalized shopper experience at Petco.

Petco has been making significant investments in Vital Care, a paid loyalty program that offers discounts and other benefits, just recently adding new perks like 10% off all nutrition and expanding the program to include small pets. The company has also been further developing its personalization model to better target online recommendations and tailor the customer journey. 

As a result of its efforts, the company’s Vital Care membership has now reached 400,000 active members, growing 200% year-over-year and 42% quarter-over-quarter. The company’s comp sales were also up 4.1% year-over-year in the third quarter, while its net revenue rose 4% year-over-year to $1.5 billion. Cultivating a loyal customer base has been a growing trend among pet retailers, especially as some discretionary categories experience less demand.

In the coming month, the company plans to develop a more offensive approach to customer service, which includes using call centers to introduce more customers to new programs like Vital Care and deploying new technology that allows Petco to make smarter product recommendations. “We’ve been playing the recipient of customer calls that have some sort of problem,” MacDonald said. “We’re pivoting and using that resource as an asset to help us grow the business.”

MacDonald spoke to Modern Retail about how Petco is approaching customer experience and how it is growing its customer base. This interview has been edited for length and clarity.

Upon taking on the role of Chief Customer Officer, what were some of your priorities?
Personalized 360-degree pet health and wellness experience — that is the unique differentiator for Petco. People can take care of their animals, all elements of care through Petco. And so, we want to make that experience as seamless and as personalized as possible.

My initial views on the opportunity were to identify and craft an experience for our customer segment that is unique to them, and ensures that they are able to take the best care of their animal possible. And so, you can think about the endpoints of that as being our Pet Care Centers, number one; online, number two; our services [and] grooming salons, number three; and then… our Customer Care Center.

It is a new role for Petco. So, in some ways, this is kind of crafting the art of the possibilities. This role kind of exists, in larger part, in European markets. It doesn’t really exist quite as much in the US but the view is that we can do a better job of harmonizing all elements of the experience.

Can you expand on what it means for Petco to address the holistic needs of pets?
This 360-degree health and wellness [strategy] enables you to certainly buy your dog food and buy your dog bed or your cat tree but we also make it seamless for you to take care of your animal in all the other ways that you need to take care of them. So we have vet vaccination clinics, and if you’ve gone to a vet vaccination clinic, we seamlessly pass off that information to our vets and to our groomers.

You can think about things like getting your prescriptions [and] getting advice, as being this 360-degree ecosystem that really is unique to what we’re able to do and, and that that’s the place that Petco plays and where we think that we’re gonna win.

Petco’s Vital Care membership has grown significantly and at such a rapid rate. What opportunities does Petco see in investing in this program?
One of our big consumer insights is that 90% of customers want to do what’s right for their animal but only 50% know how to do it. And so, what Vital Care does is help you to both understand what it is you need to do to take care of your animal and allows you to save while you do it. 

The customers that we’re seeing, their lifetime value is three and a half times larger than an ordinary customer. The customers are seeing the value. They’re purchasing more often with us with bigger baskets.

It’s introducing more customers to new categories. So a third of the members are new to food and new to the services of Petco. So it’s actually opening up wallet share for us. 

What are some of the trends that Petco is looking out for in 2023?
What we’re seeing with the macroeconomic environment is that customers remain able to spend at the high ends of the economy, which is where we participate but we also have a pretty broad portfolio that allows us to serve the needs of more value-conscious customers. We’re going to expand those opportunities and the skews that we offer in those categories 

The second one I would say is convenience. There’s a big focus on making shopping easy, fast and convenient for customers. 

We also are making payment more convenient through additional payment types that allow customers to shop in the way that they want with us.

Then the last piece for customers is they’re just looking for a one-on-one relationship with a retailer. They don’t want to feel like they’re one in 25 million. They want to feel like they are the only customer that matters. And so, as we grow this customer organization, we focus even more deeply on what that experience looks like and we stitch the data across all areas of our business.