Last December 1-800-Flowers.com CEO Jim McCann put aside his executive duties for the day and jumped behind the counter at his New Hyde Park, NY, retail store to arrange bouquets and greet customers to help his employees meet the holiday rush.

McCann's steadfast belief in customer service, focus on dynamic marketing, and drive to make every customer a loyal one have been the foundation for 1-800-Flowers' steady growth.

That commitment has helped the company become the number one floral retailer in the United States and earn year-over-year revenue growth—$670.7 million in 2005, up from $604 million in 2004—and three million new customers every year. According to Anne Milley, director of technology product marketing at SAS, which built the framework that manages and integrates all of 1-800-Flowers.com's data, McCann has built the company on the philosophy that long-term success comes from cultivating loyalty. "[Having] millions of customers requires a company to wallow in its data…to understand what customers want," she says. "1-800-Flowers.com executes that beautifully."

McCann's story is the classic American Dream. He opened his first florist shop in 1976 in New York. Ten years and 13 additional shops later, he acquired the 1-800-Flowers brand and phone number from a Dallas-based delivery company to enable 24/7 ordering. In 1992 the company became AOL's first online merchant; 1-800-Flowers.com was born in 1995 when the florist launched its own Web site and with it changed the company name.

McCann grew the business by building trust through one-to-one customer interactions. This he credits to his background as a social worker, which he says helped him to understand the importance of creating relationships. "Our competitors are all about the sales, we're about relationships," McCann says. "We are helping our customers connect with the important people in their lives through flowers and gifts created and designed for specific relationships, occasions, and sentiments. That's the difference."

Many inside and outside the company call attention to McCann's grassroots approach to customer service and brand building, as well as to his top-down commitment to enterprise customer strategy as the main reasons for the company's successes. McCann is not alone in getting out to the field, for example. During key holidays like Mother's Day and Valentine's Day, executives trade their desk jobs for delivering products, working in retail stores, or answering phones. "It's really a mentality," says CMO Monica Woo, who reads every customer comment on comparison shopping sites like Bizrate.com and responds to most of them. "We're constantly interacting with customers. It's important that we take every customer issue to heart."

The same executives who routinely listen to customers expect their employees to watch for emerging trends. Chris McCann, president of 1-800-Flowers.com and brother to Jim, alternates monthly dinner meetings with the company's six customer channel teams to stay abreast of new developments. For example, McCann might call on a vice president from the online channel team during dinner to explain the latest developments in natural language search. And then he will turn to the project coordinator to inquire about RSS and its implication for marketing. Additionally, he asks them for ideas that will help build the business. "He keeps them on their toes," Woo says.

1-800-Flowers.com gets to the root of customers' needs
This focus on staying ahead of business trends combined with Jim McCann's one-to-one customer approach helped set the company apart from competitors when it first launched its Web site. While competitors lauded the convenience of around-the-clock reliability, 1-800-Flowers.com started using the Internet to connect customers with its products and services, rather than just sell the products and services. "From a business standpoint, we're obsessed with knowing our customers and making sure we deliver the right products to the right customers," Woo says.

Doing so means collecting deep insight about customers and delivering personalized and targeted experiences as a result. 1-800-Flowers.com puts enormous effort into gaining a holistic view of its customers, identifying them, and developing targeted treatment strategies. The company collects customer information at every touchpoint, including contests, sweepstakes, Web-based surveys, and loyalty program registration. In turn, the company delivers customized communications offering products customers need and want. "Unless we know what our customers like and don't like, and we understand what the issues may be, we really can't do a good job," she says.

The customer database currently holds more than 25 million customer files and leverages customer profiles across the floral category and the other food brands. Through a sophisticated segmentation scheme of the customer base from the 1-800-Flowers.com brand, Woo's team analyzes customers' transactional behaviors (recency, frequency, monetary) and then overlays that information with gift behavior segmentation. Next her team applies psychographic information (behavioral, hobbies, media consumption, and demographic data) to build personas around four customer buckets. She then creates targeted treatments and tailors the messaging that the company sends to each bucket. (Woo has declined to discuss the specific bucket attributes and treatment strategies for competitive reasons.) "What we try hard to do is to market to customers when it's relevant, not force it," she says. "We don't just market to anything and everything, because to us, that's being disrespectful to our customers."

1-800-Flowers.com reaches out to customers using three distribution channels: the Internet, phone, and through its physical stores. Its marketing touchpoints include online advertising (AOL, MSN, and Yahoo!, search and affiliate networks, portals, email, and sites like nytimes.com and legacy.com); offline advertising (direct mail, catalogs, and radio); and public relations. The company also barters with affiliate and partnership programs (florists, credit card companies, retailers, and airlines). Channel managers analyze their specific channel and ensure brand consistency. Woo also tasks each leader with meeting certain metrics daily, as well as generating target revenue. The channel managers have different sets of metrics specific to their roles. "I don't think a marketing person can look at just one channel," she says. "Everything we do, we really think about the business processes from end to end." For example, the offline channel leader may initiate a radio campaign, but then is responsible for working with the other leaders to ensure consistency across the channels.

Woo's focus on analysis ties closely with 1-800-Flowers.com's strict policy of testing new ideas and measuring them. Woo relies on three sets of metrics: financials (top- and bottom-line performance); customer metrics (customer retention and acquisition); and brand equity (brand awareness, future purchase intent, and the percentage of customers who recommend the brand). Woo reports the results to the other senior executives, like Chris McCann and Senior Vice President Vincent McVeigh, every month. "We look at what worked and what didn't work and then apply it to next year's planning," she says.

Customer insight = marketing ROI
The company's emphasis on gathering, analyzing, and using customer insight drives many of its marketing initiatives. Take, for example, its email reminder program, "Gift Reminder," which allows customers to register for email reminders for special occasions. 1-800-Flowers.com will send emails to remind customers to buy a gift for whatever upcoming special occasion they have selected. In addition, the emails suggest gifts based on the customers' purchase histories and particular occasion.

Vikas Nehru, vice president of products at Kana, a 1-800-Flowers.com's email response partner, says the floral retailer uses dashboards and can conduct topical queries on the spot to automatically track rules-based issues such as length of time customers take to respond to emails. The company also can analyze email queries over time to determine trends. "They know the customers' buying habits," Nehru says, "and the more relevant and timely the offer is, the better the chance for acceptance."

Another example of marketing that uses customer insight is 1-800-Flowers.com's new points-based loyalty program, called Fresh Rewards. The company launched the program in February with the notion that rewarding customers creates trust, which in turn builds relationships. "In a world where customers have many choices and many places to go…you need to give them a reason to keep coming back and a program to differentiate yourself and select you over another company," says Greg Grunston, director of loyalty and phone CRM at 1-800-Flowers.

The program is simple, but Grunston says Fresh Rewards differs from competitors' loyalty programs because it offers only its own merchandise for rewards, not gifts from other brands. The value proposition is this: For every dollar customers spend they earn one point. For every 200 points, they receive a Fresh Reward pass through email. The program also offers two higher tiers: Fresh Rewards Plus, where in addition to the regular Fresh Rewards program benefits, participants who spend $400 in a 12-month period earn a 5 percent discount and one-half priced shipping twice a year; and Fresh Rewards Elite, where customers who spend $800 or more in a year also receive a 10 percent discount off a floral designer collection, as well as one-half priced shipping four times per year.

According to Mark Goldstein, CEO of integrated marketing provider Loyalty Lab, which powers Fresh Rewards, in the past 1-800-Flowers.com tracked customer transaction histories, but with the new loyalty program the company will be able to capture deeper information, such as customer behaviors and attributes, which the company intends to apply to future marketing campaigns for deeper customization and personalization.

While the Fresh Rewards program is new and results have yet to be calculated, 1-800-Flowers.com's Grunston is receiving a lot of positive feedback from customers. In addition, the company is pushing the program in promotions, emails, and ad campaigns. "We are including it in all communications with customers," he says. "We're really in the customers' faces with this because we believe in it. We want customers to be a part of it. It's great for us and great for them." It's that win-win approach that keeps 1-800-Flowers.com growing.