Cabela's 2005 Annual Report Download - page 23

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Customer Service
Since our founding in 1961, we have been deeply committed to serving our customers by selling high-
quality products through sales associates that deliver excellent customer service and in-depth product knowledge.
We strive to provide superior customer service at the time of sale and after the sale through our 100 percent
money-back guarantee. Our customers can always access well-trained, knowledgeable associates to answer their
product use and merchandise selection questions. We believe that our ability to establish and maintain long-term
relationships with our customers and encourage repeat visits and purchases is due, in part, to the strength of our
customer support and service operations.
Financial Services Business
Through our wholly-owned subsidiary, World’s Foremost Bank, we issue and manage the Cabela’s Club
VISA card and related customer loyalty rewards program. We believe the Cabela’s Club VISA card loyalty
rewards program is an effective vehicle for strengthening our relationships with our customers, enhancing our
brand name and increasing our merchandise revenue. The primary purpose of our financial services business is to
provide our merchandise customers with a rewards program that will enhance revenue, profitability and customer
loyalty in our direct and retail businesses.
Our bank subsidiary is an FDIC-insured, special purpose, Nebraska state-chartered bank. Our bank’s charter
is limited to issuing credit cards and selling brokered certificates of deposit of $100,000 or more and it does not
accept demand deposits or make non-credit card loans. During fiscal 2005, we had an average of 726,214 active
accounts with an average month-end balance of $1,509. See Note 20 to our consolidated financial statements and
our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for financial
information regarding our financial services business.
The Cabela’s Club VISA card loyalty program is a rewards based credit card program, which we believe has
increased brand loyalty among our customers. Our rewards program is a simple loyalty program that allows
customers to earn points whenever and wherever they use their credit card and then redeem earned points for
products and services through our direct business or at our destination retail stores. Our rewards program is
integrated into our store point of sale system which adds to the convenience of the rewards program as our
employees can inform customers of their number of accumulated points when making purchases at our stores. In
fiscal 2005, approximately 19.2% of our total revenue in our direct and retail businesses was generated by sales
made to customers who used their Cabela’s Club VISA credit card, compared to 17.7% in fiscal 2004.
Financial Services Marketing. We adhere to a low cost, efficient and tailored credit card marketing program
that leverages the Cabela’s brand name. We market the Cabela’s Club VISA card through a number of channels,
including inbound telemarketing, retail locations, catalogs and the Internet. Customer service representatives at
our customer care centers offer the Cabela’s Club card to qualifying customers. The Cabela’s Club card is
marketed throughout our catalogs and Cabela’s Club card offers are inserted in purchases when shipped to a
customer. The Cabela’s Club card also is offered at our destination retail stores through an application similar to
the offer inserted with customer purchases. We offer customers who apply and are approved for a Cabela’s Club
card while visiting one of our destination retail stores reward points available for use on merchandise purchases.
We implemented instant credit in our retail store credit card booths in fiscal 2005, which allows a customer to
find out within minutes if they have been approved for a Cabela’s Club card.
Underwriting and Credit Criteria. We underwrite high-quality credit customers and have historically
maintained attractive credit statistics compared to industry averages. We adhere to strict credit policies and target
consistent profitability in our financial services business. Fair Isaac & Company, or FICO, scores, are a widely-
used tool for assessing a person’s credit rating. As of the end of fiscal 2005, our cardholders had a median FICO
score of 778, which is well above industry averages. We had net charge-offs as a percent of total outstanding
balances of approximately 2.15% in 2005, compared to a 2004 industry average of 5.44%, which we believe is
due to our credit and operating practices. In addition, we believe our rewards program has helped reduce
customer attrition in our direct and retail businesses.
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