Neiman Marcus 2008 Annual Report Download - page 8

Table of Contents
Sales Associates. We seek to maintain a sales force of knowledgeable, professional and well-trained sales associates to
deliver personal attention and service to our customers through our relationship-based customer service model. We compensate our
sales associates primarily on a commission basis and provide them with training in the areas of customer service, selling skills and
product knowledge. Our sales associates participate in active clienteling programs designed to maintain contact with our customers
between store visits and to ensure that our customers are aware of the latest merchandise offerings and fashion trends that we present
in our stores. We empower our sales associates to act as personal shoppers and in many cases, as the personal style advisor to our
customers.
Marketing Programs. We conduct a wide variety of marketing programs to support our sales associates in the
communication of fashion trends to our customers in order to create fashion excitement and enhance our customer relationships. The
programs include both in-store events and targeted, brand-consistent print media communications.
We maintain an active calendar of in-store events to promote our sales efforts. The activities include in-store visits and trunk
shows by leading designers featuring the newest fashions from the designer, in-store promotions of the merchandise of selected
designers or merchandise categories, often through events conducted in connection with our loyalty programs, and participation in
charitable functions in each of our markets. Past trunk shows and in-store promotions at our Neiman Marcus and Bergdorf Goodman
stores have featured vendors such as Chanel, Giorgio Armani, Oscar de la Renta and Manolo Blahnik.
Through our print media programs, we mail various publications to our customers communicating upcoming in-store events,
new merchandise offerings and fashion trends. In connection with these programs, Neiman Marcus produces The Book®
approximately eight to nine times each year. The Book is a high-quality publication featuring the latest fashion trends that is mailed on
a targeted basis to our customers and has a yearly printing in excess of 3.7 million. Our other print publications include The Book for
Men, the Bergdorf Goodman Magazine and specific designer mailers.
We also believe that the online and print catalog operations of Direct Marketing promote brand awareness, which benefits the
operations of our retail stores.
Loyalty Programs. We maintain a loyalty program under the InCircle® brand name designed to cultivate long-term
relationships with our customers. Our loyalty program focuses on our most active customers. This program includes marketing
features, including private in-store events, special magazine issues, as well as the ability to accumulate points for qualifying purchases.
Increased points are periodically offered in connection with in-store promotional and other events. Upon attaining specified point
levels, customers may redeem their points for a wide variety of gifts ranging from gift cards to designer merchandise and trips to
exotic locations. Beginning in calendar 2006, we transitioned customers in our previous Bergdorf Goodman loyalty program to our
InCircle loyalty program. Approximately 40% of our total revenues during each of the last two calendar years was generated by our
InCircle loyalty program members.
Proprietary Credit Card Program. In June 2005, we entered into a marketing and servicing alliance with HSBC Bank
Nevada, N.A. and HSBC Private Label Corporation (formerly known as Household Corporation) (collectively referred to as HSBC).
Pursuant to the agreement with HSBC (Program Agreement), HSBC offers proprietary credit card accounts to our customers under
both the "Neiman Marcus" and "Bergdorf Goodman" brand names.
Under the terms of this alliance, HSBC offers credit cards and non-card payment plans and bears substantially all credit risk
with respect to sales transacted on the cards bearing our brands. We receive ongoing payments from HSBC related to credit card sales
and compensation for marketing and servicing activities (HSBC Program Income). During fiscal year 2006, we outsourced various
administrative elements of the proprietary credit card program, including the processing of data with respect to our proprietary credit
card program, to HSBC as provided for in the Program Agreement. We continue to handle key customer service functions, primarily
customer inquiries and collections.
In connection with our Program Agreement, we have changed and may continue to change, the terms of credit offered to our
customers. In addition, HSBC has discretion over certain policies and arrangements with credit card customers and may change these
policies and arrangements in ways that affect our relationship with these customers. Any such changes in our credit card arrangements
may adversely affect our credit card program and ultimately, our business.
On April 21, 2008, we entered into an amendment to the Program Agreement, dated as of June 8, 2005, with HSBC. The
Program Agreement, as amended, provides for 1) the allocation between HSBC and NMG of additional income, if any, to be
generated from the credit card program as a result of certain changes made to the terms of credit extended to our customers since the
inception of the Program Agreement and 2) the allocation of certain credit card losses between HSBC and NMG. We may enter into
additional amendments to the Program Agreement prior to its maturity to alter the allocation of
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