3 Ways Home Goods Stores Can Improve their Loyalty Strategy
Beauty retailers have always relied on loyalty programs to keep customers coming back. Today’s loyalty technology has evolved to enable beauty retailers to go beyond transactions and create a base of lifelong fans. In this article, we’ll explore why beauty retailers should be leveraging beauty loyalty programs to grow their business and how some real-life beauty brands are taking their programs to the next level.
5 reasons why beauty retailers should invest in loyalty
Standing out in a fiercely competitive market is just one of the many benefits of beauty loyalty programs. Here are five additional advantages.
1. Reduce churn
Churn is the rate at which customers stop buying from a retailer or brand. “The most successful brands look at loyalty and address churn starting day one and see them as an integral part of their growth strategy,” shares Erin Raese, SVP at Annex Cloud.
Beauty products are often purchased regularly, making beauty retailers a prime candidate for loyalty programs. Repeat customers refer 50% more people than one-time buyers and the customers that develop an affinity towards your brand can become strong brand advocates who promote you to others—and refer others to you (Bain & Co).
CEO and Founder of Loyalty & Reward Co Philip Shelper says, “Engaged consumers actually want to be advocates for their favorite brands. Loyalty programs can turn members into advocates by providing them with a sense of belonging and exclusivity, then harness that positivity by making it really easy for them to invite family and friends to share in that amazing experience.”
A loyalty strategy is one of the most effective ways to drive repeat purchases, move beyond transactional relationships, and build lasting bonds that reduce churn. Loyalty helps reduce churn by giving your beauty brand the power to:
- Leverage zero- and first-party data
- Access a unified customer profile
- Create data-led engagements
- Reward profitable actions & behaviors
- Offer feedback mechanisms
- Provide a community
Loyalty is the foundation for an ongoing value exchange. Each engagement increases the value of the member to your brand and the value of your brand to the member, actively reducing your churn rate. To learn more about churn, check out our Guide to Turning Churn into Lasting Customer Loyalty.
Sephora: A successful beauty retailer leveraging loyalty
Sephora has invested heavily in its customer loyalty program. The retailer offers a tiered rewards program, where customers can earn points for purchases and redeem them for rewards, such as free products and exclusive experiences. The preference center makes it easy for members to be active participants while also enabling the brand to better meet their expectations. Sephora offers personalized recommendations based on customer behavior and preferences. Due to its loyalty program, Sephora has increased customer engagement and sales, and the retailer reported robust growth in its customer base as well as a significant increase in the number of repeat customers.
2. Deliver a better omnichannel retail loyalty program experience
Omnichannel is defined as a multichannel approach to marketing or sales that offers a seamless experience to customers, no matter where they choose to interact with your brand. Retailers that use three or more channels are seeing a nearly 500% higher order rate than those using a single channel (Omnisend).
According to Deloitte, brands much break down silos that fragment the customer experience. This allows brands to deliver the consistent experience consumers expect. Annex Cloud’s huge partner network ensures your beauty brand can not only collect unique zero- and first-party data but also push that data across your ecosystem to deliver personalized experiences at every touchpoint. Omnichannel loyalty solutions enable you to recognize, know and reward your customers—regardless of where the interactions and purchases take place.
3. Increase customer lifetime value (CLTV)
Loyalty programs can boost CLTV by up to 30% by increasing purchase frequency, spend per visit and winning back potential lost customers. CLTV represents a customer’s potential value over their lifetime, considering the entire journey from acquisition to retention.
Data-driven loyalty programs can be tailored to suit customers’ needs and preferences, encouraging them to keep coming back for more of what they want. Robust loyalty data and insights enable you to offer exclusive benefits to loyalty members, such as free consultations or early access to new products, to deliver unique benefits they can’t find anywhere else.
4. Build lasting emotional bonds
Many beauty retailers struggle to create an emotional connection with their customers. Emotionally loyal customers consciously remain associated with the brand—not because of factors like price and packaging—but based on emotional factors that govern their purchase decisions.
According to Gallup, companies that provide an emotional connection with customers outperform the sales growth of their competitors by 85%. A loyalty program can help you build more meaningful relationships with your customers and engage with them on a more personal level. Emotional loyalty is one of 11 trends we unpack in our recent guide: The Future of Customer Loyalty in 2023 & Beyond.
Tom Peace, Managing Director of The Loyalty People shares, “Brands that can create emotional connections with their customers and members will thrive. Rational benefits are still important, but people need to feel connected to the brands they’re loyal to. This can be done through experiences, alignment of interest, influencers, charity, service, etc. but it must be relevant and valuable.”
Innovative beauty retailers are experimenting with Non-fungible Tokens (NFTs), Web3 and other new technologies to boost loyalty. Luxury brand YSL Beauty amassed 24,000 new wallet owners during its first NFT drop at the Vivatech Paris conference in June. They’ve now released three NFT collections to test new customer behaviors as well as different types of NFT collections, from free ones linked to music artists to more limited NFT drops, offered for purchase. The NFTs sold out within 48 hours. “We are always trying to differentiate our DTC [experience] from the online experience YSL Beauty shoppers have at Sephora or Boots,” said YSL Beauty’s Chief Digital and Marketing Officer Diane Hecquet. “We see our e-shop as a flagship, where we deliver the best brand experience through unique differentiators like gifts with purchase. It’s also easier to measure the maturity level of our shoppers through our own touchpoints, versus through [third-party] e-retailers.” The brand’s web2 loyalty program, YSL Beauty Club, is a tiered program. Based on a points system, it offers “elevated, members-only experiences, from VIP access to exclusive gifts,” Hecquet said. It also enforces brand commitments, with dedicated sustainability initiatives, for example.
Deloitte reports that a brand’s ability to leverage emotionally intelligent platforms, like Annex Cloud’s Loyalty Experience Platform, to recognize and use emotional and contextual data at scale is one of the biggest, most important opportunities for brands.
5. Anticipate customer behaviors & needs
Zero-party data (ZPD) is information customers willingly, proactively and deliberately share with you in exchange for receiving better service, a more tailored customer experience and personalized rewards. ZPD requires explicit consent which loyalty programs provide and is usually gathered through interactive touchpoints like:
- Download forms
- Loyalty membership registration
- Customer profiles
With this data, you can create a comprehensive picture of your customers and tailor your loyalty program to provide the most relevant rewards and offers versus making assumptions based on transaction data alone. Progressive profiling allows you to gain a better understanding of your customers over time as they actively share their likes, dislikes, plans and dreams. This information provides you with the valuable insights you need to create truly personal and extremely relevant experiences. Used well, these experiences will create lifelong emotional bonds between customer and brand.
Matt Reeves, Senior Vice President of Product Management, Annex Cloud provides expert insight on data collection saying, “This approach safeguards sensitive information and provides a more nuanced understanding of the customer, enabling us to deliver personalized, value-driven experiences that foster a lifetime of loyalty.”
Ulta: A beauty retailer who went beyond discounts
Ulta began its journey as a discounter, offering affordable beauty products to the masses. Today, Ulta’s loyalty program is the backbone of their business, with 98% of all transactions attributed to it.
In 2021, Ulta Beauty partnered with Target to increase customer engagement and brand loyalty. The shop-in-shop partnership enhances the customer shopping experience for more than 100 million active loyalty members between the two retailers. Digital discovery tools such as GLAMLab, allow customers to try on beauty products before purchase. Customers who shop at Ulta Beauty on Target’s website can also enjoy the benefits of Target’s industry leading, same-day fulfillment services as well as free shipping on qualifying orders. This partnership is more than a profitable collaboration—it’s an opportunity for both companies to strengthen their position in the market and provide their customers with an exceptional shopping experience.
Drive healthy growth with Annex Cloud
Annex Cloud is a technology-first SaaS-based loyalty solution provider that can give you a flexible, scalable, configurable and agile foundation for delivering the experiences your customers expect. Tune in to our podcast, Get Personal with Loyalty, to gain insights and tips from leading loyalty experts.