A Study on Ulta’s Loyalty Program – Ultamate Rewards

by Natasha Ambavle | Ulta Loyalty Program, Ultamate Rewards

When it comes to loyalty programs in the beauty industry, marketing gurus and strategists unanimously agree that Ulta’s points program is one the most efficient and successful in the sector.

Let’s delve into Ulta’s program – The Ultamate Rewards and study the key findings that have made the program one of the most lucrative loyalty offerings benefitting both the customers and the brand for almost two decades.

The Brand

It is highly unlikely that you are haven’t heard of Ulta before. Founded in 1990, Ulta Beauty, Inc. is the largest American chain of beauty retailers that carries numerous cosmetics, and skincare brands, and beauty tools and equipment. A 2020 Forbes article states that Ulta operated 1,262 stores as of Dec 2020. The brand opened 17 stores in 2020 and planned on opening 13 by the end of the fiscal year, however, the pandemic and consequent lockdown impacted the brand’s expansion plan nationally as well as internationally. In March 2021, Ulta announced that it will open about 100 stores by the end of the year. In addition, it will also open 100 shop-in-shops in Target Store. Ulta plans to have 1,500 to 1,700 stores in the United States by the end of 2023.

 

The Ultamate Rewards

Ulta launched its loyalty offering- Ultamate Rewards program in 2003 and has been routinely updating the loyalty offering. In 2015, the brand launched its referral program by joining hands with Extole, with a small subset of Ultamate Rewards members.

Ulta’s free membership loyalty offering grew by 64.8% from 2015 to 2018. The brand also diversified its product portfolio in 2016 to offer more to its customers by adding over 250 brands.  Ulta’s points program has close to 32 million members which make up for more than 95% of the sales, including online and in-store purchases. Of that 45% make up for the tier 2 and tier 3 members (diamond and platinum members respectively) which is a high-spending group. In combination, these members spend approximately $1700 per person, per year on the brand.

Ulta was also among the first beauty brands that offered an omnichannel experience which made redeeming points online and offline simpler for its customers.

How Does it Work?

The beauty and efficiency lie in the simplicity of the program. Ulta’s points program is a hybrid loyalty strategy that combines the points and the tiered system. However, the core concept is simple and hassle-free. Ulta rewards its customers for every dollar they spend! To further motivate customers to spend more, the brand offers more rewards for every milestone they reach known as tiers – Platinum and Diamond.

The Tier System

When customers spend $500 or more per year at Ulta, they are promoted to the Platinum Tier and when customers spend $1200 or more per year, then they are bumped up to the Diamond Tier.

The Points System

A regular member earns 1 point for every dollar they spend. A Platinum member earns 1.25 for every dollar they spend, and a Diamond member earns 1.5 points on every dollar they spend on the brand.

The brand doesn’t stop here, Ulta’s Point Program also routinely multiples the points of Platinum and Diamond Tier members on special occasions such as birthdays and anniversaries. It also incentivizes its members with access to special deals, free samples, birthday bonuses etc.

 

The Strengths

  • Puts the Customers In Charge – The genius of the program is that it lets the customers decide what rewards they want. Unlike other beauty retailers, Ulta’s point program doesn’t offer gifts or sample-size products. It offers discounts, the discount code can be used to buy any product from the brand.
  • Better Deals – Many brands have a tiered program, however, reaching the milestone could be a tiresome process and the rewards are not worth the time, money and effort either. Ulta makes certain that tier members receive great deals. This is a great motivator for customers to escalate through the tiers.
  • Omnichannel Loyalty – The year 2020 saw a great number of brands adopting the omnichannel technology, however, Ulta started it in 2016, giving ample time to its members to adapt to this technology. This allowed a headstart for the brand to amp up the omnichannel loyalty experience.
  • The Sensitivity – The pandemic and the lockdown had an impact on global businesses, and Ulta is no exception. Despite the situation, when the stores reopened in August 2020, Ulta offered extra deals, sales, exclusive offers and showed ways to earn more points to its loyal members.
  • Personalized Experience – Ulta also has an augmented reality feature called GLAMlab which saw 9 times more engagement in 2020 than it did in the previous years. GLAMlab in combination with AI skin analysis tool and one-on-one video conferencing has been incredibly popular with the members and helped to enhance the overall customer experience.

 

The Ultamate Rewards versus The Beauty Insider

Perhaps the best way to analyze the strengths and weaknesses of a brand or its loyalty offering is by comparing it with its contemporaries. Among the strongest contenders is Sephora’s The Beauty Insider. Both Ulta and Sephora have a well-known loyalty program. Let’s compare the pros and cons of each.

  • Both brands request personal data during membership registration. However, many members have complained that Ulta requests a lot of personal information which most are either skeptical to share about or simply find the task tedious.
  • Sephora also has a strong feature. It allows its members to use their points almost immediately, whereas Ulta has a 24hr wait window.
  • One of Ulta’s strongest and widely popular feature is that it offers better rewards unlike, Sephora that offers sample size gifts to its members.
  • Ulta also lets its members decide on what product they want to spend their points on, whereas Sephora restricts its members with a list of rewards to choose from.
  • Ulta’s program also let’s members ‘stack-up’ their rewards with other offers available at that time. This feature is very popular among its customers.
  • Sephora offers exclusive events and masterclasses to its members all year round while Ulta has a “21 Days of Beauty” event that takes place in the fall and the spring. It features luxury items for up to 50% off with different deals each day for the coming 21 days.

 

Despite its one or two drawbacks, The Ultamate Rewards has been widely successful for the brand. During a session at the National Retail Federation’s 2021 digital conference, Kelly Mahoney, Vice President, Customer Marketing at Ulta, shared some insights on Ulta’s points program. She stressed on the importance of customer loyalty as a differentiator for them and a basis for understanding customer behavior. She summed it up by stating that, ““Loyalty is at the heart of our work,” and that, “Ulta aims is to better personalize its communications with its members so their experience across every touchpoint—online, in-store, via social media—is personalized to them.”

With a strong framework of a dynamic loyalty offering, customer personalization, and a strong omnichannel experience, it is safe to assume that Ulta may be the next big thing to watch out for. If you are seeking to elevate your customer experience with tailored loyalty solutions as well, connect with Annex Cloud.

 
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