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Sephora

How Sephora is evolving its loyalty program

With 40 million members across the U.S. and Canada, Sephora is continuing to add perks to its Beauty Insider loyalty program.

In August, Sephora put on its first-ever Rouge Celebration Event — four days of in-store and online activations for the retailer’s top spenders. Participants snagged exclusive rewards from brands such as Tatcha and Kerastase, attended brands’ online masterclasses and were the first to shop for new products from companies including Drybar and Givenchy. Sephora held the events in the U.S. and Canada and saw a significant number of Rouge members take part.

“[There] was an increase versus the number of Rouges that had engaged with us this time last year,” Emmy Brown Berlind, Sephora’s svp and general manager of loyalty, told Modern Retail.

Sephora, which is owned by LVMH, launched its Beauty Insider program in 2007. Beauty Insider has since grown to be one of the largest loyalty programs in North America. In January, LVMH said that Sephora had “another record-breaking year for revenue and profit,” although it did not share exact numbers. It did say, however, that selective retailing, the business unit that houses Sephora, posted a 25% jump in year-over-year revenue.

Beauty Insider is free to join and has three tiers: Insider (for those who spend $0 to $349 in a calendar year), VIB (for those who spend $350 to $999 in a calendar year) and Rouge (for those who spend $1,000 or more in a calendar year). The majority of members belong to the Insider and VIB tiers, with less than 10% in the Rouge tier. All tiers include a free birthday gift and special discount days.

The beauty industry is especially ripe for loyalty programs, considering that customers tend to make repeat purchases of products they use every day. In fact, Sephora says its Beauty Insider members are responsible for a majority of sales. Meanwhile, another giant in the space, Ulta Beauty, attributes 95% of its revenue to its rewards program, which had 42.2 million members at the end of 2022. As the cosmetics space becomes increasingly crowded — and as shoppers continue to watch their budgets — retailers like Sephora are making changes to their rewards program to stay competitive.

At Sephora, new offerings like the Rouge Celebration Event are key to this strategy. Sephora wanted to throw a Rouge Celebration Event to say thank you to its most loyal customers, Berlind said. But it also held the event to try and speak to Sephora’s strengths. For instance, one of Sephora’s biggest draws is its brand relationships, Berlind said. Thus, for the Rouge Celebration Event, Sephora brought 30 brands into 13 stores to hold product demonstrations and giveaways. It also worked with brands to get Rouge customers new products.

“We were really inspired to think about, ‘How do we truly celebrate these members and give them something that only Sephora could provide?’” Berlind said. “This group of folks is generally early adopters. They know a lot about beauty. They love the brands that we sell. So giving them opportunities to learn more about those brands or get special perks from those brands was something that we were really excited about.”

Outside of the Rouge Celebration Event, Sephora has reworked its loyalty program multiple times to appeal to shoppers looking for deals. In 2020, Sephora introduced Beauty Insider cash, which allows members to redeem 500 points for $10 off an in-store or online purchase. In September 2023, Sephora gameified its rewards experience by adding challenges that members could complete for extra points. One of these challenges involved trying out Sephora’s in-store shade-matching tool, Color iQ.

Loyalty programs aren’t new, but they’ve become more popular in the past few years as brands and retailers look for ways to keep shoppers coming back. Francesca’s, for instance, started The Fran Club in 2022, which lets customers swap out points for cash. Meanwhile, in 2023, Sweetgreen relaunched its original loyalty program with two tiers: one paid and one free.

There are multiple benefits to having a retail rewards program, especially during times of economic instability, Greg Carlucci, senior director analyst at Gartner, told Modern Retail. “Any time you’re able to create a relationship as a brand with a customer in an environment that you can control, like a loyalty program, it enables things like personalization, one-to-one communication and overall, just advocacy in building retention,” he said.

Today, about 86% of U.S. shoppers belong to at least one loyalty program, per Gartner research. What’s more, nearly a third (31%) of chief marketing officers told Gartner that they are putting more money toward loyalty programs in 2024.

For Sephora, launching in-person activations like the Rouge Celebration Event is a way to keep its members engaged. The idea, said Berlind, is to “stay ahead of what the rest of the market is doing.” 

This article was originally published by Modern Retail on 10th September 2024. View original.

Photo by Nick Noel on Unsplash.

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