Loyalty Program Represents Incredibly Valuable Asset for Ulta Beauty

Ulta Beauty’s growth is simply astonishing, due in large part to its immensely popular loyalty program, Ultamate Rewards.

Ulta Beauty achieved more than 20 percent top-line growth during the company’s second quarter.

“We exceeded the high-end of our guidance for total company sales driven by strong new store productivity,” Ulta Beauty CEO Mary Dillon said during the company’s recent earnings call.

Dillon noted Ulta Beauty’s strategic imperative to acquire new guests and deepen customer loyalty with existing guests.

“Our loyalty program continues to represent one of our most valuable assets,” she said. “As of the end of July, Ultamate Rewards grew to 25.4 million active members, which represents an impressive 23 percent year-over-year rise, driven by merchandising and marketing efforts and excellent in-store conversion.”

With 1.4 million new members added in the second quarter, and nearly 5 million new active members acquired over the past year, “our share of the beauty enthusiast market has increased to 27 percent with plenty of opportunity remaining to attract more members,” Dillon said. “Retention rates, sales per member, the frequency of purchase, and average member ticket are all strong and stable. Our Ultamate Rewards credit card continues to ramp up. We just celebrated the one-year anniversary of the launch and continue to make improvements to the credit card application experience on ulta.com, as well as roll out initiatives to drive credit card application.”

Ulta Beauty’s new grocery store gift card program expanded into the Blackhawk Network recently launched into additional retailers like Albertsons, Safeway, and Publix.

“We expect to be rolled out to 22 retailers in 12,000 locations by the end of the third quarter,” Dillon said. “This program is off to a great start and we expect it to be a more meaningful contributor to sales in the fourth quarter when gifting is a much larger part of our business.”

Awareness of the Ulta Beauty brand continues to rise. In the second quarter, the company reached 87 percent aided awareness versus 84 percent a year ago, and its unaided awareness increased by seven points to 47 percent this year versus 40 percent last year.

“Our advertising strategies including new creative for television and radio and increased investment in digital marketing channels continue to drive awareness of our brand as a preferred destination for beauty,” Dillon explained. “While new product introductions in the makeup category haven’t been quite as strong as last year, we don’t see any indication that the beauty enthusiast is any less passionate about makeup. We are even more engaged with beauty in social media channels and the interest and beauty in key growing demographics like with millennials and teens continued to work in our favor. We’re confident the pipeline of newness excitement and innovation is stronger in the back half of the year compared to the second quarter. Here’s why: We continue to have access to more and more coveted brands. We recently announced the addition of Bumble and Bumble haircare products from the Estee Lauder portfolio. Rolling out online and in 500 stores next month.”

Evan Magliocca, brand marketing manager for Baesman Insights & Marketing, told Loyalty360 that Ulta Beauty’s growth in a challenging retail environment is “staggering. Loyalty is a big reason why Ulta has been so successful. It’s a brand’s best friend and Ulta is a prime example.”

Ulta Beauty’s impressive earnings growth is coupled with a 23 percent rise in rewards members, Magliocca noted.

“And that’s not a coincidence,” he explained. “Loyalty growth is driven by two areas. First, its market position on tiers, earn velocity, and offers are favorable compared to Sephora. Customers are getting a lot of benefits for their money. Second is in-store conversion. Store associates make-or-break a program. They see so much traffic coming through each day and, if they can create a significant increase in memberships from that traffic, it really adds something to the program that can’t be replicated, even through e-commerce and other channels.” 

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