Ulta Beauty’s Loyalty Program Stronger Than Ever

Loyalty marketers seeking to mimic a successful loyalty program should look no further than Ulta Beauty and its highly successful Ultamate Rewards program. A staggering 90 percent of Ulta’s sales come from its loyalty program members.

The program is basic in its premise−1 point for each dollar spent−but, members can earn bonus points at various points throughout the year, including their birthday and membership anniversary, and can redeem for any of Ulta’s 20,000-plus products. The program also offers members extensive and informative content and a credit card where bonus points can be earned also.

During the company’s recent first-quarter earnings call (in which comp sales grew more than 14 percent on top of 15 percent growth the previous first quarter), CEO Mary Dillon−Fortune’s third-ranked “Business Person of the Year” in 2016, behind Mark Zuckerberg of Facebook and Jeff Bezos of Amazon−talked about the ongoing success of the loyalty program.

“We’re particularly proud of these results in light of the challenging environment many retailers are experiencing,” Dillon said. “Our differentiated increasing compelling assortment, the experience and nature of our stores, the strength of our loyalty program, and CRM capabilities that help us drive traffic and manage promotional activity with greater precision.”

Dillon noted the company’s concerted efforts and its strategic imperative to acquire new guests and deepen the loyalty of existing guests.

“During the first quarter, we acquired $1.1 million net new loyalty members, bringing the Ultamate Rewards program to 24.5 million active members,” she said. “This represents growth of 26 percent year-over-year, driven by continued strong execution by our store teams were passionate about converting new members and healthy traffic in our stores, supported by our merchandising and marketing efforts. As we anticipated, the growth rate is beginning to moderate slightly as we cycle the big impact from initiatives that led the conversion rate over the past several quarters. But, we still expect to see rapid growth in loyalty membership well above square footage growth.”

All of the metrics Ulta tracks, including retention rate, sales per member, the frequency of purchase, and average member ticket, remain very strong, Dillon said.

“We continue to find ways to enhance the benefits of the program, particularly adding products for our most engaged platinum level customers, who spend more than $450 a year,” she explained. “Our brands are increasingly interested in partnering with us on loyalty and CRM efforts. An example of this is our most recent free birthday gift for loyalty members, who with the deluxe sample of Lancôme’s new Monsieur Big Mascara, was offered to our members before the full-size product launch in store.”

Dillon said that Ulta’s brand awareness has reached an all-time high (86 percent aided awareness versus 84 percent a year ago, and unaided awareness was up six points at 45 percent this year, versus 39 percent last year).

In an age when many retailers are shrinking their respective real estate portfolios, Ulta Beauty is headed in the other direction. The nation’s No. 1 specialty beauty retailer is about to open its 1,000th store, with plans to open 100 new stores each year.

Chirpify CEO Chris Teso told Loyalty360 that Ulta Beauty has taken several steps that help drive greater loyalty.

“First, Ulta Beauty has taken the time to research what its most loyal customers want,” Teso explained. “Which has presumably led Ulta Beauty to reward customers above and beyond points−with unique content, special invites, and more. They have also introduced a mobile presence with insight into loyalty points, status, and progress. Together, these features serve to help create a greater value exchange with customers. I would encourage Ulta Beauty to continue with its efforts to tailor its program to its customers’ needs while engaging more deeply on social media through their mobile app, rewarding customers for advocacy activities that drive new customer acquisition.”

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