A new generation of loyalty programs is helping beauty brands stay competitive

For beauty brands, rewards programs are getting a makeover.

As Sephora and Ulta dominate the beauty retail landscape and their rewards programs receive praise for their offerings, beauty brands are launching or hitting the reset button on their own loyalty programs. Individual brands, in particular, are using these programs to educate customers in ways multibrand retail partners cannot and to reach new customers in new markets and foster a brand lifestyle for top-paying customers. Last week, Kiehl’s announced a relaunch of its program, with a focus on providing experiences, for example, while Yves Saint Laurent Beauté is launching its own at the end of September to capitalize on its growth and entry to the United States.

Indeed, having some kind of rewards program is becoming table stakes for brands as more customers see them as an expectation, which is why Sephora and Kiehl’s both revamped theirs in August, adding new features, rewards and ways for customers to engage with the brands. In an increasingly competitive beauty industry, customer loyalty programs have evolved beyond their perfunctory points-for-rewards or one-size-fits-all incentives, and are becoming more about engagement, emotional connection and personalization, as well as key revenue drivers. According to research by IRI Worldwide, in 2017, 74 percent of consumers chose a store based on a strong loyalty or discount program. This holds true across generations, with 79 percent of millennials and Gen Xers wanting a “strong loyalty or discount program,” as well as 74 percent of baby boomers.

Brands are taking notice, and they’re creating rewards programs customized to their objectives.

Tarte Cosmetics: Driving social engagement
Tarte Cosmetics, which has had a loyalty program called Tarte Rewards since 2013, relaunched its program in September 2017 to move away from a pure cash-back relationship to one that rewards social engagement from customers and drives customers to its website where its full range of products is offered. Currently, Tarte has retail partnerships with Ulta, Sephora, Macy’s and QVC, but each partnership only has a limited selection of products and cannot provide the deep level of brand education or as much content as the brand can offer itself. Driving consumers to the Tarte website in order to see the full range of products and learn more is an important reason for Tarte to beef up its program and incentivize people to visit, according to Kellen Fitzgerald, marketing manager of Tarte Cosmetics.

“Our focus for the first year is acquisition and driving the awareness of the program and the benefits. We are slowly seeing awareness creep up,” she said, adding, “Our future vision for Tarte rewards is to be a [key] brand platform, and my vision is for it to be our differentiator and bring [customers] to shop on our website, instead of a retailer or third-party platform.”

Since the relaunch, Tarte Rewards members can earn points by shopping on the website, engaging with the brand by following it on social channels and visiting Tarte’s website. Depending on the level of loyalty reached — Secret Admirer, Sweet Tarte or Soulmate — customers gain access to free products, special shipping rates, surprise gifts and exclusive products. The brand declined to say how many rewards members it has but did share that between 30 and 40 percent of its top-spending customers are already in the program.

“We have an older demographic who are spending more with us, and engaging more on email and the Tarte website but not on social. And they are super valuable. But we also have a younger audience with not as much spending power who are sharing us on social,” she said. By combining social engagement with shopping, the brand is able to appeal to both types of customers and encourage each set to purchase more and engage further.

Innisfree: Creating customer awareness
Innisfree, a South Korean brand popular in Asia, is a relative newcomer to the United States market and has been using its program to reach new people and build awareness, according to Julien Bouzitat, vp and gm for Innisfree in the U.S.

“We know that beauty loyalty programs have been very successful in driving loyalty. In that regard, we look at our loyalty program as critical for recruiting new customers and keeping them coming back,” he said.

Innisfree’s program offers two tiers, a “Green” tier, which is free to join, and a “Green VIP” tier, which members reach after spending $200 within 12 months. The program allows members to earn three points for every dollar spent (five points for VIP), double points during holidays, birthdays and other special events, and 50 points for every full-size product they recycle in-store. When customers initially sign up, they receive a special Welcome Kit with their first purchase, which informs recipients about the brand’s origins and story, its role as a clean beauty brand and more. There is also a Bite Size Beauty Bar that allows members to add up to three deluxe sample-size products, depending on how much they are spending during a single purchase, in addition to three complimentary samples for every purchase.

“For us, it’s really providing an added value experience at the total brand level for consumers. It’s a way to personally get customers to dive into the brand, get more products and learn more,” Bouzitat said.

As a direct-to-consumer brand, Innisfree views multibranded retailers like Sephora as competitors, just as much as it does any individual brand, he said, adding that the brand has been active in getting people to sign up for its program. The brand has an ad for the program on its website that pops up quickly after someone visits, as well as dedicated in-store associates with iPads prompting people to sign up while waiting in line. Store openings have been the biggest source for adding new members, and the brand plans to open five to eight stores over the next year in the New York City, Long Island and New Jersey area, before expanding to Los Angeles and San Francisco. The brand declined to say how many rewards members it has but said it’s expecting to double the number in the U.S. between now and the end of 2018.

As Innisfree continues to mature within the U.S. market, adding a third tier as well as the capacity to reward social engagement and host events at flagship locations are on the table, Bouzitat said.

Kiehl’s: Offering experiences
But for brands with an established consumer presence — like the 168-year-old Kiehl’s — the purpose of a rewards program transcends awareness. With its relaunch last week, Kiehl’s is focused on using its program to solidify the loyalty it has had for over a century by immersing its customers in the brand lifestyle.

“Loyalty is really critical to every business, across industries,” said Nathan Puksta, svp of marketing and e-commerce at Kiehl’s. “Customers are very promiscuous these days, especially with millennial customers. You can have a great experience buying a product, but that’s table stakes now, and beauty brands have to elevate the experience and give them something they haven’t had before.”

The new relaunch for Kiehl’s, which has had a rewards program since 2015, includes new features like five tiers based on precious metals and gems: Silver, Gold, Ruby, Sapphire and Black Diamond. The program was redone with the global customer in mind, as it is the same in all countries where Kiehl’s is available. A customer advances to each new tier based on the points they accrue, an idea borrowed from popular gamification features seen in Asia, according to Puksta.

But the points are also crucial for Kiehl’s: Members are rewarded not only for spending, but also for social sharing and attending events.

“It’s really around experiences. It not promotional or getting rewards at every spend point,” Puksta said.

For Kiehl’s, the implementation of VIP events not only served as a way to thank and or acknowledge the loyalty of high-spend customers but also as a means of promoting a lifestyle concept for the brand that keeps customers engaged all year round. The brand declined to say how many loyalty members it has, but offered that 77 percent of its direct-to-consumer revenue is generated by those in the rewards program.

“If you train people to think loyalty programs are about getting a percentage off, then you are going to train your customer to be promotional who only shops certain times during the year,” he said. “We think it should build brand loyalty through experiences, education and service.”

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