Ulta's Strategy for Winning Customers’ Loyalty

In a session yesterday at the CRM Conference (CRMC) in Chicago, Eric Messerschmidt, senior vice president, strategic marketing, CRM and loyalty at Ulta, discussed the beauty retailer's approach to customer retention.

Ulta has a very active loyalty program, Ultamate Rewards, with more than 24 million members. Those customers have helped Ulta become a leader in a challenged retail industry, particularly for traditional brick-and-mortar stores. In its 2016 fiscal year, Ulta's sales increased nearly 24 percent year-over-year, and earnings were up 28 percent. The retailer's loyalty program saw a 27 percent growth in members last year.

Messerschmidt noted that approximately one-third of Ulta's customers’ beauty spend is with the brand. That's a number Ulta is intent on growing, and its loyalty program and CRM efforts will play a big role in accomplishing that goal. With that in mind, Messerschmidt offered the audience five tactics that Ulta has implemented in its CRM program:

1. Align on a trusted measurement methodology for your CRM program. You need to be able to prove it out, and be willing to be transparent with results — good and bad, Messerschmidt said.
2. Implement a cycle of continuous learning. Ulta is constantly testing campaigns and other customer touchpoints, and learning from a process of trial and error. “If you haven't failed, you're not trying hard enough,” said Messerschmidt.
3. Employ a diverse set of offers and approaches. Ulta works with its brand partners to create appealing deals and promotions for its Ultamate Rewards customers, including free samples, early access to new product releases, discount offers, and more. When successful, those test promotions are a triple win, notes Messerschmidt: Ulta's guests, its brand partners and the retailer itself all win.
4. Build and leverage a knowledge base. Ulta frequently conducts data analysis and market research (e.g., customer surveys) on its brand partners, including Urban Decay, NARS, MAC Cosmetics, to identify opportunities. Then, a targeted campaign is sent to select customers, a control group is created, and Ulta measures the performance of the targeted segment vs. the control group. We're looking for an incremental lift from the targeted group, be it sales, margin, average order value, Messerschmidt said.
5. Staff consultative “account managers.” With hundreds of brand partners — Ulta added 65 new brands just last year — having employees responsible for managing those relationships has helped it create successful partnerships. However, it's not a situation where every brand gets the same level of exposure from Ulta. “We're going to focus on the brands that are moving the needle,” said Messerschmidt.

Going forward, Messerschmidt said Ulta is looking to introduce more automation into its CRM strategy, including the use of machine learning and artificial intelligence (AI).