Introduction
Businesses grow as the number of customers increases. While this statement is absolutely true, growing the number of customers is not an easy job and also quite expensive. This is because to acquire new customers a business has to run all types of marketing campaigns across channels, has to establish its credibility among competitors and all this translates into heavy acquisition cost.
But what to do? You need customers, right?
Right.
But there is another way to increase customer footfall without spending as much. The trick is to turn existing customers into returning customers. The idea is a customer who has already purchased your product/service already knows about your business and trusts you. Studies suggest that retaining an existing customer is seven to five times cheaper than acquiring a new customer. What you need to do is put some effort into making that customer loyal to your business, which means whenever that customer thinks of purchasing something from your niche, he/she will think only of you.
In business lingo, these efforts are known as Customer Loyalty Program. In this case study, we break down the secret behind the huge success of customer loyalty programs.
And our pick is Sephora.
Sephora – the Beauty Giant
Sephora is a premier global chain of beauty boutiques renowned for its luxurious assortment and indulgent shopping experience. Founded in France in 1970, Sephora disrupted the cosmetics retail space by allowing customers to interactively sample products before buying. It was acquired by luxury powerhouse LVMH in 1997 and has since expanded into a multi-billion-dollar juggernaut spanning 35 countries and over 2,700 locations.
A major reason behind this astounding growth of Sephora is its loyal customer base cultivated by the company’s awesome customer loyalty program. Rather, the company is known for its customer loyalty program, second to its products.
Sephora’s Customer Loyalty Program
Sephora has introduced different tiers in their loyalty program, each offering incentives to its customers depending on their spending levels. Let’s have a look at the tiers.
The first and oldest is the Beauty Insider Program. Members earn points on all merchandise purchases, both online and in retail stores, which can then be redeemed for rewards. For every dollar spent, Beauty Insider Members receive 1 point when they provide their registered email address at checkout. Through its tiered point-accrual model incentivizing brand loyalty, Sephora aims to enhance customers’ shopping journey and experience across purchase channels, all while driving engagement through its Beauty Insider rewards program. Building upon the foundations of its Beauty Insider Program, Sephora strengthened engagement initiatives by introducing privilege-based tiers for top-spending patrons.
In 2009, the company pioneered rewards for high-value customers through its Very Important Beauty (VIB) Insider level, granting elevated status to shoppers spending $350 or more annually. This was followed in 2013 by the prestigious “Rouge” designation, recognizing committed beauty enthusiasts whose prolific purchases surpassed an annual $1,000 across Sephora’s prestige offerings.
Benefits of Beauty Insider Program
Sephora has effectively created its own community. They have developed a forum exclusively for Beauty Insiders establishing its own virtual community. Insider beauty enthusiasts can interact with each other, exchanging advice, product recommendations, and tips and tricks. Besides, personalized product recommendations are sent directly to each member’s email and account. Members may find new favorites as a result, and the business benefits as well because it may encourage more browsing or sales.
Three times a year, Sephora hosts its Savings Event sale, during which Beauty Insiders are granted access to special discounts. Rouge members receive the biggest discount and first access to the sale, while insiders across all tiers receive tier-specific discounts on the beauty products of their choice.
Every year on their birthday, Beauty Insiders of all levels receive an additional 20% off. Every year, all Sephora Beauty Insiders receive complimentary birthday presents; however, VIB and Rouge members are entitled to extra benefits, including access to other exclusive gifts and samples all year long.
Every Sephora Beauty Insider has access to the Sephora Rewards Bazaar, an online store where they can exchange their points for brand samples and other benefits. Invitations to exclusive events, such workshops and early access product releases, are also sent to VIBs and Rouge members. Rouge members gets an alluring reward of $100 off on purchase on exchange of 2500 points.
Cementing its competitive edge in customer loyalty efforts, these stratified programs incentivize Sephora’s leading aficionados through access to exclusive products and promotions, presale shopping events, and enhanced rewards redemption rates.
The tiered model fuels a sense of community and added value among those demonstrating exceptional brand loyalty each year.
Why the Program is Successful
Loyalty programs are not uncommon in business, especially in retail business it’s a heavily used method to keep hold on customer loyalty. However, Sephora’s customer loyalty program yielded and continues to yield unforeseen success because of few reasons:
1. Compelling Rewards:
Sephora allures Beauty Insiders with exclusive product previews, customized makeovers, and VIP access that speak directly to their passion for beauty. These aspirational experiences make the program rewards as alluring as the products themselves.
2. Seamless Integration:
Members can immerse themselves in the Beauty Insider community wherever they engage with Sephora – in-store, online, or on the app. Sephora bridges the consumer journey across all touchpoints, ensuring easy access to rewards balances, personalized offers, and loyalty perks.
3. Emotional Bonds:
While racking up points and redemptions, Beauty Insiders also gain a sense of belonging. Sephora cultivates relationships through Studio classes, insider events, and birthday delights. These meaningful experiences tug at heartstrings, fostering affinity beyond discounts.
Rather than just offer discounts, Sephora’s loyalty program focuses on building connections through VIP access. Members enjoy invitations to launch parties, hands-on workshops, and other experiential events that make them feel part of the Sephora community. These memorable and exclusive experiences give loyal customers a meaningful emotional attachment that transcends transactional rewards.
4. Targeted Marketing:
Through detailed customer profiles and purchase history data, Sephora fine tunes product suggestions, promotions, and birthday surprises to match each shopper’s unique tastes and preferences. This personalized approach strengthens Sephora’s relationship with its customers by making every shopping interaction feel special and catered.
Conclusion
Sephora’s wildly successful loyalty program demonstrates how brands can cultivate meaningful emotional connections with customers that foster true brand loyalty. By understanding their passion points and crafting personalized, VIP experiences catered to individuals, Sephora makes patrons feel valued in a way transactional discounts cannot achieve.
Their tiered program incentivizes top spenders with access, exclusivity and belonging – aspirations that tap straight into the psychology of brand love. For any business seeking to emulate their retention results, the key is to use granular data to surprise and delight people in a way that reflects true value.
