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Ulta Beauty Leverages Data-rich Loyalty Program

Ulta uses data from its loyalty program to target samples to relevant shoppers.

Ulta Beauty’s loyalty program is giving the retailer key insights, including data that helps with sampling programs.

Ulta’s Eric Messerschmidt, senior vice president of marketing strategy, loyalty and CRM at the retailer, spoke at Oppenheimer’s 17th Annual Consumer Conference on Tuesday. He detailed one of Ulta’s sampling programs, unleashed after Urban Decay released its Vice lipstick collection.

“They had 150,000 really nice sample packages that they want[ed] to mail out to our customers,” Messerschmidt said. “We worked with Urban Decay. We have 24 million customers, who to send these to? Oh my gosh. We leveraged our data to figure it out.”

Ulta sorted through the data to find which customers liked Urban Decay, which liked lip products and which ones liked lip but didn’t buy Urban Decay, according to Messerschmidt. “We targeted segments of those customers with those 150,000 samples and mailed out to exact specific people we wanted to mail to. We measured them over three, six, nine months to see did they come back and buy — 41 percent lift from that type of program. So we do that all the time.”

Ulta’s loyalty program has more than 24.5 million active members, and is growing at a rate that outpaces the company’s retail expansion, Messerschmidt noted (Ulta has plans to open about 100 stores per year).

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That program still has room for growth, he said, noting that about three-quarters of beauty enthusiasts in the U.S. don’t shop at Ulta, or haven’t in the past year. Ulta has an opportunity to expand the categories its customers shop in, which is usually about one-quarter of the categories the store offers. “She spends a lot in beauty,” Messerschmidt said. “About one-third of it is with Ulta, two-thirds of it is with those 70,000 other places that she can buy beauty in the United States. Our challenge and our opportunity [is to] get more members in our program and try to drive share of wallet with those existing customers.”

Ulta’s loyalty members overlap with those of other beauty retailers, including Sephora.

“There’s definitely overlap, and we keep our finger on that pulse as we regularly survey customers to understand that share of wallet,” Messerschmidt said. “Our largest competitor is not Sephora, if you look at it just in terms of sales. And you probably know, I mean, Wal-Mart sells a ton of beauty product … It’s not perfect overlap, but their beauty enthusiasts, even at their best, may give us half their beauty spend. They love beauty, and they’ll go buy beauty wherever. And so yes, they’re shopping at Sephora.”

Messerschmidt also acknowledged Ulta’s arrival to the prestige stratosphere. “Our success, at least over the last several years, has allowed us to build a really strong pipeline of newness,” he said. “Brands are coming to us. I started at Ulta six years ago, it wasn’t this way six years ago. We had to scrap and fight for every brand. A brand like MAC, six years ago, we’re like, ‘We’re never going to get MAC.'”

MAC launched online with Ulta in May, and will roll into 100 doors (with makeup artistry services) before the end of the year.