Sephora has made a practice of revamping its loyalty perks and policies — sometimes within just a few months of a previous update — and that’s part of what keeps the program successful, according to Emeline Berlind, senior vice president and general manager of loyalty at Sephora.
“It’s core to how we are keeping a vibrant program going,” Berlind said in an interview. “We keep on trying to make sure that we’re offering the best loyalty elements possible.”
The program first launched in 2007 and now boasts more than 31 million members in the U.S. — about 10 million fewer than rival Ulta’s Ultamate Rewards program, which clocked in at 41 million active members in its most recent quarter, up 9% from the previous year.
Those loyalty members can have an outsized impact on revenue: Ulta has said in the past that rewards members account for 95% of its sales. While Berlind would not say specifically what percentage of Sephora’s U.S. sales come from Beauty Insider members, she did say it was a majority.
While already big, the Beauty Insider program is “growing rapidly right now,” Berlind said. To keep customers satisfied, Sephora has evolved the program time and again, but always with a focus on the elements its shoppers want most.
‘It’s more than just discount’
Thanks to customer studies, Sephora knows that two factors — value and convenience — are particularly important, and those principles have guided some of the changes Sephora has made to the Beauty Insider program over the years and where the retailer focuses its efforts.
The retailer operates with three tiers — Insider, VIB and Rouge — a structure that was introduced to bring more benefits to customers that spend more with Sephora. How to effectively differentiate between the tiers without offering overpowering benefits can be something of a challenge: At one point, different Sephora tiers earned a different number of points for each dollar they spent, but the retailer in 2020 ditched that offering in favor of Beauty Insider Cash, which allows all members to exchange 500 points for $10.
That benefit is one of the program’s most popular, according to Berlind. With other perks, Sephora focuses on giving a baseline benefit to everyone, but more choice or more discount the higher up a customer gets in the tier structure. At the upcoming spring sale, for example, Insiders will get 10% off, while VIBs receive 15% and Rouges receive 20%. Different tiers also have access to more exclusive samples.
Convenience and value drive improvements to the program overall as well. In terms of convenience, delivery has been the focus of many new benefits. Sephora expanded free shipping to all Beauty Insider members in the fall, and also offers BOPIS and same-day delivery now. When it comes to value, Sephora prioritizes events like its spring and holiday sales, which shoppers “look forward to all year,” according to Berlind.
“We really think of value broadly and it’s more than just discount,” Berlind said. “Obviously discount is a key part of it, but we also offer value through the samples that we offer, through access to experiences like our virtual brand events … we’re trying to make sure that there’s a lot of different dimensions to the value that we offer as part of the program.”
But then, of course, there’s the birthday gift.
The perk allows shoppers to cash in for a birthday gift once per year, on their birthday. The birthday perk is not just a standard discount, as many retailers do for customer birthdays, it’s a choice between a range of specially chosen gift options. This year, for example, Sephora customers can access things like the Ilia Makeup Birthday Gift Set, which features a mascara and a multi-stick, or “The Ouai of Life” set, which offers mini versions of shampoo, leave-in conditioner, eau de parfum and body cleanser.
“What’s been kind of the bedrock of the program … every time we do consumer research, it’s always the No. 1 benefit, is the birthday gift. People just love the birthday gift,” Berlind said. “We work really hard with the brands that participate to make it a compelling gift each year. And we’ve continued to offer more choice to our clients as well over the years.”
It’s also developed into something of a problem for the retailer. Sephora in November added language to its terms and conditions dictating that no more than 150 gifts could be sent to one physical address, and then in June, the retailer instituted a $25 order minimum in order for shoppers to redeem their gift online. Asked about the changes, Berlind said they were made as part of its regular process to make sure offerings are competitive and that they “remain accessible” to all members.
She also stressed that shoppers can still pick up their birthday gift in Sephora stores for free, and even at department store Kohl’s, which actually has one exclusive birthday gift to itself this year. The department store in some ways offers a new growth path for the program, as it broadens Sephora’s reach to a new customer base.
A new frontier?
Sephora has long relied on U.S. department stores as an additional means of growth. The retailer housed shop-in-shops within J.C. Penney locations for more than a decade before splitting with the retailer to partner with Kohl’s instead.
Even when the retailer was pursuing its own store expansion in 2020 (before the pandemic derailed it), executives emphasized the importance of its relationship with J.C. Penney and highlighted that it was not abandoning those shops or that customer. The large store footprints of Sephora’s partners — past and present — meant additional means of customer acquisition and retention.
The Kohl’s partnership puts Sephora in more strip-center locations, a departure from its mostly mall-based footprint with J.C. Penney. The two retailers also have different customer demographics, analysts observed at the time, which could mean Sephora has the opportunity to acquire older shoppers than its usual younger cohort.
So far, benefits have been two-fold: New members have joined the Beauty Insider program through Kohl’s stores and website, and former Sephora members have reactivated their accounts thanks to the Kohl’s partnership, according to Berlind.
In fact, the Kohl’s shop-in-shops — which are expected to be in all of the department stores’ locations by 2025 — intentionally offer many of the most sought-after Sephora loyalty benefits. In addition to redeeming birthday gifts at Kohl’s stores, customers can also cash in points for samples and use other popular benefits.
“We really felt like expanding into Kohl’s would give us this opportunity to engage with more people in the markets where they were really strong that Sephora stores didn’t have as much presence and so we’ve seen really positive results,” Berlind said. “Those clients have been great — they’re newer to the program so they’re still developing their relationship but one of the things that we really made sure was the case was the key parts of the loyalty program that we knew were most popular are also offered at Kohl’s stores.”