Reward Program Strategy

How to Build a Loyalty Program in the Cosmetics Industry

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Over the past couple of years, cosmetics retailers have been taking the ecommerce world by storm.  With 70% of shoppers preferring to purchase their cosmetics online, the $300 billion dollar per year industry has been undergoing a lot of changes, with many companies bumping elbows in an effort to secure new business.

This intense competition – combined with a high purchase frequency, high customer lifetime value, and unbelievable margins – makes a loyalty program as necessary in the cosmetic industry.  Treat your customers to an experience they can’t wait to talk about with their friends and family, and start delivering an unbeatable customer experience that leaves each of your shoppers feeling elite.

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When designing an effective cosmetics loyalty program, it’s important to consider your customer lifetime value, purchase frequency, and average order value.  If these metrics aren’t high, your business may not be equipped to sustain your program, making all of your strategies redundant.

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(Find out how these metrics and your company’s margin are perfect for a loyalty program!)

Thankfully there’s nothing to worry about for cosmetic retailers.  Many shoppers have made makeup a part of their daily routine, guaranteeing that they will need to replace their cosmetics quite often – sometimes as often as biweekly!  Each of these repeat purchases will have a high order value, securing an even higher customer lifetime value for each of your valued customers.

loyalty program in the cosmetics industry competition

Last (but definitely not least), you need to look at how much competition you have.  As I already mentioned, cosmetics is an unbelievably competitive market, which means many retailers will be attempting to entice customers away from you with over-the-top discounts.  This unsustainable business model  will get you nowhere.  Loyalty, however, will!

loyalty program in the cosmetics industry strategy

(Increase profit, build community and more with a loyalty program)

Even though many customers develop a loyalty to specific products, the high level of competition means that other brands may attempt to sway customers with jaw-dropping low prices.  Loyalty programs help combat this switching barrier by putting value at the centre of your acquisition and retention strategies, encouraging higher order values that drive profitability.

When designing your program, you need to make sure that your program strives to acquire, retain, and nurture your customer base.  Offering a loyalty program sets your brand apart by demonstrating clear value that isn’t being offered by your competitors.  

loyalty program in the cosmetics industry exceed expectations

(Discover how to acquire, retain, and nurture your best customers)

By giving them more than the products they came for, you can provide your customers with an exceptional customer experience that recognizes the longevity of their spending habits.  These considerations will keep them happy, engaged, and excited by your products and services, making you the obvious first choice.

A great way to exceed your customer’s expectations is by offering them free samples as rewards.  Many people are hesitant to try new products when they already know which ones they like, so being given the opportunity to try something risk-free is very appealing.  You can also offer gift cards or store credit as rewards, empowering your customers to choose whatever they want/ need to incorporate into their daily beauty routine.

loyalty program in the cosmetics industry build community

(Learn about the power of tiered rewards and how a loyalty program can capitalize on them)

Building a strong brand community is also very important for cosmetic loyalty programs.  Encourage your customers to engage with each other by rewarding them for referring others to your business and/or sharing their experience with your products across social media channels.  Applications like Instagram are perfect for cosmetic brands. It allows customers to share their opinions and personal experiences with you as well as with others.

loyalty program in the cosmetics industry motivated by status

(Find out more about the impact of gamification in the Loyalty Programs for Cosmetics Guide)

So you have your customers excited about your loyalty program, but how does the earning and redeeming actually work?  These considerations are crucial to the success of your program, and should be developed with an emphasis on choice. Offering multiple ways to earn and redeem allows customers to design personalized experiences that speak to their spending habits and preferences, making them feel special and appreciated. This is especially important in cosmetic industry programs.

Tiered programs are an excellent way to do this, particularly in the cosmetics industry.  As a vocal community, cosmetics customers are incentivized by gamification, and will strive to reach each new tier so that they can tell others about it.  Many cosmetic shoppers are actually more motivated by prestigious status than the actual rewards offered. Just take a look at Sephora’s loyalty program. You can round out your rewards offerings by using a points-per-purchase model and rewarding for social sharing and referrals.

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So what does it take to build the best loyalty program in the cosmetics industry?

1. Develop a program strategy which places excellent value and customer service at the core of your program.

2. Reward your customers for referring friends to your business to encourage community.

3. Provide multiple ways to earn rewards, focusing not only on dollars spent but on the complete experience.

4. Offer rewards that inspire a sense of elitism and provide additional value to their day-to-day routines.

Putting these recommendations into practice will make your program appealing to new and repeat customers alike, increasing your profitability and making your brand as necessary an accessory as the perfect nail colour.

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