Retaining customers in a competitive beauty industry
The beauty and personal care industry has moved from strength to strength in the digital age, with the American market valued at $90 billion last year alone. This success could be attributed to a major shift towards customer-centricity in the face of changing consumer habits in recent years.
Emerging competition from ‘disruptive’ digital-first beauty brands, a shift in focus away from bricks and mortar and an increasing need to use the customer experience as a competitive differentiator, are industry-wide challenges. It’s therefore imperative that customer retention and loyalty remain a priority for beauty retailers.
One way leading brands are continuing to differentiate is through personalization; the National Retail Federation identified personalization as the largest technology investment in retail in 2019.
Here are 4 personalization tactics, with examples, that beauty brands can deploy to engage and retain a loyal customer base.
1- Segment visitors for more effective targeted messaging
Segmentation is the foundation of any effective personalization strategy; segmenting users through a variety of different criteria means that you can surface offers, products, and content that is more relevant, thus building a relationship and a sense of brand affinity with beauty consumers.
Segments can include, but are not limited to:
- Customer lifecycle segments - non-purchasers and purchasers, those who have purchased your hero products, replenishers, loyalty program members and VIPs (by loyalty tier)
- Skin concern - dry skin, fine lines, redness
- Makeup experience level - absolute beginner, in the know, make-up artist
- Demographics - age, gender, and location
To identify and address by skin concern we can create segments by encouraging visitors and customers to self-segment by deploying a quiz.
2- Leverage loyalty programs to encourage repeat purchases
It’s well known that acquisition costs five times more than retention, yet the small percentage of repeat purchases and loyal customers represent the biggest margin of profit. According to a Bain & Company report, a 5% increase in customer retention produces more than a 25% increase in profit.
In order to convert visitors to loyal customers, incentivize loyalty by leveraging tiered or points-based programs with personalization experiences.
For first-time visitors, display the loyalty benefits for becoming a member on the navigation bar, including discounts, free delivery or personalized messaging.
For existing members, send an email letting them know how many points it will take to move up a tier, and remind them to replenish a product they’ve purchased and are due to run out of.
3- Deliver an omnichannel experience
‘Omnichannel’ has become a buzzword in retail but, given the desire to ‘try before you buy’ and the luxury of consultation and advice in-store, physical retail maintains a place of importance in the beauty shopping experience; 46% of makeup shoppers discover products online, but 61% still evaluate products in-store.
According to Ulta’s latest annual report, omnichannel customers spend almost 3 times more than store-only customers, so being able to provide a seamless experience between channels presents a lucrative opportunity to beauty retailers.
Through email, engage in-store visitors who sampled a product by recommending the full-sized product, along with other relevant products based on previously purchased items. Another example is to send push notifications via mobile to remind customers if an item they were viewing online is about to go out of stock in order to get customers over the line to conversion.
4- Product replenishment
Beauty transactions can be categorized into two ways; one is the trying and buying of new products, and the second is replenishment of a previously purchased product. Personalized replenishment experiences aim to make the repeat purchase process as smooth as possible, whilst increasing customer lifetime value.
By calculating an average lifetime for each of your products, and considering the average lifetime for a seasoned replenisher, you can surface replenishment options when a customer needs a refill, at the most effective touchpoints in the customer journey.
Personalization at scale is the next step for beauty
The next big challenge for retailers in the beauty sector will be to make personalization the new mass beauty model. Beauty marketers who know how to use AI and customer data to identify and solve consumer issues will be the winners of this new challenge.
Using AI and customer data to precisely guide individuals to the right product at the right time, and contextualizing this personalization in order to communicate the added value effectively, will generate customer retention and loyalty.
If you’d like to know more about maximizing your online experience for beauty customers, download the Future of Beauty here.