Ultamate Rewards Case Study

Ulta Beauty attributes 90% of its overall sales to its Ultamate Rewards program, making it a clear example of how crucial loyalty programs can be to businesses. The beauty brand has had to incorporate and improve certain features to its loyalty program over the years to achieve this. The program is based on a points system with 3 tiers. This post will look at how the Ultamate Rewards program works, the features that made it successful, and some of the improvements they could consider to make the program even more attractive.

How does the rewards program work?

Signing up to become a member of the Ultamate Rewards program or getting an account is free. Customers can either apply to become members at any Ulta Beauty store, visit www.ulta.com, register as a user, or apply to join the program at Target through its website or the Target Circle app. Upon joining, each member receives a unique Ultamate Rewards account number and card. If a member loses their member card, their accrued points will be transferred to their new account. However, members will not receive any credit or cash for their unused points. The program offers higher rewards depending on the customer’s tier and how much they spend with the brand per calendar year.

Members who spend up to $500 between January 1 and December 31 are classified as Platinum members. This status is valid for the rest of the year in which it was earned till the last day of the following year, i.e., between twelve and twenty-four months. For instance, if a member earns Platinum status in June 2021, that status is valid until December 31, 2022. The benefits of being a Platinum member include:

A 25% higher earning rate or 1.25 points for each dollar spent.
Additional bonus points.
Birthday gifts.
Exclusive access to Platinum Member events.

Members who spend $1200 between January 1 and December 31 are elevated to the Diamond status. Like the Platinum tier, the Diamond status is valid for the rest of the year in which it was earned through to the last day of the following year. So if a customer becomes a Diamond member in March 2021, their Diamond status is valid until December 31, 2022. Diamond members enjoy extra benefits and promotional offers, including;

points that do not expire during the validity period
a 50% higher earning rate (1.5 points for each dollar spent)
birthday gifts
a welcome gift
additional bonus points
free shipping for orders worth $25 or more on their website.

They also get a free $25 beauty service reward card and exclusive access to all Diamond Member events.

Members are eligible to earn Ultamate Reward points for purchasing all products and services both online and in-store, except for purchases made with gift cards. Members earn one point for every dollar spent, meaning if you spend $100, you will earn 100 points. However, as members reach the spending thresholds listed above, they become either Platinum or Diamond members and earn more points per purchase. Points can be redeemed for discounts when shopping. In addition, Ulta offers $3 off for 100 points, $8 off for 250 points, $17.50 off for 500 points, $30 off for 750 points, $50 off for 1000 points, and $125 off for 2000 points.

Ulta also gives a 20% off all products on a customer’s first purchase using their Ultamate Rewards Credit Card. All points earned in the rewards program expire at the end of the calendar quarter a year after those points were earned. The calendar quarter-end dates are March 31, June 30, September 30, and December 31. For instance, if a customer earned points on November 2, 2020, they will expire on December 31, 2021.

What are the good things about the program?

Omnichannel Experience

Ulta Beauty understands that its diverse customers interact with its brand differently and has used this to their advantage. As such, the company has made provision for its rewards program to be available across multiple platforms via its mobile apps, desktop or online platforms, and in-store. Since customers can access the program irrespective of their preferred platform, they are more likely to participate fully and purchase more frequently. In addition, the seamless integration between these platforms makes it easier for customers to enjoy their rewards and utilize their reward cards when shopping online and in-store.

Exclusivity

One of the most remarkable things about the Ultamate Rewards program is how it makes its customers, particularly those in the higher tiers, feel well appreciated. As you may already know, the beauty industry’s reward programs ride on prestige and exclusivity to build its most loyal following. Ulta Beauty uses tier-based rewards and experiences to incentivize its customers to advance in its program.

The Platinum status challenges members to spend at least $500 per year, while the Diamond status challenges customers to spend $1200 per year. The rewards for both tiers are higher in value than the standard membership and offer exclusive access to private events. In addition, members can earn higher points, various options for free shipping, $10 birthday coupons, a $25 gift card, and other exclusive VIP perks.

How could they have made the rewards program more attractive to customers?

Offer More Value

Although Ulta has done a good job at offering rewards that each member can enjoy, regardless of their status, a good section of shoppers and members who have not reached the higher tiers may not see the value in the rewards. Particularly concerning the redemption of points, infrequent shoppers will hardly see any value from the rewards program. For instance, to redeem a $3 discount at Ulta, members need to have spent $100 (equivalent to 100 points). In reality, when compared to a host of other cosmetic reward programs, purchases worth $100 can earn them rewards ranging from $10 to $15. Therefore, Ulta can enhance its rewards program by providing more value for points earned, especially for its standard members.

Include all customers

A characteristic of a good loyalty program is its ability to include all of its customers. While we noted earlier that Ulta does an excellent job at reaching its customers across different platforms, the brand has failed to extend its rewards program to its international customers. The Ultamate rewards program is only available to customers in the United States, which is unfortunate for the brand’s international customers. Since the purpose of building reward programs is to win customers’ loyalty, brands must attempt to include all of their customers rather than alienating a good number of them. Due to this limitation, the company may be losing out on potential loyal customers who otherwise could have joined the program.

Wrapping Up

Despite the drawbacks noted above, the Ultamate Rewards Program remains one of the best loyalty programs in the beauty and cosmetics industry. It possesses most of the characteristics a good loyalty program should have. It has a vivid explainer page, offers exclusivity and great value, has well-structured tiers and an omnichannel experience. At the very least, Ulta Beauty ensures that all customers find a reward and a reason to engage with the program, irrespective of their membership status.

This article is part of our series of case studies of loyalty programs implemented by the world's most famous brands.