Retention Marketing: The Secret to How Sephora Customers Spend 3X More $$

How Retention Marketing Can Transform Web3 Brand Customers into Loyal Brand Advocates

You may know this, Sephora is a well-known multinational retailer of beauty and personal care products.

But here are a few things you did not know about Sephora, and how they have mastered the subtle art of Retention Marketing:

While one of the key aspects that set them apart is their unique retail concept. their stores are designed to provide customers with an interactive and immersive shopping experience.

Where they feature a “try-before-you-buy” approach, allowing customers to test and sample products before making a purchase.

Sephora is one brand that has mastered the subtle art of Retention Marketing.

Sephora’s emphasis on inclusivity and diversity in the beauty industry, highlighted by the “We Belong to Something Beautiful” campaign, was a huge success in 2019.

Also, taking a Bold step to increase the representation of diverse beauty brands and addressing racial bias through initiatives like the “15 Percent Pledge.”

Sephora’s commitment to offering a wide range of products for diverse customers has set them apart in the industry.

In this context of offering a wide range of products for diverse customers, their retention marketing strategy focuses on tailoring and expanding product offerings to meet the diverse needs and preferences of existing customers.

And it’s been a brilliant strategy. One that has helped Sephora to grow to a $37.2 billion Valuation. With over 30,000 Stores Worldwide, 962k followers on YouTube and 13.9 million followers on Instagram.

So How did they leverage this strategy? And how can web3 brands especially, implement similar strategies to grow their brands?

Sephora Retention Marketing Strategy

Sephora’s retention marketing strategy is primarily centred around its loyalty program called the “Beauty Insider”.

The program was launched in 2007 and has since become a cornerstone of Sephora’s marketing efforts.

The program rewards customers for their purchases with points, which can be redeemed for a variety of rewards, such as free products, exclusive experiences, and other perks like:

Deluxe Samples, Beauty Services, Limited-Edition Sets, and Exclusive Events.

Now this is where it gets even more interesting,

Specific rewards available through the Beauty Insider program can vary over time and may differ based on a member’s tier within the program (Insider, VIB, or Rouge).

Sephora’s Beauty Insider program consists of three tiers, each offering different benefits and rewards based on a member’s annual spending:

Beauty Insider:

This is the entry-level tier that all customers automatically join when they sign up for the program.

Beauty Insiders receive access to Sephora’s Beauty Insider Community, and birthday gifts, and can earn points for their purchases. They also have access to exclusive sales, promotions, and events throughout the year.

VIB (Very Important Beauty Insider):

VIB status is achieved when a member spends $350 or more in a calendar year.

VIB members receive all the benefits of Beauty Insiders, along with additional perks such as early access to product launches, exclusive VIB-only gifts, and seasonal savings offers.

They also receive monthly gifts and can attend exclusive VIB-only events.

Rouge

Rouge is the highest tier in the Beauty Insider program and is achieved when a member spends $1,000 or more in a calendar year.

Rouge members enjoy all the benefits of Beauty Insiders and VIBs, as well as additional exclusive perks.

These perks include free custom makeovers, free two-day shipping on eligible orders, a private Rouge hotline for customer support, and invitations to Rouge-only events.

You notice how each tier offers progressively more benefits and rewards as the member’s spending increases.

With this Loyalty Program. Sephora’s “Customers” become “Members” of the Program.

The program was clearly designed to encourage repeat purchases and increase customer loyalty, and it has been very successful in achieving these goals.

In fact, according to Sephora, members of the Beauty Insider program spend on average three times more than non-members.

To put this in context: The Sephora loyalty program boasts 17 million members in North America alone. And these members are responsible for 80% of the company’s sales.

Sephora uses data analytics to track customer behaviour and preferences and then uses this information to create personalized product recommendations and offers for each member.

This helps to create a more engaging and personalized experience for customers, which in turn drives loyalty and repeat purchases.

And this is a Cue web3 brands can learn from when looking to increase Retention in their brand.

Rather than creating Loyalty programs that have little value to the community,

Like Sephora, Web3 brands can start by creating amazing products their members appreciate, then building custom programs that enable Co-creation between the team and community.

How Web3 Brands can build Scalable Loyalty Programs and Redefine Customer Engagement

In today’s ever-evolving digital landscape, traditional loyalty programs are facing new challenges.

While Sephora Loyalty Program was a huge success, Traditional loyalty programs are facing new challenges due to changing consumer behaviours and expectations.

Customers are becoming more digitally connected and have access to a wide range of options, making it harder for brands to stand out.

Additionally, traditional loyalty programs often rely on a points-based system, which can feel transactional and impersonal. Customers now seek meaningful engagement and personalized experiences.

Furthermore, data privacy concerns have grown, and customers are more cautious about sharing their personal information.

As a result, traditional loyalty programs must adapt to these evolving dynamics to remain relevant and effectively engage customers in today’s digital age.

And the Foundation of Web3 offers the solution to these challenges.

So it’s crucial to explore how Web3 brands can create scalable loyalty programs that redefine customer engagement in a way that aligns with new customer demands.

While this can completely change the game for Web3 brands. It is important to emphasise the need for great products. No loyalty Program works with a broken product.

In the real sense of things: Product Dev, community and marketing are the trinities to getting a PMF

The Paradigm Shift: Loyalty Programs in the Web3 World

Web3 brands have an exciting opportunity to revolutionize loyalty programs by leveraging blockchain technology.

Unlike traditional programs that rely on centralized databases, Web3 loyalty programs can offer transparent, secure, and decentralized ecosystems.

By using smart contracts and digital tokens, Web3 brands can establish loyalty programs that provide verifiable and immutable rewards to customers.

Engagement Beyond Transactions: A Personal Connection

Web3 loyalty programs have the power to transcend mere transactions and foster a deeper connection with customers.

Instead of treating loyalty as a point-based system, brands can create immersive experiences that engage customers in meaningful ways.

For instance, by allowing customers to contribute ideas, collaborate on product development, or vote on future initiatives using decentralized governance models, brands can empower their community to shape the brand’s trajectory.

The Dual Benefits: Community and Brand

Web3 loyalty programs can create a win-win scenario for both the community and the brand.

By engaging customers in the decision-making process, brands gain valuable insights, refine their offerings, and build a loyal customer base.

Simultaneously, customers feel a sense of ownership and inclusion, deepening their emotional connection with the brand.

This symbiotic relationship fosters loyalty, advocacy, and long-term growth.

The Untapped Angle: Data Privacy and Ownership

While Web3 loyalty programs offer exciting opportunities, they also address a pressing concern: data privacy and ownership.

By leveraging blockchain technology, brands can empower customers with ownership and control over their data.

Customers can choose to share specific data with the brand, ensuring transparency and trust.

This angle is often overlooked, but it holds immense potential to reshape loyalty programs and build trust with customers.

Prioritise Feedback: It’s all in the community

Most times, Web3 Loyalty programs tend to be boring and bare. In contrast, they are supposed to be exciting and bring a sense of ownership within the community.

But they don't. Simply because Web3 brands create these programs based on what they believe to be the best way loyalty programs should run.

Neglecting the feedback or communication of the community on what are the best features they’d love in loyalty programs, brands risk creating programs that don’t just work.

The idea and culture pattern of the loyalty program in web3 should be custom specific to the community member's preferences.

Web3 brands can get this information by simply communicating with them

By embracing blockchain technology, Web3 loyalty programs can provide scalable solutions that foster genuine customer engagement, ownership, and transparency.

These programs transcend traditional points-based systems, forming vibrant communities and cultivating lasting relationships.

The Web3 era presents an exciting opportunity to redefine loyalty, build trust, and create a new paradigm of customer-brand interaction.

In embracing Web3 technology, brands can embark on a transformative journey that prioritizes collaboration, transparency, and shared success.

By harnessing the power of decentralized networks, loyalty programs can become catalysts for innovation, community building, and lasting emotional connections.

It’s time to embark on this uncharted path and reshape loyalty programs for a Web3 future.

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