Finding a route to its premier spenders, Sephora hosted an inaugural Rouge Celebration event, feting its top-tier loyalty members with early access to products, guided training sessions and rewards from high-end brands. Spread over four days, the event was both in-person and online.
Owned by luxury brand LVMH, Sephora has one of the largest loyalty programs, estimated to have over 31 million members globally. Sephora’s program is a hybrid model, combining both points and tiers for earning. Beauty Insider allows users to earn points on every dollar spent, redeemable for samples, full-size products, or exclusive experiences, creating an appealing incentive for Sephora shoppers across its "Insider," "VIB," and "Rouge" tiers. While not disclosing actual numbers, the Beauty Insider program represents “a majority” of its revenue, and with many members making frequent purchases. (In contrast, Ulta’s Beauty Rewards larger loyalty program accounts for a whopping 95 percent of its sales.)
The Sephora Beauty Insider program is one of the most lauded, recognized for its alignment with consumer preferences. In a world where purchasers can be fickle — driven by internet or promoter hype — Sephora leans into that interest, rewarding its customers (and brands) with sample sizes in new products.
Capitalizing on word-of-mouth, the community-driven nature of the beauty industry, Reddit’s r/makeupaddiction community alone has over 4 million members. These members are active purchasers as well, purchasing beauty products monthly, with 10 percent making weekly purchases. The impact is compounded by the higher average sale from loyalists. According to Accenture, loyalty program members spend an average of 12-18 percent more with each purchase.
Frequently responding to both competitive moves and feedback from its members, Sephora has evolved the program, altering rewards earning tiers and points to keep them competitive and attractive. Changing the program three times in as many years, Sephora landed on a popular cashback reward, where 500 points earns $10 cash on purchases. Higher tiers get progressively larger percent discounts on purchases, and can access more exclusive samples.
Earning its place as a top ranked loyalty program, Sephora wisely keeps Beauty Insider fresh and in tune with its members. But could there be more? We have some ideas.
Giving the Sephora Beauty Insider program a glow-up
Improving an already successful program is possible, but not often done. Loyalty teams tend to tinker with tiers, rewards and points to hopefully continue to engage, and attract newcomers. That’s certainly the case here, and it’s producing results, but those are often incremental. Real change comes from a revamp of the program, beyond the usual tactics.
Here, we’d recommend Sephora offer a loyalty wallet, where rewards, cashback, and points are deposited into an individual Beauty Insider’s account. Members can also pre-fund their next purchase, even if it’s not currently planned. Reflecting purchase pattern frequency, imagine a repository for months’ worth of purchases, a version of Save Now, Buy Later. These Beauty Insiders would earn more points with every dollar stashed away, giving them even more incentive to stock up for the future. Mirroring the Starbucks model, Sephora holds the funds on its customer’s behalf and earns yield on the aggregated sum.
And then…
Taking this one step further, if the Beauty Insider wallet was funded via ACH, direct deposit, or cash in-stores, Sephora avoids network fees, essentially funding the rewards program through those savings. The alternative payment is seamless for consumers, earning them more valuable points and tiers, while netting significant cost savings for Sephora.
One last idea: P2P
These same Beauty Insider wallet holders can share rewards and gifts with other members. For example, a Rouge-level member would be able to purchase a gift card for another wallet holder. It’s a frictionless transaction via mobile app, transferring dollar amounts (or points) from one Sephora Beauty Insider wallet to another — all within the Sephora ecosystem. Money comes in, and stays in for all manner of purchases and endless use cases.
