When cosmetics company Bare Escentuals decided to offer a customer loyalty program in May 2012, it took a non-traditional approach, giving fans personalized gifts and invitations to insider events rather than asking them to count points or accrue discounts. The risk has paid off. The Friends and Benefits program (FAB) has netted Bare Escentuals, a U.S. division of Shiseido, 1.3 million members since it started. In its first three months, about 40 percent of online and in-store customers signed up for the program—about double the typical sign-up rate for loyalty programs, per ePrize, which executes FAB. Since then, an average of about 30 percent of customers have signed up.
Each member is promised a customized gift for her birthday and gets to pick one day out of the year to get 15 percent off all her purchases. The company also sends out unexpected personalized gifts to members at random times, which tends to generate immediate social media buzz, said Nina Ciminelli, senior manager of relationship marketing at Bare Escentuals.
Women ages 25-44 who are active on social media are the core target of the loyalty program. While they don’t have to make a purchase to sign up, they do have to fill out a profile. “We are using the gifts and community to build emotional bonds with our customers and prospective customers. We can harness that” for sales growth, said Ciminelli.
Loyalty programs usually reward people for past behavior rather than driving emotional connections, said Taddy Hall, svp, global practices at Nielsen. “Consumers expect points for providers they frequent, so if a brand just gives them what they expect, they don’t really engage. But this company is doing something unexpected in a way that can surprise and delight customers, potentially eliciting an emotional response and brand engagement,” he said.
Most loyalty programs still reward points, but customized loyalty programs that use data mining and targeting are gaining ground because they tend to get better participation from consumers. Walgreen’s new “Steps With Balance Rewards” program gives members points for every mile they walk or run and offers personal incentives for daily weigh-ins. In the video-game industry, the Xbox LIVE Rewards loyalty program gives members points and products for playing games and engaging with Xbox LIVE features, as well as for buying Xbox goods.
Bare Escentuals goes beyond purchase history to look at customers’ preferences and skin and hair color in selecting gifts, using product reviews she’s written and the profile she filled out. For instance, in August 2012, before introducing a new line of foundation, the company sent 100 FAB members the soon-to-be-released foundation in their individual skin shades. Each gift was signed by Bare Escentuals founder Leslie Blodgett. About 40 of the recipients wrote online reviews and posted comments and photos on social media about their gifts, Ciminelli said.
Another benefit to the gift approach: cost. A loyalty program using targeted gift giving tends to be less costly than traditional automatic rewards programs, said Tamara Oliverio, ePrize loyalty director.