This is a sponsored post by AIMIA under the Master Report series.
The beauty industry has become a hotbed for competition with new entries coming from both start-up brands appealing to niche customer segments as well as from fashion brands such as H&M expanding its portfolio into cosmetics and skincare.
According to a 2016 Statista report, the global beauty industry is estimated to be worth US$265 billion, with 40% of the market share attributable to the Asia Pacific region alone, with further expected growth of ~15% by 2021.
With so many new entrants into the beauty domain, beauty shoppers today have a plethora of choice compared with 15 years ago.
As a result, today’s beauty shoppers are more sophisticated in how they curate their make-up bag; venturing to trying new brands that are at the right price-point for them and becoming multifaceted in how they identify with various brands from brand value and environmental impact to celebrity endorsements.
According to Kurt Jetta, founder/CEO of TABS Group: “The heaviest cosmetics shoppers demonstrate no brand loyalty, purchasing more than eight brands on average, and shopping at many more outlets than lighter buyers.”
The entry of beauty retailers such as Sephora adds to the dilution of brand loyalty – are beauty buyers loyal to the cosmetic/skincare brand or to the beauty retailer? So how can beauty brands reignite their relationship with their customer base?
The answer is in the customers’ journey with the brand. Using the five key stages in the customer’s life cycle with beauty brands below, brands can form a view from the perspective of their customer to understand their customer needs and decision drivers across the different stages in the beauty brand life cycle. This ultimately helps brands identify the best-fit customer engagement strategy.
1. Seeking beauty advice through online communities and consultations
Beauty buyers invest much time in doing their research before making the jump to buy a product that will be applied directly to their skin.
They go through a process of shortlisting by brand association before even beginning to utilise social avenues such as word-of-mouth, blogs and YouTube to seek product reviews, match product expectations with reality and build confidence before buying.
To facilitate this process, many retailers have developed community platforms and smart consultative tools to help enable customers to make the right choices for themselves.
Sephora’s “Beauty Talk” and Coty’s “Let’s Get Ready” are leading examples.
A recent study shows that customers who use Sephora’s Beauty Talk platform spend on average 2.5 times more on buying products from Sephora than the average customer.
Additionally, the community has developed huge credibility among its users, driving them to make a purchase solely based on members’ reviews without even trying the product.
2. Smart sampling and free sampling to drive shoppers’ purchases
In addition to reading reviews, to ensure skin and tone compatibilities, beauty buyers also prefer to be able to sample products in which they are interested in.
In an effort to enhance this part of the buying process, established brands are leveraging augmented reality technology to deliver a digital sampling experience, while smaller brands/start-ups are leveraging subscription models for actual sampling.
L’Oréal’s Makeup Genius app and Birchbox are two such cases in the US that are doing sampling right. According to the latest reports, L’Oréal’s Makeup Genius app has contributed to a 31% growth in store sales, with downloads of more than six million.
However, every new technology has a cost associated to it. For mid-to-small brands, subscription-based sampling could be a solution to not only get customers to experience their products and make a purchase, but also secure recurring revenue from subscription fees.
Birchbox, a beauty box subscription service, sends its subscribers a box of up to five cosmetic samples every month, which could include skincare, perfumes and a range of cosmetics that are customised for each customer according to their profile details.
This iterative process can help brands learn more about their customer’s preference to create a more in-depth view of their customer base and help in fine-tuning their segment and relevant customer journeys.
3. Driving purchases and repeat purchases through relevance and convenience
While brands expect repeated purchases to help them maintain their market share, customers expect brands to provide them with relevant products at the best possible price point. To achieve this, brands need to collect data to fine-tune their offerings.
However, with customers making more of their purchases at retail outlets than at beauty counters, beauty brands continue to struggle with collecting customer data and buying insights.
Utilising a digital payment strategy, brands can integrate the mobile payment function in their loyalty app to convert the customer into a buyer right after their sampling experience.
A mobile payment function allows brands to leverage customers’ impulse psychology to convert their liking for a tester into an instant purchase. This way, brands can also gain access to transactional data, build behavioural insights, overlaying these with customer preferential data and finally delivering hyper-personalised offers back to customers.
In return, the customer also gets a seamless checkout experience. Brands can also potentially use this data to trigger replenishment reminders, which also acts to extend the customer touch-point. Ulta, a beauty retail chain in the US, is an example of a brand that is moving forward with the concept of a third-party mobile payment solution with Apple Pay to enhance the experience for shoppers.
4. Innovative and relevant gifting
Gifting is a form of advocacy for a brand where a customer’s gift represents who they are, the brand(s) they trust, and also represents them and their well wishes.
In this area, L’Oréal is differentiating itself in the industry by launching a Facebook messenger bot (the Beauty Gifter) that is an AI-driven, gift-giving liaison for personalised makeup and skincare gifts.
This is a leading example of how AI-powered tools have been successful in understanding customers and optimising their experience by gathering and auctioning user data insights. L’Oréal’s strategy also allows it access to Facebook’s 1.3 billion active user base and is a powerful acquisition and awareness creation tool.
5. Experiential rewards for engagement platforms and partnerships
In a recent Annex Cloud study, 65% of shoppers agreed that receiving rewards impacts their frequency of purchase and 64% said it also affects their spending amounts. Relevant rewards are effective in driving incremental sales and building brand loyalty. Customers also respond positively to special treatments and exclusive premium experiences.
The success of cosmetics retailers such as Sephora is attributable in part to its offering of distinct experiential rewards.
Platforms such as Sephora’s Beauty Insider programme and Lancôme’s Elite Rewards programme infuses experiential engagements through gifts and private beauty consultations, complimentary makeovers and invitations to exclusive member events.
Lancôme further rewards members with status badges for their engagement and participation with the brand. Providing customers with the opportunity for unique experiences not only builds an emotional connection with customers, it also allows brands the flexibility to re-emphasise their brand DNA in creative ways.
Brands with limited assets or marketing budgets can also consider collaborating with complementary brands to increase the value proposition to customers. Take for example, Estée Lauder’s grouppartnerships with brands, including Clinique, Origins and Bobbi Brown, that allows members to consolidate their spend, earn points within the Estée Lauder group; and in return Estée Lauder acquires customer insights at the group level.
Beauty buyers are constantly looking for ways to improve and simplify their beauty routine without sacrificing the overall results. Helping customers achieve this from developing a product all the way to the purchasing journey and brand experience is an impactful way to create true customer loyalty for a brand.
Getting the brand proposition right begins with customer centricity and the brand’s customers at their key life-stages. Once a brand takes hold of customer data, it is important to use it to improve the customer’s experience in ways that will create an environment of trust and reciprocity between the customer and brand.
Brands can leverage behavioural segmentation to help retain and improve the ongoing customer experience and relevant offerings to create this improved customer environment and experience with the brand.