Shoppers facing holiday expenses turn to loyalty programs

Shoppers facing holiday expenses turn to loyalty programs

Chrissy West is taking a new approach to her Christmas shopping this year. When buying gifts for her family, she plans to finance them by cashing in her Ulta loyalty points.

Ms West, a makeup aficionado who enjoys buying lip glosses and blushes, has earned hundreds of loyalty points at beauty retailer Ulta. During a shopping spree in September, she redeemed more than 800 points, reducing an $89 bill to $57.

Ms. West is focused on spending less money this year, and she plans to really use her loyalty points during the holiday shopping season. He has 233 marks left.

“I will use my points on gifts for my sisters because they have all the products I want,” said Ms. West, a 23-year-old graduate student in Tallahassee, Florida. It’s to the point where it’s almost free, but because I have so little it will just be a discount.”

Ms West is not alone in her viewpoint. This holiday season, 39 percent of shoppers plan to use rewards and cash-back offers to buy gifts for others, according to a PayPal survey released in November. About the same proportion of people said they would use their rewards points on items for themselves.

Retailers are taking notice. These programs and the incentives that come with them will be key to attracting shoppers who are slowing their overall spending and waiting for deals before purchasing. Stores recruit customers into their loyalty programs throughout the year, but the programs become a major draw at the end of the year – when retailers can earn up to a third of their annual revenue. Retailers also spend the year testing different promotion strategies, but they implement them en masse during December.

Customers see benefits in these programs, the money they spend is rewarded through free products or other benefits. According to a PayPal survey, one in four shoppers feel like they are getting something free when they purchase a gift using Rewards.

“This is the time of year when brands adopt their most aggressive loyalty strategies,” said Stephanie Meltzer-Paul, a MasterCard executive who helps retail clients shape their loyalty programs.

Shoe retailer DSW, with 27 million members, is one of the companies leaning into its loyalty programs. On Black Friday and Cyber ​​Monday, it offered a four-piece travel kit as a gift with purchase — a promotion it only offers five times a year. Online, it is pushing a “12 Days of VIP Deals” program for loyalty shoppers.

“The added incentive that motivates them to convert gives them validation that they are making the right choice, but also makes it a fun experience to do so,” Julie Roy, DSW’s chief marketing officer, said in an interview.

Many retailers like Sephora are turning the act of earning points into a game. The beauty retailer is allowing loyalty members to rack up points by taking certain actions, like signing up for text alerts or buying something online and picking it up in store.

Ulta, which has the largest U.S. retail loyalty program with 42 million members, knows that people love the feeling of accumulating points. Fifty-six percent of shoppers told Ulta that the main reason they made purchases during Black Friday and Cyber ​​Monday was to earn points.

Typically, Ulta offers shoppers points equal to the price of the item. Spend $80, get 80 points. During the promotion this holiday season, it is offering customers the opportunity to earn up to five times the points purchase amount. So that $80 now equates to 400 points. However, the calculations can be complex, and there are TikTok channels dedicated to decoding “alta math.” For example, one creator explained in a video that if she purchased beauty products on a day when Ulta was offering double points for purchases, she had money put toward a future purchase that would then be free for her.

“People are really trying to maximize volume in a lot of different ways, and these points are a key enabler for that,” Michelle Crossan-Matos, Ulta’s chief marketing officer, said in an interview.

Kim Spader, a 44-year-old secretary at a middle school in Mystic, Conn., posted a video on TikTok in October showing how she combined her 10,000 Ulta points with a 20 percent coupon for an $800 purchase in October. The video has been viewed more than 25 lakh times.

Ms. Spader, who was paid by Ulta to create content on social media last year but is not currently compensated by the retailer, estimated that she has sold makeup, hair care and skin care since April. He spent $1,200 on the project, most of which he used to create content. When Sephora offered deals that would multiply her points, she increased her overall points count by scheduling purchases of certain brands or products.

“You don’t want to buy a product just because there’s a point multiplier,” Ms. Spader said. “Don’t put it on a credit card to buy it. But if you’re buying products anyway, and can earn more points quickly, this is a great way to get ‘free’ makeup.

At the end of the year, shoppers compete to achieve higher status under various loyalty programs. Generally companies increase incentives for members having higher status. For example, the highest level Ulta loyalty members earn 1.5 points for each purchase they make. Every year, before the process starts again in January, buyers try to secure and add to their positions. Recognizing this, Ulta isn’t shy about sending emails to members reminding them that they’re closer to reaching a new level if they spend more.

“People are obsessed with raising the bar,” Ms Crossan-Matos said. “They feel like they are getting an extra benefit. People love the concept of building up points so that when they see something they absolutely love it’s worth enough cash to either invest in themselves or invest in gifts.

Of course, encouraging shoppers to spend is beneficial to Ulta, where the year-end shopping period brings in about a third of its annual sales.

For retailers, the holidays can be an opportune time to convert customers into new loyalty members, with the hope that programs will bring customers back in the coming year.

“If you get someone to redeem a reward, they’ll spend more later,” said Kate Hogenson, principal consultant at brand-loyalty consulting firm Mallet Group. “Alta has the largest reach of any loyalty program, and 95 percent of its revenue is tied to a single loyalty member.”

When Ulta offered 20 percent off its Dyson AirWrap hair dryer (which sells for $600), it saw a spike in sales as people redeemed their points to purchase it. During big sales like these, shoppers take to TikTok to happily share the moment their bill dropped sharply after redeeming their points at the register.

“We find in many loyalty programs, including ours, people really enjoy sharing what they are doing with their loyalty points and being rewarded for it,” Ms. Crossan-Matos said. “Gamification” — adding competitive elements to the shopping process — “isn’t that exciting in itself,” he said. “It’s when you feel like you’re part of a community that celebrates who you are, what you’re doing and it brings you more points and rewards,

Ms. West, a graduate student in Florida, posted on TikTok about her Ulta purchase and the free black Fenty tote bag she got when she made the purchase. Still, she knows there’s always room for prudence.

“Because of the way I spent this year, I have a new strategy for next year,” Ms West said. “Don’t spend all my points at once.”

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