How Ulta is remaking the customer experience

WASHINGTON—Ulta Beauty (NASDAQ:ULTA) is a one-stop destination for beauty products and services, and now the retailer is leveraging technology to personalize and customize its connection with customers.

"Our customers are the most important part of our business and finding new ways to engage with them in beauty and building our authority in that space is critical to us," said Dave Kimbell, Ulta's chief marketing officer at Oracle Industry Connect in Washington, D.C..

The 25-year-old retailer was founded on the principle that selling beauty "the old way" with prestige products in department stores and general products available via mass retailers isn't the way most women want to shop for their beauty products. So they created an environment that offers all of those products together in a unique and differentiated way—a wide selection of both mass and prestige products with different price points, all available in one location.

"The idea of 'all things beauty all in one place' is foundational to our business," said Kimbell.

With 774 stores in 47 states offering 20,000 beauty products, Ulta is a rising power player in the beauty category. Each Ulta store also features a salon offering hair, skin, and brow services—an element that serves to further distinguish them from other beauty retailers.

Ulta's rewards program—ULTAmate Rewards—currently boasts 15 million active members. More than 80 percent of sales are made to loyalty members. "This allows us to have rich access to information that enables us to have targeted conversations with these guests in a very personalized way," said CIO Diane Randolph.

Kimbell and Randolph outlined a series of six core strategies the company is committed to as it looks to drive growth. Both acknowledged that while these principles may seem basic, each will take a lot of work to successfully implement.

First and foremost, Ulta is working to acquire new customers and deepen the loyalty of existing ones. Kimbell admits that even though Ulta has been around for 25 years, "a lot of people don't know we exist. We are working hard to tell our story in bigger ways and communicating what makes us special." The retailer is committed to not only acquiring new guests, but deepening its relationship with existing preferred customers.

Ulta is striving to differentiate itself by delivering a distinctive and personalized guest experience across all channels, to offer relevant, innovative and often exclusive products, and to deliver exceptional services in three core areas: hair, skin health, and brows. According to Kimbell, less than 7 percent of Ulta preferred members actively use the retailer's salon services, so this area represents an opportunity for significant growth if the company can successfully migrate product customers into the store to also use those services.

Ulta plans to grow its store count with 100 new locations in 2015. Although e-commerce is an important part of its existing business, Kimbell commented that "our best guests are the ones that are using our physical stores as well as our e-commerce business and then ultimately using our services—a trifecta that works well for us."

Finally, the retailer plans investments in infrastructure to support the shopper experience and growth, and capture scale efficiencies. Finding new systems and new capabilities that support the business is a key focal point. In addition, Ulta is focused on building out new physical assets including building a new distribution center next year.

The first step in implementing these imperatives is gaining more brand awareness in the marketplace. Historically, Ulta has not advertised in a big way, said Kimbell. But the chain recently ran a series of commercials with the tagline "Get all things beauty all in one place." The ads are currently running in select markets and there are plans to go nationwide later this year.

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