Shoppers faced with holiday spending are turning to loyalty programs

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

Ms. West is a makeup enthusiast who enjoys buying lip gloss and blush and has amassed hundreds of loyalty points at Ulta, the beauty retailer. During a shopping trip in September, she redeemed more than 800 points, bringing the $89 bill to $57.

Ms West has focused on spending less money this year, and using her loyalty points is how she plans to do that during the Christmas shopping season. She still has 233 points left.

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

Ms West is not alone in her approach. According to a PayPal survey published in November, 39 percent of shoppers plan to use rewards and cash back offers to buy gifts for others this holiday season. Nearly the same percentage of people said they would use their reward points on items for themselves.

Retailers are taking notice. These programs and the incentives that come with them will be critical in attracting buyers, who will slow their overall spending and close deals before they buy. Stores recruit customers to their loyalty programs all year round, but the programs become a big attraction at the end of the year, when retailers can make up to a third of their annual sales. Retailers also spend the entire year testing various incentive strategies, but roll them out en masse in December.

Customers see the benefit of these programs, where the money they spend is rewarded with free products or other benefits. According to the PayPal survey, one in four shoppers believe that buying gifts with rewards is something free.

“This is the time of year when brands deploy their most aggressive loyalty tactics,” says Stephanie Meltzer-Paul, a Mastercard executive who helps retail clients shape their loyalty programs.

Shoe retailer DSW, with 27 million members, is among the companies focusing on their loyalty programs. On Black Friday and Cyber ​​Monday, a four-piece travel set was given as a gift with purchase – an incentive that is only given five times a year. Online, it offers loyalty shoppers a program of “12 days of VIP deals.”

“Those extra incentives to convert them give them confirmation that they are making the right choice, but do it in a fun way,” Julie Roy, DSW’s chief marketing officer, said in an interview.

Many retailers, like Sephora, turn earning points into a game. The beauty retailer offers loyalty members the opportunity to earn points by completing certain tasks, such as signing up for text alerts or buying something online and picking it up at a store.

Ulta, which has one of the largest U.S. retail loyalty programs with 42 million members, knows people like the feeling of collecting points. Fifty-six percent of shoppers told Ulta that earning points was the main reason they shopped during Black Friday and Cyber ​​Monday.

Typically, Ulta offers shoppers points equal to the price of the item. Spend $80 and get 80 points. During promotions this holiday season, it is offering customers the opportunity to increase their points by five times the amount of a purchase. So $80 can now equal 400 points. The calculations can get complicated, though, and there are TikTok channels dedicated to decoding “Ulta math.” For example, one creator explained in a video that if she bought beauty products on a day when Ulta was offering double points on purchases, she would have money for a future purchase, which would give her peace of mind.

“People are really trying to maximize volume in very different ways, and points are a critical factor in that,” Michelle Crossan-Matos, Ulta’s chief marketing officer, said in an interview.

Kim Spader, a 44-year-old high school secretary in Mystic, Conn., posted a video on TikTok in October about how she combined her 10,000 Ulta points with a 20 percent off coupon for an $800 shopping spree in October. The video has been viewed more than 2.5 million times.

Ms. Spader, who was paid by Ulta last year to create social media content but is not currently compensated by the retailer, estimated that as of April she has spent $1,200 on makeup, hair care and skin care, much of which she used in content creation. She increased her total points by timing her purchases of certain brands or products when Sephora offered deals that would multiply her points.

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

As the year draws to a close, shoppers are also racing to secure a higher level of status within many loyalty programs. In general, companies boost incentives for higher status members. For example, top-tier Ulta loyalty members earn 1.5 points for every purchase they make. Every year, shoppers try to secure and improve their status before the process starts all over again in January. Ulta realizes this and isn’t shy about sending out emails to remind members that they’re about to reach a new level – if they spend more.

“People are obsessed with improving their level,” says Ms Crossan-Matos. “They feel like they are getting extra benefits. People love the concept of building points so that when they see something that they absolutely love, it might be a lot more difficult money-wise, they can invest in themselves or invest in gifts.

Of course, encouraging consumers to spend money is good for Ulta, where the year-end shopping season generates nearly a third of annual sales.

For retailers, the holidays can be an opportune time to turn customers into new loyalty members in the hopes that the programs will keep customers coming back in the coming year.

“If you let someone redeem a reward, he or she will spend more later,” says Kate Hogenson, principal consultant at the Mallett Group, a brand loyalty consultancy. “Ulta has the highest penetration of all loyalty programs and 95 percent of revenue is tied to a loyalty member.”

When Ulta offered a 20 percent discount on its Dyson Airwrap hair dryer (which retails for $600), the company saw a spike in sales as people redeemed their points to buy it. During big sales like these, shoppers take to TikTok to giddily share the moment their bill suddenly dropped after their points were redeemed at the checkout.

“We’re seeing a number of loyalty programs, including ours, where people really enjoy being able to share what they’re 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,” she added. “It’s when you feel like you’re part of a community that celebrates who you are, what you do and earns you more points and rewards.”

Ms. West, the graduate student in Florida, posted on TikTok about her Ulta purchases and the free black Fenty tote bag she received when she made a purchase. Yet she knows there is always room to be smarter.

“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.”