You might be hard pressed to name a runaway brick-and-mortar success story in the age of Amazon. But one of the biggest retail breakouts of the last decade, Ulta Beauty, has bucked the trend. David Kimbell, the company’s Chief Merchandising and Marketing Officer, has applied a combination of traditional and new marketing tools to better understand and serve Ulta Beauty’s customers.
This formula helped the company’s stock grow by more than 3,000 percent between 2009 and 2016, at a time when the S&P 500 grew 250 percent. These returns were concurrent with Ulta Beauty’s rapid expansion of storefronts across the U.S., at a time when most brick-and-mortar businesses were rapidly losing ground to online goliaths.
In conversation with Eric Leininger, a clinical professor of executive education at the Kellogg School, Kimbell discusses how Ulta Beauty resisted the temptation to jettison tried-and-true principles—and how that decision has paid off for the company.
This interview has been edited for length and clarity.
LEININGER: You’ve been working in a brick-and-mortar retail environment referred to as difficult, challenged, or a disaster, among other things. How have you separated from the pack?
KIMBELL: Ulta Beauty’s success is rooted in a single consumer insight that the founders uncovered. Like all great insights, it is simple but meaningful: Most consumers shop for and buy beauty products across price points, across categories, and across brands. They are looking to curate their own collection. But the beauty industry has always been—and largely remains—set up to separate products by price and category.
Over the last few years, we've worked hard to accelerate our execution on that insight, and really establish that our assortment is what makes us special in the marketplace. In addition, we’ve established a stronger loyalty program and the experience in our stores—fresh, fun, and real—is every bit as important as the products themselves.
LEININGER: You have a very strong sense of your core customer. Many marketers are tempted to try to reach too many people in too many ways. But with your brand proposition you’ve done exactly the opposite—staying very focused. How did you get to that discipline, and how do you maintain it?
KIMBELL: While Ulta Beauty has had a lot of success over time, it is only more recently that we've worked to understand what motivates our customers’ engagement. What we find is that this engagement isn’t about demographics. Rather, there is a segment of consumers that sees beauty as a joy: it's fun, it's a passion, it’s an escape. By tailoring our experience in a way that helps this behavior come to life, we've been able to have success.
There are, of course, certain demographic skews within that group that are driving a disproportionate share of category growth. So by leveraging our customer relationship management (CRM) capabilities, we’ve been able to better tap into these individual pockets of growth. Whether we’re talking about millennials, Latinas, or teenagers, there are different ways we can tailor our message and reach smaller sub-segments across our customer base.
"When we acquire new guests online, our first objective is to get them into a store—that's what brings our brand to life." —Dave Kimbell
LEININGER: So how would you characterize your blend of old and new messaging techniques? What is the relationship between delivering a single core message to a core target and tailored messaging for individuals?
KIMBELL: I’d look at it as layers of communication.
Our overarching objective is to clearly establish what makes Ulta Beauty special. We do that through both traditional vehicles, like our magazine, as well as more advanced, analytical-based CRM capabilities that we personalize. Our loyalty program has more than 23 million active members, which gives us tremendous opportunity to personalize our message.
For example, when one of the brands we carry launches a new product, we can identify the customers most likely to buy the product and personalize communication, sampling and point-of-sale efforts directly to them. The ROI on these types of programs has been very strong.
LEININGER: You hear a lot of companies talking about separating brand building and commercial messaging, with some messages designed to build the brand and others designed to be more hard hitting to move the business. What you're saying is, no, those are joint: the brand message penetrates every commercial message, and every commercial message is representative of the brand.
KIMBELL: Exactly. It's all tied together. Everything—whether
it’s a TV spot or a highly targeted email or anything in between—plays
an important role at every turn of the consumer purchase journey. We
have worked very hard to elevate the branding and quality of every
single touch point to ensure we’re bringing our message to life
consistently and powerfully. We are trying to tell our stories in
compelling ways that engage our customers in the right moment.
LEININGER: How do you identify that “right moment”? How have you reduced the complexity of a customer journey to what matters the most to customers when you’re trying to reach them?
KIMBELL: Well, it really depends on what we're trying to accomplish, but there is a critical role for education in the beauty space. A lot of this happens online. When our customers are looking for information on new products or trends, we need to be there in interesting and creative ways. Email is also essential for this level of core communication. We're getting a lot better at tailoring—making sure that what we put into your email is going to be relevant.
Offline, one thing that continues to surprise me is the effectiveness of our magazine. We mail these out, and our customers love the experience of flipping through a beauty-oriented magazine that brings to life all of these new products and trends. We worked hard to redesign this publication, which was once more of a promotional flyer and now feels like a high-quality subscription magazine.
Finally, the in-store piece is critical. When a customer walks into a store, we first have to take care of the basics, like ease of navigation. But beyond that, we make sure that we're delivering a consistent and engaging brand experience. Our store is at its best when we walk in and the salon is full, hair dryers are going, people are getting their brows done, or there’s a makeup event in the front of the store. We know that our consumers want to immerse themselves in this beauty experience.
LEININGER: With so much retail traffic heading online, how do you envision the relationship between that in-store experience and the web?
KIMBELL: We see our ecommerce business as a complement to our brick and mortar business. It's not a replacement or a separate enterprise.
When we acquire new guests online, our first objective is to get them into a store—that's what brings our brand to life. But we know that convenience is really important, and there are times when online is easiest.
E-commerce competition is fierce, so it's really important that we deliver a great experience. That means making both the purchase and post-purchase experiences as perfect as can be—the order arrives on time, it's what you ordered, it's how you expected it. Additionally, it’s important that we continue to connect our physical stores with our e-commerce business to enable easy return, manage inventory availability, enable price transparency, and deliver great content and product education to simplify the shopping experience in either channel.