Sephora Cares about Sharing

As a marketing analyst who has been focusing on clients' direct mail campaign analysis, judging direct mail has become an occupational habit of mine. I try to pay attention to the direct mail I receive every day, from their messaging and design to their arrival timing and targeting accuracy. The best direct mail I have received in the past few weeks was from Sephora's annual Very Important Beauty Insider (VIB) event. It’s a traditional annual promotion event of Sephora's which provides an exclusive 20%-discount offer for their VIBs. They usually send a mailing with one discount card appended and allow the customer to share it with one friend when they shop in the store. I had received the same offer in the past two years. However, what is a little different this year is that Sephora has sent two discount cards in the mailing. One is for me and the other one, designed to look like a gift card, is for one of my friends.

It is interesting that Sephora cares more about sharing with friends this year. Why? According to an article on redorbit "Researchers found that loyalty program members value the ability to share an experience with their friends. Most surprisingly, they are willing to trade the scarce nature of preferential treatment in order to do so." My experience supports this finding as well. I have always shared my Sephora's discount offer with a friend in the past. So when I first opened this year's VIBs event mail, I was intuitively convinced that they made a smart move with a small extra cost. VIBs are the most loyal customers. Also, they are great word of mouth channels and can spread the most reliable reviews. They influence people around them who would potentially become a loyal customer as well. Sephora should try their best to maintain this group. Sharing will make VIBs feel more delighted with the rewards and also attract more customers for Sephora.

As an analyst, I tried to think how Sephora could justify this campaign. What questions will their analyst ask when they analyze the data? I assume they had a control group to which they sent out one card mailings and a testing group to which they sent out two cards mailings, so they can compare the results between the two groups. Their analyst might get some information by asking the following questions: Is the testing group's referral rate higher than the control group? What percentage of the friends become members or move to premium levels? How long is the customer lifetime for this newly joined group? Will the extra cost result in an increased retention and in increased revenue?

Companies make all kinds of efforts to attract the right customers, retain them, and encourage them to bring more customers. In his book Arthur Hughes wrote "Developing a bond of loyalty between you and your customer is what database marketing is all about." At Anthem, we make this happen.

Posted by Shu Tao on 11/12