The Beauty of CRM in a Digital Age
How cosmetics retailer Sephora is innovating in customer service and brand loyalty
Headquartered in the heart of San Francisco, Sephora has strategically positioned itself at the forefront of digital innovation within the retail industry, being first to market with technology that enhances every aspect of the customer experience. In an age where consumers demand and expect personalization, speed, and customization, retailers must continue to provide new and enhanced experiences to keep their customers engaged.
While digitization impacts many aspects of a retailer’s business model – from supply chain to point-of-sale – I believe that in order to remain relevant to the consumer and competitive in the industry, retailers must focus on the impact of digitization specifically with regards to customer service. Sephora recently achieved a “Genius” ranking from business intelligence digital benchmarking firm L2 for its efforts in this space. [1]
What is Sephora Doing?
Innovation in Customer Service
Enter Sephora Virtual Artist, an in-app experience allowing a client to virtually try on thousands of shades of lipstick, and hundreds of styles of fake eyelashes, taking the guesswork and friction out of the shopping experience. (See image 1). According to Bridget Dolan, Sephora’s VP of Innovation, the technology “has been an unprecedented success” with clients “trying on over 70 million lip shades digitally” since the launch [2]. This interactive tool not only allows trialability on a mobile device without having to enter a store, but also provides links to product pages and thus encourages commerce and social sharing [3]. As mobile e-commerce surges to new heights, having grown 60% in 2015 to reach $120 billion, Sephora is enabling customers to preview purchases and virtually try on products in their own homes, in line at a movie theatre, or during their commute. [3]
Sephora has also launched “shopbots” which offer makeup tips, product reviews, and customer service answers. Sephora has some of the highest engagement rates on messaging app KiK, where chatbots “adapt to customers and effectively “learn,” allowing them to make suggestions based on purchase history and products best suited for specific customers.” [4] (See Image 2). Now more than ever brands are clamoring for engagement from consumers, wanting to interact with and provide guidance online. Brands, like Sephora, who are successful, build strong relationships with customers to ultimately capture cost savings and increase revenue. [5] A recent study by Twitter found that customers are willing to spend up to 20% more with a brand if it responds to their social media activities. [6]
(Img 1: Example of Virtual Artist App) (Img 2: Example of Chatbot App Kik)
Integrated Customer Experience
Sephora has revealed a new store concept which integrates digital and social elements within the store. Sephora CEO Calvin McDonald says Sephora “will focus on bringing together smart technology, hands-on teaching and customer beauty to create an innovative, intuitive and personalized store experience.” [7] (See image 3). The store also features a Digital Makeover Guide, which records the customer’s specific service received, provides customized product and application tips, and delivers the information directly to the client via e-mail. [8]
(Img 3: Example of new store design with Digital Makeover Guides)
The beauty retailer also has other interactive digital tools to personalize and provide service to the client in the store. Their Color IQ technology identifies the customer’s skin tone and makes recommendations on the proper shade of concealer and foundation. (See Image 4). Additionally, their Skincare IQ takes customers through an interactive quiz which then provides personalized skincare product recommendations (See Image 5). Finally, the retailer is using beacons and augmented reality to integrate the shopper from her mobile phone, into the store. (See Image 6).
(Img 4: Color IQ Technology) (Img 5: Skincare IQ Interactive tablet) (Img 6: Augmented Reality and Beacons)
What can Sephora do better?
Instagram recently began testing embedding shoppable links within customer posts – I believe Sephora should try to join the pilot as customers are extremely visual when it comes to beauty, and there is a huge sales and brand loyalty opportunity. (See Image 7)
(Img 7: Example of shoppable links in Instagram)
Data: The immense amount of data Sephora can collect on the client can lead to useful insights as well as personalization for the client. For example, Sephora e-mails are not particularly targeted – different clients do not get different product recommendations based on their history. Sephora could leverage their database and gain greater click through rates, conversion, and loyalty once e-mails are personalized.
Impact to Sephora
Sephora has fundamentally changed the way it interacts with and provides service to customers, continuously adapting their business and operating models with the new demands of the client. While the company is private and thus does not disclose such information, a quick search on LinkedIn shows that they are hiring and have hired a large number of data analysts, digital strategists, and product developers. They have clearly invested significant capital expenditures towards updating their stores to bring technology and thus a seamless omni-channel experience to better serve the client.
What do you think of Sephora’s efforts? Do you think they will remain competitive as digital continues to influence the beauty industry?
(787 Words without Sources)
SOURCES:
[1] L2 think tank: Top 10 specialty retail brands in digital (2016). . Chatham: Newstex. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1806095715?accountid=11311
[2] Sephora virtual artist expands with new features for virtual lash try on and live tutorials. (2016, Jul 06). PR Newswire Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1801884126?accountid=11311
[3] Smartphone shopping generates 70 cents of every $1 in mobile e-commerce. (2016, Oct 18). Business Wire Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1829768958?accountid=11311
[4] Tech Crunch “How legacy brands and retailers can keep up with our tech driven world” https://techcrunch.com/2016/09/15/how-legacy-brands-and-retailers-can-keep-up-with-our-tech-driven-world/, Mona Bijoor, 9/15/16, accessed November 2016
[5] Lithium unveils the state of social engagement 2016. (2016, Oct 06). PR Newswire. Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1826116484?accountid=11311
[6] Retail brands set up shop on social media in time for holidays. (2016, Nov 07). PR Newswire Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1836597428?accountid=11311
[7] Sephora Presents New Retail Concept at CEW Event’ 2016, Beauty Packaging, 21, 1, p.71, Business Source Complete, EBSCOhost, viewed 17 November 2016.
[8] Sephora opens its 400th store and brings its teach, inspire and play approach to chicago’s michigan avenue. (2016, Aug 26). PR Newswire Retrieved from http://search.proquest.com.ezp-prod1.hul.harvard.edu/docview/1814172312?accountid=11311
Image Sources:
Image 1: Personal iphone
Image 2: Forbes: http://www.forbes.com/sites/rachelarthur/2016/03/30/sephora-launches-chatbot-on-messaging-app-kik/#1d46b465512c
Image 3: Sephora Presents New Retail Concept at CEW Event’ 2016, Beauty Packaging, 21, 1, p.71, Business Source Complete, EBSCOhost, viewed 17 November 2016.
Image 4: https://www.dexigner.com/news/25463
Image 5: http://www.pearltrees.com/crmsephora/item111968823
Image 6: http://www.chainstoreage.com/article/sephora-big-omnichannel-push-beacons-store-augmented-reality-and-more#
Image 7: Tech Crunch: https://techcrunch.com/2016/11/01/instagram-shoppable-photos/
I agree that Sephora has deployed a lot of technology to improve many aspects of their operating model, and they have taken on some interesting projects. It seems like Sephora is using these pilot projects to understand which digital technologies customers most positively respond to. I think the younger generation of Sephora customers will adopt most of these technologies seamlessly and consider it value add, but I am concerned that these technologies will also alienate their older customer base.
In a few articles I read, Sephora has had strong strategic partnerships in the past with Google and Apple. It’s clear that these strategic partnerships help them deploy some of the digital technologies they are currently using, but I think they should also look to suppliers selling digitally oriented products to increase the use of technology in actual product use as well. Check out some of the cool new technologies for beauty products here! https://www.wearable-technologies.com/2015/06/technology-in-disguise-wearable-technologies-for-cosmetics/
If Sephora can integrate their customer service oriented digital technologies with technology enhanced products from suppliers, I think they will be unstoppable in the future beauty industry.
Thank you for this article Yarden. The first thing I did after reading it was to download the Sephora app! I had no idea all of this exists! Sephora has a very hard task in front of them – selling cosmetics online without trying is much harder than selling clothes. For this reason, I am very impressed with what they have done. Integrating mobile into the shopping experience does not seem as a major edge for the company as everyone seems to do it these days. What I am impressed with, is what they used the technology for – i.e. helping to create customized personalized recommendations. This is particularly useful for people who like cosmetics and do not mind spending on them but tend to stick to a few basics. This also creates an element of trust. Suddenly as a customer you do not rely on recommendations from a sales representative, who is naturally biased based on personal preferences, but from a ‘computer’ that create a program just for you. This creates huge opportunities for cross recommendations Sephora can offer after collecting customer data.
Sephora certainly does seem to be leveraging mobile and digital in-store technologies to improve customer satisfaction, especially for millennials. One additional area where Sephora, make-up manufacturers and potentially fashion retailers could engage potential customers and fans through social media during awards shows. Sephora and its channel partners could connect with consumers by offering them a “how to look like [inset celeb here]” either over Twitter, Instagram or Facebook and provide real time links to its website to purchase the types of make-up that the celebrities were wearing.