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Kline Study Finds Beauty Retailers Use Rewards to Bolster Customer Loyalty

-- Mature Market Drives Multi-Channel Retention Efforts --

LITTLE FALLS, NJ, July 9, 2007

– U.S. retailers of beauty products are banking on multi-channel sales and personalized customer relations strategies to maintain a competitive edge, according to a newly published study by global management consulting and market research firm Kline & Company. Faced with a challenging, mature market and growing competition from the direct-to-consumer sales channel, beauty retailers are beefing up enticements like customer loyalty programs and purchase rewards in an effort to retain customers and attract new ones.

“Beauty product retailers are using more personalized approaches and more frequent, targeted communications to develop tighter bonds with their customer base,” says Carrie Mellage, director of the consumer products practice for Kline’s market research division.

Retail giants like CVS, with its Customer Care Card, are now being joined by specialty shops like The Body Shop and Ulta in offering customers an opportunity to earn rewards that can be applied toward savings on future purchases. Meanwhile, department stores are focusing on a multi-channel approach utilizing in-store, online, direct mail, and telephone contact to drive growth. According to the Kline study, sales of beauty products through department stores are expected to grow by 3% through 2011, compared with only 2.7% growth expected for the overall market.

“Retailers are stepping up their efforts to offer multi-channel touch points to reach customers and integrating these channels to make it easy and convenient to evaluate options and make a purchase,” Mellage says. She points to NordstromBeauty.com, which is designed specifically to announce new products and special events. The site also lists a toll-free beauty hotline number that customers can call to speak to knowledgeable consultants about the product lines.

In concert with the online offerings, retailers are also adding a personalized approach to foster customer loyalty by maintaining purchase diaries to make replenishment purchases easy, delivering personal phone invitations by in-store beauty consultants, and hosting “members-only” events.

“In a market where only modest growth is expected, retailers are learning that price is not the only motivating factor for consumers. They want service, rewards, and atmosphere in exchange for their beauty dollars,” Mellage says.

Beauty Retailing USA 2006 provides a detailed analysis of the retailing environment for the $35 billion cosmetics and toiletries industry. Now in its seventh edition, the report examines the major purchase channels, product categories, and retailers in the U.S. market, providing insight into the competitive landscape for cosmetic and toiletry products at the retail level. For more information about this research, go to www.klinegroup.com/reports/y416.asp or contact Carrie Mellage at +1-973-435-3412.

About Kline & Company
Established in 1959, Kline & Company, Inc. is a global management consulting and market research firm serving the consumer products, life sciences, chemicals and materials, and energy industries. Kline provides clients with practical business solutions derived from a distinctive combination of industry expertise, global reach, strategic consulting, and market research capabilities. Additional information is available at www.klinegroup.com.

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