Ulta 2012 Annual Report Download - page 13

Vendor relationships
We have close relationships with our over 300 vendors. There continues to be vendor consolidation within the
beauty products industry. Our top ten vendors represent approximately 53% of our total annual sales. These
include vendors across all product categories, such as Bare Minerals, Estee Lauder, L’Oréal, Procter & Gamble,
and Coty, among others. We believe our vendors view us as a significant distribution channel for growth and
brand enhancement.
Marketing and advertising
Marketing strategy
We employ a multi-faceted marketing strategy to increase brand awareness, drive traffic to our stores and
e-commerce website, acquire new customers, improve customer retention and increase frequency of shopping.
We communicate with our customers and prospective customers through multiple vehicles. Our primary
marketing expenditure is in direct mail catalogs and free-standing newspaper inserts which highlight the breadth
of our selection of prestige, mass and salon beauty products, new products and services and special offers. We
advertise in national beauty and lifestyle magazines and execute a comprehensive public relations strategy to
enhance Ulta’s reputation as a beauty destination, increase brand awareness, support our charitable efforts on
behalf of The Breast Cancer Research Foundation and drive awareness of new products, in-store events and new
store openings.
Our loyalty programs are an important tool to increase retention of existing customers and to enhance their loyalty
to the Ulta brand. We currently operate two loyalty programs, ULTAmate Rewards and The Club at
Ulta. Approximately 11 million active customers are enrolled in these loyalty programs, generating more than
50 percent of Ulta’s sales. The Club at Ulta is a certificate program offering customers reward certificates for free
beauty products based on their level of purchases. Customers earn reward certificates to redeem during specific
promotional periods throughout the year. ULTAmate Rewards is a points-based program in which customers earn
points based on their purchases. Points earned are valid for one year and may be redeemed on any product or select
salon services. We expect to convert all loyalty program members to the ULTAmate Rewards program over time.
Both loyalty programs provide us with rich customer data which continue to fuel our direct marketing programs,
with the long term goal of driving higher share of our customers’ spend in the beauty category. During 2012 we
implemented the first phase of a new Customer Relationship Management solution to enable more sophisticated
mining of this customer data in our loyalty member database as well as greater personalization of our marketing.
A growing percentage of our marketing expense is directed at our digital marketing strategy as a highly effective
channel to communicate with existing customers and reach customers who are not familiar with Ulta or who
haven’t yet shopped with us. Our online marketing strategy includes search engine optimization, paid search,
mobile advertising, affiliate relationships, social media, display advertising, and other digital marketing channels.
Ulta’s email marketing programs are effective in communicating with and driving sales from online and retail
store customers.
Staffing and operations
Retail
Our current Ulta store format is staffed with a general manager, a salon manager, three to four assistant
managers, and approximately twenty full and part-time associates, including approximately six to eight prestige
consultants and eight to ten licensed salon professionals. The management team in each store reports to the
general manager. The general manager oversees all store activities including salon management, inventory
management, merchandising, cash management, scheduling, hiring and guest services. Members of store
management receive bonuses depending on their position and based upon various metrics. Each general manager
reports to a district manager, who in turn reports to a Regional Vice President of Operations who in turn reports
to the Senior Vice President of Operations who in turn reports to our Chief Executive Officer. Each store team
receives additional support from time to time from recruiting specialists for the retail and salon operations,
regionally based human resource managers, a field loss prevention team, salon technical trainers, management
trainers and vendors.
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