CX Decoded Podcast Episode 8: Digital Innovation Through the Lens of Beauty

Dom Nicastro: Hello, everyone, we're back with another edition of CX Decoded season three here from CMSWire. I am Dom Nicastro, managing editor of CMSWire.com. I’m here with my co-host, Jennifer Torres, making her debut in the CX Decoded podcast world. Jenn, what's going on? 

Jennifer Torres: Hi, Dom. It's great to be here. Very exciting. 

Dom: We got you. You're in. We got this, Jen. So let's get right into it. I love the CX Decoded podcast when we have practitioners doing the work of digital customer experience. That to me is the win for CX Decoded. And we have that today in the form of Michelle Pacynski, VP, digital innovation at Ulta Beauty. She's going to talk about digital customer experience efforts. It doesn't get any better than that for us. Michelle, how's it going? 

Michelle Pacynski: Hey, Dom. Hey, Jennifer. It's going great. Having a great day. 

Dom: Awesome. 

Jennifer: Michelle. So we'd like to start off getting to know our guests a little more. Tell us about your role in the company, how you got there and share one fun fact about you not related to work. 

Michelle: I would be delighted. But first you guys, hey, thanks a lot for having me on the podcast, a little bit about Ulta Beauty. We are the largest beauty retailer in the US. We sell both mass and prestige cosmetics, fragrances, skincare and haircare products. In addition to offering salon services, we have over 25,000 products that are available in more than 12,050 stores as well as very robust digital channels. 

A little bit about myself. I've been with Ulta Beauty for a little over 10 years. When I started, I was in IT. I've been a technologist for a long time. And I oversaw all of our guest-facing systems. So guest-facing systems, our stores, marketing, ecommerce and mobility. And then four years ago, we formed a dedicated digital innovation team. And that was part of Ulta’s commitment to accelerate innovation, in order to further differentiate Ulta Beauty and elevate our guest experience. So the digital innovation team, we sit inside the digital econ business, reporting into our chief digital officer. And the mission of digital innovation is to merge digital and physical beauty journeys by leading thought while discovering and creating technology to enable great guest experiences. 

And then I think you said a fun fact: The immediate fun fact that comes to mind is I am originally from Minnesota. Born and raised in Minnesota, my whole family's there, and I frequent Minnesota often during the year. 

Dom: So what happens during the Bears-Vikings game?

Michelle: Well, I'll tell you what. I mean, I admit the fact hopefully — if there's any Minnesota listeners — they're not going to forgive me for this — but I do root for the Bears over the Vikings. I converted. 

Dom: Wow. Okay, that's a big leap. I mean, that's a huge leap because conference rivals, right? 

Michelle: Yes, that's very true. Very true. 

Dom: Wow. 

Michelle: Yeah. Sadly, I don't know — I should be rooting for the Vikings this year. I think they're doing pretty well. And the Bears are the Bears — not doing well.

Which Digital Channels Drove Ulta Beauty’s Success?

Dom: Well, they beat my Patriots. So you got one up there on me for sure. And Fields had a great game that day, let me tell you that much. But outside of our breakdown of the NFL scene, you mentioned those digital channels. I would love to know, you know, our audience is always wondering, you know, which digital channels to invest in? Why should we invest in these channels? So can you kind of give us the layout of Ulta Beauty's digital landscape? You know, what those channels are? And sort of where you have success? 

Michelle: Yeah, absolutely. For sure, you know, kind of the key digital channels would be Ulta.com. And then our mobile apps, we have both an iOS and Android mobile app. We've had them since 2012. They've definitely evolved. Dom, as you know, right, there's always been the debate about native apps, should you have them or not? What I would say is definitely mobile apps are great, the mobile app for us in the grand scheme of things like between web and mobile app, we have fantastic adoption in our mobile app, we have — I forget the total number of downloads — but it's well north of 5 million. And we really see that one of the benefits of the mobile apps is just how efficient and easy the experience can be because you can easily remain signed in so that all of your information is available. 

And it makes for a really seamless checkout. So I'm a big advocate of mobile apps, and then the digital channel itself for Ulta Beauty has just been on fire for the past few years, publicly, we certainly have talked about the performance of the digital channel at Ulta. But it's grown dramatically. And then during the pandemic, of course, I think that to some degree, right, COVID is still out there. But digital grew even more. So the web and mobile app channels for us are highly complementary to our physical stores. And they perform incredibly well. 

Dom: Yeah, that digital and physical game, you know, is so crucial right now. Right? During COVID. It was just a digital game. There was no physical — physical disappeared for the most part, right? You talked about that, that effort to combine digital and physical and you know, some industry people call it “phygital.” I don't know if you've heard of that term, Michelle. But industry pundits created that word, you hear about that word? 

Michelle: Uh, you know, I have not heard about that word. But of course, the word that we've all been talking about for a long time is “omnichannel.” So omnichannel and omnichannel is certainly very important at Ulta Beauty. And those guests that are omni are even more valuable. 

Related Article: How Omnichannel Marketing Feeds Into Stronger Customer Experiences

How Digital Innovation Transformed Shopping for Beauty

Jennifer: Michelle, Ulta, has said that DX is a big focus. Can you tell us about the partner experiments you've conducted and how these serve to propel that focus? 

Michelle: I'd be delighted. Shortly after forming the digital innovation team, the digital innovation team made Ulta Beauty's first-ever acquisitions. One of the acquisitions was in fact, our virtual try-on partner Glam Sreet. They had been our partner for virtual try-on since 2016 when we had a try-on virtually launched in our mobile apps. And then the other key partner that we were experimenting with was a small AI startup in Silicon Valley, QM Scientific. So we acquired both of those companies. And very quickly, what we were able to do with both QM Scientific, an AI startup, and then Glam Street was to create a personalization platform. So from an experience perspective, the idea was to really create unique one-to-one online and offline experiences that would help our guests navigate the beauty space. 

Dom: So you were kind of building that technology in-house, Michelle? 

Michelle: Well, originally, it was through Glam Street, third party, and then for sure, leveraging our data to create differentiated experiences. We've always done that. We've always kind of internally built some specific tools. But through digital innovation, and then these two acquisitions, we were really able to accelerate the in-house work we were doing related to personalization and mining the data. And kind of an interesting way to maybe think about that from a personalization perspective. And what we are doing now, all kinds of in-house, when you think of Glam Lab, which is the solution for virtually trying on makeup, there can be nothing more personal than visual characteristics or what people look like. And when you have that information, then it's even more relevant to make recommendations based upon what someone looks like. 

Dom: Yeah, and I would imagine that world, Michelle, like digital asset management is probably pretty important. Is that a big part of the game here managing all the pictures of these beautiful people with Ulta makeup on? Is that a challenge or that's something another department handles? How do you go about what they call DAM in the DX space?

Michelle: Well, certainly, Dom. That's a big topic within Ulta Beauty, kind of content management in general. And for sure, it is something that is handled by our content team and specifically on digital assets then by the digital merchandising team. What's kind of cool, though, about thinking about digital assets, specifically for something like virtual try-on is one thing that needs to be done with all the products is that they have to be calibrated. So in order to really have a good effect and to have them try it on virtually, you need to understand things like the coverage, a little bit about the texture and then color is super important. So we see all of the products for virtual trial on those digital assets, understanding and labeling the data for color, texture, coverage, as an example, or you think about an effect like glitter and the degree of glitter, right, all of that has to be managed uniquely against each of the individual skews so that you can have a really high-quality try-on experience virtually. 

Jennifer: So you mentioned omnichannel before, Michelle. Can you please define that for our audience? And how Ulta executes that? 

Michelle: Yeah, you know, omnichannel, the way that we see it is guests that are engaging with us both in our physical stores and then digital channels. We talked about the digital channels of the web, the mobile app and certainly social channels as well. You know, Instagram, Facebook, YouTube, TikTok, of course, right, that's important these days. 

So omnichannel is those guests that are engaging with us across all of the channels that we show up in. And what I would say is that the way that we look at guests, and how we get them to engage in the different channels is one, I think I mentioned earlier, our digital and physical are very complementary. So maybe unlike other retailers, where guests are choosing, you know, or they may go to one more than the other within beauty because the beauty enthusiast is so highly engaged, they will engage with us digitally, to browse to learn to maybe review how-to videos and some of their social channels. They may make a purchase because we have a variety of digitally native brands that maybe can only be purchased online. 

But then they'll also go into the physical store because they then want to touch, feel, engage and kind of the fun, accessible environment that exists within the physical store. So again, what we try and do right is we make sure that if they're looking at products online, we have very robust information, all of the product review data is available, they can really learn about the products, learn about trends. And then in the physical stores, we make sure that everyone's included and the invitation to come in for all beauty enthusiasts that it's open to everyone. 

Democratizing Your Data

Dom: Nice. No, I love it. This is so like, I can see what your team is doing. You know, it's so tangible. I love it. I love it when practitioners are talking about what they specifically do to make digital customer experience work. And one of the things that you need, Michelle, to make this work is good sense of data. You're talking about omnichannel, physical, social media, emails, and website, app, you mentioned all these innovations that Ulta Beauty is doing. At the core of it is data collection, you have to have a good sense of your data, where it's going, is there a centralized repository for it? How does the Ulta digital team view data management? You know, what kind of platform you know, do you use for it? And how do you just make sure that it's actionable? 

Michelle: Again, Dom, really great discussion because we believe that our data is probably some of the most differentiated data in retail. The reason that we say that is that we have 38 million active loyalty members. And then when you think about the breadth of our assortment, we're low to high across all beauty categories. And then publicly, we've always stated that our loyalty members make up close to 95% of our sales. 

Dom: Wow. 

Michelle: I mean, so we really know our guests. This data set is this breadth of guests that we understand and then across a wide breadth of product. And so when we mine the data, right, one of the things that we underpin all of our personalization with artificial intelligence. And for sure, over the years, it's been a journey to make sure that the data that we're mining is accessible. So about three, four years ago, we were on a mission to what we refer to as democratize the data, really pull it out of a lot of the silos and get it into the cloud, into an environment that's readily accessible so that we could intelligently use artificial intelligence to cluster the data in ways that it was going to be really relevant to our guests in the form of a recommendation. 

Related Article: Do Your Customers Trust You on AI, Data Collection and Customer Experience?

Using AI and AR to Get to the Next Level

Jennifer: So since Ulta was established, the company has revolutionized the way consumers shop for beauty by bringing products out from behind the cases to try on with testers. How do you feel that AI and AR is taking this to the next level? 

Michelle: Jennifer, really when you think about Ulta Beauty, Ulta Beauty transformed the beauty and retail industries by bringing all the categories — cosmetics, hair, skin — across all price points in one place and making them accessible, right? 

Because years ago, if you think about beauty, generally you went to the department stores, it was behind the counter. And furthermore, prestige brands, the higher-end brands, you know, wouldn't have even considered being next to, you know, what might have even been referred to as like a drugstore brand. And that really all changed through Ulta Beauty’s model in the store model and making beauty be accessible, make it be something that all beauty enthusiasts could come in, and have easy access to it. 

So basically, with a foundation of disruption within Ulta Beauty, our North Star is always to imagine the possibilities, we like to say, right, the possibilities are beautiful, and to keep reimagining them. And so think about once again, this accessibility that beauty enthusiasts have walking into an Ulta, and something like experimentation and testing, sampling is so important to our guests, they want to come in, they want to touch feel it, try it on, swatch it on their forearm, right, see what it might look like. 

So now kind of fast forward to AI and AR and God forbid we had a pandemic, we still have COVID out there, right? Many stores were closed, right? And then something like testing, I mean, samples and testers were when the stores reopened, that was something that wasn't yet available. So there wasn't access to testers because of everything that happened with the pandemic initially. And so through AI and AR, you have the emergence of virtual try-on, so that now guests can continue to experiment, can continue to learn what something looks like virtually wherever they are. So they don't need to be in the store, they were able to continue experiencing beauty products in the comfort of their home. 

And then of course, when stores reopened once again, the beauty enthusiast came back — kind of with a vengeance. And now what you have — you have technologies in AI understanding and processing a facial image, right to be able to apply the effect of makeup, you have capabilities that people can, they can experience beauty if they want to in their own home. And then they can also physically come in and experiment with that in person. 

Related Article: How Augmented Reality Will Impact Marketing in the Multiverse

The Importance of Providing Flexibility and Care

Dom: You know not to put you on the spot, Michelle, because you likely don't have all your data in front of you. But, if off the top of your head, if you can look at March 2020. Remember that month, we all remember that month. It was terrible month. That's when the pandemic just really kicked in.

Michelle: The shutdown. 

Dom: You know, people were suffering and all. It was troubling, businesswise that was a dramatic month. Now fast forward, the recording of this podcast is November 2022. So we're two-and-a-half years later at this point. So my question is this. What's been the biggest change in the digital game for Ulta? If you look at March 2020, man, we were not doing this. In November 2022, this is a big part of our game. Was this something that obvious that is so different from two-and-a-half years ago? 

Michelle: You know, I would say if anything, right, that what we've learned and not necessarily learned — but digital has become just even more important. If anything, the pandemic really accelerated things digitally. What do I mean? You know, we were talking earlier about omnichannel. And we like to say at Ulta Beauty, it's all things beauty all in their worlds because you really have to meet the guest where they want to be met. And so something like buy online, pick up in store, we have that capability. But then you have buy online, pick up curbside. And so all of the different formats of being able to browse, discover, and then make a purchase, it's become even more important, right? It's kind of table stakes now that you have to offer a physical store experience, at least in beauty, you need digital for sure. And then as far as accessibility or actually getting the product delivered to them, right, it needs to be, you know, as fast as possible. Next day, same day, and then wherever they want that ship to home, come into the store, have it available, pick it up at the curbside, right? All of these choices are just super important. So flexibility is more important than ever.

And then I think that the other thing for sure that is needed is, we do have to make sure that right from a safety perspective, safety is even more at the forefront now that we've had a pandemic. And we've had a lot of other interesting things occurring in the world right, not the least of which by the way, is some of the weather that we've been having. And so safety was really at the forefront for Ulta Beauty, and making sure that when guests came into our stores, that once again, the environment, if people want to mask up, they can if they don't want to right now, obviously, there's just even more choices. So I think safety is really important. 

And then kind of last, what I would say is having empathy, really understanding and understanding that, you know, people are going through a lot and having some empathy for not only our guests, but our team members, the people in the store, in the home office, in distribution centers. It's just — it's super important to care for people. 

Related Article: How Has Pandemic Thinking Affected VoC?

The Possibilities of the Metaverse

Jennifer: So looking ahead, one of the things that really interests me are the possibilities of the metaverse, and I wanted to ask you what forays Ulta has made into the metaverse and what have you learned? Also, I'm curious how you envision the space Ulta would occupy in a virtual world? 

Michelle: Yeah, everyone's talking about the metaverse, right. And again, for us, this is another place that people are, right? When we say all things beauty all in their worlds. The metaverse is one of those worlds, right? And it's a variety of things, a couple of the things that we have done this past year, and we're definitely experimenting and figuring out how to engage our guests in these different places. But a couple of the things that we did is we did launch an NFT earlier this year, and we did that kind of commemorating the year that Ulta Beauty was founded. 

So we had kind of an augmented reality experience and a collectible if you will that commemorated the year that we were founded. And then recently in the past couple of months, we've launched two experiences in Roblox and it's interesting, what I would say is that we're definitely learning a lot in the area of NFTs — it's cumbersome, you know if you want to actually mint the NFT, and guests then are required to have digital wallets and in the beauty space for beauty enthusiast. One of the things that we've learned is not a lot of people have digital wallets. And that's not just in beauty alone. 

But so this is very early on, people are just not there yet. With Roblox, I think what's really fascinating is Ulta Beauty, we're not global yet. But basically, there are millions of global players in a lot of these different worlds. So that means there are just huge audiences. And there's a ton that you can learn from them. 

Dom: Yeah, we agree with you on the early days of the metaverse, too, you know, I've done a lot of reporting on that. At the Forrester CX Conference in Nashville earlier this year, you know, they were just telling me that they think, I don't know why they put this exact date on it, but they think it's not going to be really actualized until like 2030. So you know, you're looking at almost 10 years from now, that's a long time in this world. But we'll see. We'll see at least it sounds like you're in an exploratory, we're there, we're testing. But those 95% of your loyal customers, they're not exactly diving headfirst into metaverse. Is that the message I'm getting from you, Michelle, Is that accurate? 

Michelle: You know, we really haven't necessarily, Dom, probably looked deeply into the connection between the worlds that we've dabbled in so far, and what that connection is physically. So we haven't really been able to have a concrete you know, assessment of how many of our beauty enthusiasts, how many of the Ulta Beauty collective, how many are there? We are for sure thinking about doing something to be able to connect those worlds with the physical store, whether that's some form of an offer so that we can really maybe tie it together.

And you know, as you say, I mean, if you look at Roblox obviously the demographic skews quite a bit younger than the people that are walking in and purchasing at Ulta Beauty. However, we think there's a really great opportunity to educate some of that demographic and the likelihood that their parents or people within their family, maybe Ulta Beauty guests is probably highly likely right? So we know there's an audience there. We think even kind of building brand awareness that it makes sense to do that and if nothing, for sure, we're there to learn, to learn about what interests them. How do they engage? Because in many of these gaming environments, right, that level of engagement is just — people are in these worlds playing games for a long time, you'd like to have them in your stores for an hour or two or online. So I think there's something for all of us to really learn from an engagement perspective. 

Related Article: Is It Really Time for Customer Experience Professionals to Explore the Metaverse?

The Benefits of Low-Code, No-Code

Dom: Yeah, we're gonna wrap it up pretty soon here. But Michelle, I wanted to ask, one of the phenomenons we're hearing in the CX marketing tech space, digital experience is the phenomenon of low-code and no-code. And that's the concept that practitioners that are marketers, not necessarily or customer experience, folks, not necessarily tech savvy, can use an implement in they don't have to worry about code. Where's Ulta in that game? Or is it a big part of the digital game using low-code and nd no-code? 

Michelle: That's a really great question. And what I would say is, is that having been a technologist for a long time, and looking at the evolution of kind of development tools, this is really a reality. This is the way that we see it is low-code, no-code, code tools, they're mature, they're real, they really do work. And digital innovation, my team uses these tools pretty heavily to rapidly experiment. And one of the ways that it's really powerful, is leveraging them to access data. Because oftentimes, with a lot of the tools, they serve as a very easy, fast, efficient way to access different data sources, and to kind of pull the data together. And then there are many libraries that in some instances, some of these tools will readily have available. 

So that kind of almost like a little bit of building blocks, like Legos, you can easily grab maybe something from a library. And if you're looking at data and want to do something like find the most used words and reviews, or something like that, you can access the data quickly from a variety of sources. And then you can use some capabilities that are kind of pre-assembled, some building blocks that are there to make sense of it. So for sure, we are big fans of low-code, no-code to rapidly develop some experiences that you can experiment with. 

Related Article: No-Code/Low-Code Solutions Could Be Answer to Better Customer Experience

Learn About Engagement From the Beauty Industry

Jennifer: Michelle, we're gonna wrap things up with one final talking point to summarize this discussion. What can CX practitioners and other industries learn from the beauty industry?

Michelle: What I would say is engagement. They can learn about engagement because the beauty enthusiast and people within the beauty community, they're highly engaged. And what I mean by that is, again, they love the assortment, they talk about it on social, they are into what's happening, what's new. So you have them highly engaged in social channels, the explosion of all of the influencers, within beauty kind of emerging, creating how-to videos, almost selling your product for you, right? Because they love the assortment and the environment within beauty so much. 

So I would say, Jennifer, for sure. Engagement, look at the level of engagement within the beauty community and how they engage very evenly, you know, both physically and digitally. 

Dom: Michelle, we can't thank you enough for being on this and sharing your tales inside the Ulta Beauty digital world. 

Jennifer: Yes, Michelle, it was so great having you. Thank you. 

Michelle: Hey, thanks a lot, you guys.

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