BrainTrust Query: Identifying and Leveraging VIPs

Discussion
Oct 12, 2011
Doug Fleener

Through a special arrangement, presented here for discussion is a summary of a current article from Retail Contrarian, the blog of the Dynamic Experiences Group.

Of course all customers are important to the success of a retail business, but the top customers are even more important. Let’s call them VIPs. There are three types of retail VIP customers.

One set of VIPs are customers who buy the most over a given time period. I like to measure spending over an 18-24 month period. This makes it easier to spot customers who are falling down or coming up the list. The number of VIP buyers a retailer tracks depends on how big the business is. Most retailers track the top 50 to 100 per store.

I like to break the VIP buyers into two groups. The top 10-20 customers are my Top VIPs; the rest of the top 50-100 customers are my Current VIPs.

Another group of VIPs aren’t actually big spenders but are still vital to a store’s success. These are either loyal advocates who bring in a large number of new customers, or someone in the community we benefit from being associated with. Examples include: someone famous, a political mover and shaker, and well-known businesspeople. Call this group the Community VIPs.

Most retailers have identified their Current VIPs but haven’t necessarily segmented the Top VIPs or officially identified their Community VIPs. It’s important to not simply identify the three different groups of VIPs, but to also to leverage each group.

Does the retailer keep track of when a Current VIP last visited the store? Do they call or send a note or gift to Top VIPs to invite them in to see the newest products? Is the store making sure their Community VIPs are getting special invitations for key events?

Loyalty cuts both ways. The customer who spends a $2,000 a year deserves more attention and an even better experience than the one who spends $50 a year. As always, the goal is to WOW every customer, but elevate the WOW and personal service to an even higher level for the VIPs. This also enables a store to create incremental visits and sales from their VIPs.

Discussion Questions: To what degree should a store’s best customers and word-of-mouth generators be catered to? How should retailers be assessing and targeting their VIPs? Which VIP group identified in the article — Top VIPs, Current VIPs or Community VIPs — should be receiving significantly more attention?

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17 Comments on "BrainTrust Query: Identifying and Leveraging VIPs"


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Dick Seesel
Guest
9 years 6 months ago

The numbers of “top VIPs” versus “current VIPs” will obviously depend on the size of the business. It’s well worth catering to the top tier of customers, but it may be an even more profitable CRM strategy to figure out how to squeeze even more revenue out of the second tier. What has the retailer learned about the behavior of the top tier (how often they shop, how recently and what goes in their “market basket”)? And how can he or she apply this learning to incentivize the second tier? It’s a big challenge and an even bigger opportunity.

Phil Rubin
Guest
9 years 6 months ago

If a company is serious about loyalty and retaining customers, there’s not a better place to start than VIPs. That includes Top VIPs, Current VIPs and yes, Community VIPs. While all groups should receive attention, and are all important for different reasons, you have to remember that the ultimate scorecard is the P&L. The “P” comes from preserving and growing revenue. This simply cannot be done, or at the least it’s significantly more difficult, without retaining the top spenders.

Gene Hoffman
Guest
Gene Hoffman
9 years 6 months ago

Dig most deeply for retail gold where the gold is … and also where it will be tomorrow.

The store’s best customers — Top VIPS, Current VIPs and Community VIPS — are all vital assets that must be regularly recognized. And while today’s biggest and most consistent spenders should be rewarded for being today’s top assets, remember they won’t be there forever.

Tomorrow is really today. Thus retailers should always keep their eyes on tomorrow’s big revenue sources and appropriately embrace them for they will grow in strength.

Marge Laney
Guest
9 years 6 months ago

I think the best customers should be rewarded for sure, but where and how are the issues. Rewards and special offers through the mail or email are a great thank you and incentive to purchase again.

But, I don’t think shoppers should be singled out when they’re in the store. Tasking an associate to treat one customer better than another is a lose, lose. If I am that customer I feel churned, if I’m not that customer I feel ignored.

The in-store customer experience should be comprehensive and consistent for every customer no matter what their spend. Because as Doug points out, today’s big spenders may not be tomorrow’s and vice versa.

Ed Rosenbaum
Guest
9 years 6 months ago

There is an expression in the sales world that the top 20% of your customers account for 80% of your business. That does not hold true for the typical retail chain store business. It is probably the reverse. Concentrate on getting the “word” out to all, but especially those who create more customers for the business. The retail world wants the doors to open often to a flood of potential customers.

Matthew Keylock
Guest
Matthew Keylock
9 years 6 months ago
The general approach of rewarding your best customers is the right one. In different sectors this will have slightly different dynamics, so is unlikely to just be handful of customers except for very small or niche businesses. To get this approach right you must look at the business through the eyes of the customer, not look at the customer through the eyes of the business. By focusing on spend or even profitability you may not identify the customers that are really engaged and loyal. It is important to let the data drive this and not to impose artificial frameworks on the data. The customer lens this provides must then be applied across the whole business for maximum value. Having one approach in marketing and a different one across merchandizing/operations, etc., will not reward the behaviors you seek. Social media provides an opportunity to augment your view of behavioral loyals with more emotional loyalty and apply concepts of advocacy and influence to your strategy. This is not simple to do, and having a great data and… Read more »
Bob Phibbs
Guest
9 years 6 months ago

This of course makes perfect sense, Doug, but the devil is in the details. I imagine a manager reading this, then planning to fawn over their best customers upon arrival — at the expense of average customers. Maybe this works for a snooty brand like Bergdorfs, but everyone deserves the Wow experience. Plus, how do you out-Wow a Wow?

Please don’t say with incentives like coupons or free gift wrap….

Mike Osorio
Guest
Mike Osorio
9 years 6 months ago
Knowing and catering to your best clients is critical to the success of upper moderate to high end retailers. A comprehensive strategy to do so must be in place to succeed in this space. There are two sides to this effort. First, every customer who visits the store should be provided with an exceptional shopping experience. This must be accomplished by intentionally selected sales professionals well trained in the art of individualized service delivery, and led by equally intentionally selected leaders well trained in the art of individualized sales associate development. Second, the retailer must have a system to track and communicate with the three levels of VIPs discussed in the article. Yes, these VIPs should absolutely be provided access to special products, exclusive events, and more. They must perceive that they are appreciated on an individualized, personal basis for their spending and loyalty. Sound complicated, and expensive to create, administer and maintain? It is! That is why so few achieve it. But if you are serious about being this sector of the retail trade,… Read more »
Fabien Tiburce
Guest
Fabien Tiburce
9 years 6 months ago

The most important VIP is not the one that spends the most (or anything for that matter) but the one whose lifestyle is “aspirational” in the eyes of other customers. Lululemon gave away its products to yoga instructors; sales followed as yoga enthusiasts went and bought what the instructor was wearing. Rewarding your customers is one thing, rewarding people who can act like walking billboards and influence others with their purchase is another. You can and should do both.

Julia Staffen
Guest
Julia Staffen
9 years 6 months ago

Catering to all types of VIP customers is crucial for retailers. Top VIPs are fiercely loyal and are a key factor in determining what the ultimate customer for that brand desires. Current VIPs are equally as important. Good marketing will get these customers into the store but it is a consistent customer experience that keeps them coming back — retailers need to understand what makes these customers tick and deliver an exceptional customer experience each and every time. Community VIPs are your influencers and advocates. These people will publicly talk about their experiences with your brand and, if needed, will go to bat for you online. It is important that a retailer implements social media monitoring practices and advocacy programs to encourage these VIPs to continue the conversation and reward them for their contribution.

Ralph Jacobson
Guest
9 years 6 months ago

This is such an important tool for retailers to leverage. However, typically, only a few specialty and high-end department stores take advantage of this. For decades I can think of stores that did this effectively with literally no real technology. They used their “little black book” to keep in touch with good customers. Today, I know of several great technologies that have a huge, quick ROI to leverage good customers, however, few retailers have taken advantage of what’s in the marketplace now.

Craig Sundstrom
Guest
9 years 6 months ago

At the risk of stating the obvious, I would think the applicability of these ideas is heavily dependent upon what kind of business you operate, and of course how large it is as well; certainly the impetus for fawning over at the individual level makes more sense in an upscale boutique or restaurant than at a convenience store or a $50M/yr big-box store.

Lee Peterson
Guest
9 years 6 months ago

The model for this technique has already been proven by the casinos in Las Vegas. They completely turned their businesses around when they dropped the idea of ‘family friendly’ and began to focus on top customers — in that case, “high rollers” (a term that works for retail as well). Really, it’s a no-brainer with significant payback. I believe one of the casino CEOs has written a book about that experience (anyone know of it?).

Mark Heckman
Guest
9 years 6 months ago
Understanding the enormous value VIPs have to the enterprise is under appreciated in my view. While it is intuitive that a chain or store has a group of shoppers that visit more frequently or spend more dollars, despite the ramblings of many experts on the topic, this group usually is unappreciated and under recognized as the VIPs that they are. Anyone who has been around customer data as much as I have understands this group’s contribution to the store’s sales and profiles are comparatively overwhelming to the average customer, but more than that, most VIPs are vested in the retailer’s brand and are the most valuable ambassadors you can have. Ironically, some retailers have this knowledge but believe that these loyal shoppers have already been won over so they focus their dollars and attention on attracting new shoppers and mass promotions while ignoring their best. While it is difficult to be overt in VIP recognition in the store with special benefits or privileges (like special parking, free samples, etc)…there are many ways to connect to… Read more »
Adrian Weidmann
Guest
9 years 6 months ago

Retailers and brands should design cross-channel communication strategies that communicate relevantly and intelligently to all their customers in order to move them to become VIPs-for-life. Each customer should be a VIP, not become a VIP because they historically spent money with you. They should be a VIP the second they touch your brand — regardless of the channel. At that moment brands and retailers need to begin to communicate with that individual in a relevant and personalized manner.

David Slavick
Guest
David Slavick
9 years 6 months ago
Mark Heckman’s prescriptive advice is right on; great examples. The Store Manager and Associate are counting on the Marketing/CRM team and technology to make it happen on the back-end. Comments shared that it is unwise to deliver special service to a VIP and then make the next person in line feel “less special” is right on. However, I will point out that Neiman-Marcus and Nordstrom have had excellent programs delivering personal shoppers/clientelling that I believe is a best in class in-store differentiator, for those chains that can handle the payroll — but the payback is outstanding. Importantly, when designing a program — even if you don’t truly know who the top 20 out of 100 are or even the top 10% delivering 60% of your profit (note I typed profit, not sales — beware of clearance/ bottom feeders disguised as “best customers”) — you better plan for a tiered structure to create aspiration and cause those who to date have been splitters to now open their wallets and become true high spend/high profit VIPs. Community,… Read more »
Doug Fleener
Guest
9 years 6 months ago

Thanks everyone for adding your insight and experience to the conversation. There were some great additional points made.

I would just reiterate that every customer in the store should be treated as a VIP and feel special…because they are. That’s how a retailer creates even more top spenders.

My point on “more attention and an even better experience” was meant more for pre and post visit than in store. Things like offering follow-up calls from the mgr/owner, private shopping, exclusive events, etc. To Bob’s point, I don’t think any of us would advocate dropping a customer to run to help a VIP.

I did write a follow-up post on some of the things we can do to elevate a VIP’s experience. It can be found here.

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