Customer Data & Analytics Blog

How to Turn Your Customers Into VIPs

Ed Wolf | 3 minute read

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Customer facing business know that VIPs are crucial to success.  But, instead of waiting for VIPs to emerge, what if you could proactively identify potential VIPs and nurture them, even while they are still new customers?  

Studies show that, on average, the top 5% of customers are responsible for 60-65% of revenues and, in some industries, it can be even more. Beyond being a predictable source of  revenue, VIPs are invaluable to business because of their brand advocacy, as well. 

It goes without saying that savvy marketers need a well-defined strategy in place to keep those top customers loyal and engaged.  But, imagine if you could target and nurture VIPs as early as on as their first purchase. 

This approach has clear benefits:

  1. The time from new customer to VIP status can be shortened, providing even more revenue from those customers during that interval
  2. You can convert a higher percentage of new customers into VIPs. Through the special treatment of these “Potential VIPs,” you stand a greater likelihood of converting a higher percentage of them to VIPs.
  3. By identifying a sub-segment of “potential VIPs” and marketing to them as such, you can quickly discover and refine the VIP-criteria, making future VIP identification efforts more accurate.

Identifying VIPs is fairly simple.   Every business has their own method for defining their top customer segment, but typically it is decided by pre-defined rules around how much a person has spent, how long they’ve been a customer, how frequently they shop, whether they’re a loyalty member of a certain status, or some combination of those factors. 

That said, actually scoping out these potential VIPs before they have reached that lofty status requires marketers to use customer data to analyze early behavior, as well as other attributes, to truly understand which characteristics will successfully predict VIPs. 

As an example, one way of doing this would be to select all the customers who are currently categorized as VIPs and look at their early activity, from first browsing session—online or in store purchase—all the way to VIP status.   The key is to understand exactly which behavioral patterns are hinting toward a potential VIP. 

For instance, if a fashion retailer does this analysis and sees that of all the customers who spend at least $150 on their first order, and then make their second purchase from a different product category within two weeks, 60% go on to reach VIP level, that is a strong indication that the retailer should work to lead initial buyers down that path.   Perhaps a free shipping offer for those folks that have made the initial $150 or more purchase to get them to buy from that second category. 

Once the retailer has run this promotion, a certain percentage of customers will take them up on the offer and are on their way to VIP-hood.  For those that don’t, it doesn’t mean they will never be VIPs, just that this one promotion wasn’t right for them, so the savvy marketer will quickly try another offer.   The important concept is one of ever-increasing personalization.   By constantly using data to test various campaigns on more granular customer segments, businesses are coming closer to achieving true 1:1 marketing. 

If, in the above case, you are starting with 1,000 customers in the campaign, and if 600 bite on the offer then, for round two, you would try something different with the other 400.  In this round, say 200 accept that offer, try a third thing for the remaining 200, and so on and so on until you really understand what each “microsegment” customers will respond to. 

Once this has been done, the marketer now knows instantly what campaigns should be run immediately for each sub-segment of potential VIPs to get them down that path as soon as possible.   It also becomes clear that a certain portion of customers DON’T need any sort of promo or discount to become loyal and engaged VIPs, so you will be able to save money by not having to unnecessarily cannibalize. 

Of course, to do all of this data collection, cleansing, analysis, testing, and refining, manual data prep and Excel usage will only go so far.   To scale this in a meaningful way without battalions of expensive data scientists requires some type of AI or machine learning capability.   The ability to sort and analyze all this data in a timely enough fashion to make a difference can only be done if the marketer is using advanced technology such as an AI-powered data and analytics engine.   Today’s cutting-edge customer centric businesses are doing exactly that. 

To learn more about how Zylotech can help you convert more VIPs faster, visit us at www.zylotech.com.

Topics: Customer Intelligence