Identifying and Retaining VIP Customers with Loyalty Programs
Every brand has a customer segment that is more loyal and valuable as compared to the average customer. These customers are considered VIPs and often generate a major share of a brand’s revenue. Failing to identify VIP customers at the right time can turn an opportunity into a loss for brands.
Are they the highest-spending customers? Or the customers who purchase most frequently? These are some questions marketers face while trying to identify VIP customers. It can be challenging to differentiate VIPs from a regular loyal customer base. This is where loyalty programs come in.
By analyzing loyalty program data, such as engagement rates and spending habits, brands can recognize VIP customers. In addition, brands can use loyalty programs to retain these customers.
Identifying VIP Customers with Loyalty Programs
Customer loyalty program can help brands gather valuable data on their customers' purchasing habits and behaviors. Here are some metrics brands can analyze to identify VIP customers:
High Spend Analysis:
Brands can analyze the spending patterns of their customers and identify those who consistently spend a high amount on their products or services. 57% of customers spend more with businesses they are loyal to. These customers often shop with the brand despite price hikes, inflation, and other market changes.
For example, The Body Shop’s ‘Love Your Body Club’ groups high spenders and frequent shoppers under the VIP umbrella.
Engagement Metrics:
Brands can track engagement metrics of a loyalty program, such as the number of visits, points earned, and rewards redeemed, to identify highly engaged customers with the brand. Customers who are highly engaged with a brand are likely to purchase more frequently and recommend the brand to others. Customers who are highly engaged with a brand are 3X more likely to recommend that brand to others.
For example, DaVinci’s ‘The Explorer Club’ segments VIP customers into the highest tier based on their engagement with the brand.
Feedback and Surveys:
Tracking customers' opinions and preferences using feedback mechanisms and surveys allows brands to identify customers who consistently provide positive feedback, generate positive word-of-mouth marketing for the brand, and should be considered VIPs. 60% of shoppers become long-term customers of brands they are satisfied with.
For example, Adidas’ Creator Club considers customers who advocate for the brand by leaving reviews and feedback as VIPs rather than those who purchase the most.
Demographic Data:
Collecting demographic data through loyalty programs can help brands identify specific groups more likely to be VIPs based on factors such as age, location, and income. Brands can use this data to segment customers into different profiles. These profiles make it easier for brands to send targeted offers to VIP customers.
For example, Audi segments its VIP customers based on income and has created the VIP program specifically for celebrities, professional athletes, and high-level executives.
Metrics to determine the VIP customers are specific for every brand. Audi segmented its VIP customers on income levels, but a Cosmetic brand like Sephora uses “purchase frequency” and “average order value” to segment VIP customers. Once you have segmented such customers, the next step is to deliver them value to ensure maximum retention.
Retaining VIP Customers with Loyalty Programs
Offer Exclusive Discounts and Rewards:
Offering the same rewards to each loyalty program member can discourage VIPs from being loyal. Instead, brands should provide special discounts and rewards to their loyal customers. This shows VIP customers that brands recognize their efforts and reward them. Furthermore, exclusive rewards motivate customers to engage and spend more frequently with the brand. For example, Sephora's Beauty Insider program offers exclusive discounts and rewards based on customers' spending habits.
Personalized Experiences:
Brands can analyze customer data to offer personalized experiences to their VIPs through loyalty programs. For example, Starbucks creates personalized experiences for its ‘Starbucks Rewards’ members. Based on purchase history, members receive rewards, such as free drinks and discounts on favorite menu items. This incentivizes customers to continue making purchases and engaging with the brand. Brands can also use personalized promotions to win-back VIP customers that have been inactive for some time.
Publicly Recognize VIP Customers:
Brands can publicly recognize their customers, such as by featuring them on social media or giving them awards, as a way to reward them for their loyalty. For example, Dunkin' Donuts regularly recognizes customers for their loyalty and rewards them with special discounts. In addition, 55% of customers are more likely to recommend a brand to others if they feel valued. Acknowledging customers who have made significant purchases or have been loyal customers for a long time can show you value their business and create a deeper connection. Brands can do this by offering VIP customers surprise gifts, free upgrades, and special invitations to exclusive events.
Utilize Gamification/ Offer More Engagement Opportunities:
Though VIP customers are high spenders, their interactions with brands are often rare. A loyalty program can help brands increase the engagement of these customers by employing gamification tactics. Brands can use gamification to encourage customers to keep engaging with their loyalty programs. Incorporating gamification elements such as tiers and challenges in the loyalty program can boost engagement by 47%.
Nordstrom's ‘The Nordy Club’ rewards program offers a tiered rewards system, with increasing benefits as customers reach higher levels of engagement with the brand. This incentivizes customers to continue making purchases and engaging with the brand while also rewarding their loyalty.
Dedicated Customer Service:
Another way to show VIP customers that they are valued is by providing dedicated customer service. This can include providing a dedicated customer service representative or a VIP hotline available to VIP loyalty program members. With dedicated customer service, brands can ensure that their VIPs have a positive experience with the brand, encouraging them to remain loyal.
For example, Whole Foods Market's ‘Prime Rewards’ program offers a dedicated hotline for VIP members, providing them access to a customer service representative.
Conclusion
VIP customers are every business's most valuable clients. They generate a majority of the band’s profit and drive new leads. Therefore, losing VIP customers can be a huge setback for brands. That is important to identify and deploy strategies to retain VIP customers.
Brands can use a combination of data analysis, customer feedback, and engagement metrics to identify their VIP customers through their loyalty programs. Then, offering exclusive benefits and personalized service can help retain these customers and strengthen their loyalty to the brand.