VIP Customers: How To Identify and Leverage Them

No matter what niche your business falls into, you will certainly have VIP customers that are worth giving superior service to by treating them with a little extra care. These ‘Very Important People' are the ones who drive your company's bottom line in a steadily climbing curb and keep your doors open when business gets thin. The question is, however, are they truly who you think they are?

In this guide, we will explain how you can use data analysis to determine what gives some clients extraordinary value and how to use the information in the metrics you gather to not only identify them but also give you ideas on the extra special steps you can take to keep them coming back again and again. In short, this guide will help you to identify and leverage VIP customers to increase your profits and grow your business.

We will look at some tried and true rewards and incentive programs that you can easily implement to help increase customer satisfaction, loyalty and retention.

Also covered will be what information you should gather and how to best communicate with customers—both potential and current—to increase the possibility of them becoming a VIP in the future. You can never have too many VIP customers, so let's get started.

What is a VIP Customer?

What makes a customer a VIP can depend greatly on the type of business you are operating, your business model and the industry you operate in. However, they will generally fall into one of the four following categories.

1. Large ticket buyers who may not shop often but spend big bucks on highly profitable items when they do.

1. Promoters who love to spread the word about how wonderful they were treated both through Word-of-Mouth Advertising (WoM) and on social media.

1. Frequent shoppers who give you consistent sales over time and require little customer care.

1. High-profile clients whose endorsement on social media or in their social circles could be more valuable than paid advertising.

The key to what makes someone a VIP customer is how they affect your bottom line. They might fall into one or multiple of the above categories but if they are contributing to your ROI in a noticeably positive way, they deserve special VIP treatment.

One other group that might also be worth considering giving VIP treatment to is disgruntled customers. There is an old axiom, "A happy customer tells three people, an unhappy one tells eight." In the Internet age, you can multiply those numbers by thousands or more depending on your business.

These customers can have a serious effect on your growth potential. It might be worthwhile to reach out to dissatisfied customers, offer apologies for any real or perceived issues they might have and offer them a little something extra to make up for it.

How To Identify VIP Clients Using Data Analysis

Good analysis begins with good data. It can be difficult to identify VIP customers if you are not tracking the right data. Some of the metrics and attributes that almost universally should be tracked and compared would include:

Customer Lifetime Value (CLV)

One of the most important metrics you should be able to grab at a moment's notice is a customer's lifetime value. This is a measure of what a customer could potentially be worth over their lifetime at their current purchase rate. If your system allows, you should have alerts set on this attribute as clients can often slip under the radar.

Customer Support and Indirect Expenses

Some clients who appear to be VIP customers may not be. The indirect expenses associated with them will tell you this. A boutique shopper who comes in and buys five designer dresses may seem like a VIP candidate. But, if they tie up half the sales staff for several hours and end up returning two of the outfits while complaining to no end, they might not be as profitable as they first appeared.

Order Value

A customer who only appears every few months but buys in large volume on those visits, even if it is small items, may not stand out like the people who frequent you every day or buy big-ticket items. Their CLV though could be very high.

Profit Generated

This is the bottom line. How much profit has been garnered from a customer; daily, monthly, yearly and over their lifetime are vital statistics to keep an eye on. It is profits—not sales—that drive business.

Purchase Margins

Some shoppers, even those who buy high-priced name brand items, only buy when they find a great deal or a special offer. Tracking their profit margin will identify these potentially false VIPs.

Purchase Frequency

Most businesses survive on repeat business. Unfortunately, owners and managers overlook their favorite customers when developing VIP programs because they fail to realize the value of the person who buys one or two small items daily. Depending on profit margins, these customers could have a higher CLV than those who stand out with large purchases.

Referrals and Social Proof Generated

Despite all the changes that society has gone through, WoM Advertising is still king. It is just that now much of it takes place on the Internet. An AC Nielsen poll consisting of over 30,000 international consumers found that 66% of respondents trusted online testimonials, and a Bright Local study found that 88% of people valued geographically targeted reviews online. It pays to pay attention to who is singing your praises and reward them.

VIP Customer Retention Strategies and Best Practices

There are many ways that you can make your VIP customers feel special. Some of the most popular to offer include such perks as free shipping, discounts on purchases, cash-back programs, retention gifts, points systems for special rewards and preview sales just for them. You don't have to stop there though.

With proper data tracking, you can send them special gifts out of the blue as they reach tiers they don't even realize exist. You can greet them on special days like birthdays and anniversaries. You can even offer them access to special events and shows.

What will work best for your business is highly dependent on your niche and your clientele. A VIP customer at a bait and tackle shop will probably not appreciate the same gift that the client of a lingerie website would find enticing. The main point is that for your VIP customer program to be effective it has to be properly targeted through data mining and correlation, provide appropriate benefits to your customers, be easy enough to manage that it doesn't become cumbersome and most importantly makes your most valued customers feel like VIPs.