Airlines have different classes (economy, business, first) with very different experiences. They also have had frequent flier programmes for a long time. They combine these two to create magical experiences for frequent flyers travelling in business or first class. I still remember the time (pre-2001) when a Cathay Pacific steward walked up to my wife and me and said, “Ma’m, Sir, would you like to spend some time in the cockpit as we land in Hong Kong? The pilot and co-pilot would be delighted to have you join them.” Which of course we did! I later asked why we had been chosen. The reply – because we were frequent travellers. Sitting in the cockpit behind the pilots and watching the plane touchdown at Hong Kong airport was an experience of a lifetime – something that created even more brand loyalty towards Cathay Pacific.
The best hotels do the same. While everyone gets the smile and quality service, the best is reserved for the frequent travellers. Loyalty brings forth differentiated experience (the room facing the sea, the softer pillow) which in turn begets more loyalty – and perhaps, word of mouth.
(Ironically, it will probably be some time before most of us are able to experience airlines and hotels again.)
We all have memories and stories that we can share of these “Welcome back” moments – where our brand loyalty gets rewarded not just in a higher tier but genuinely differentiated experiences – what I have termed Velvet Rope Marketing. Just like the velvet rope with balustrades at the side create for experiences which are very different at places like airline check-in counters or Disneyland’s special entrances for rides for its premium customers, some brands are extraordinarily good at rolling out the red carpet for their Best Customers.
And yet, most don’t. They have the data, and yet they treat everyone the same. Not just same, it is like everyone is visiting their site or store for the first time and will never come back. Brands are thus missing on the most obvious opportunity to grow revenue and profits – in fact, create a flywheel that can lead to accelerated growth. Because Best Customers (top 10-20%) are many times more valuable than the Rest Customers (long tail). The lifetime value of the Best Customers, their lesser propensity to switch, their ability to get more customers like them – all can become high value generators for brands. And yet, few brands do this in practice. This is the big mystery in the modern marketplace.