For many businesses whether they know it or not, the power law curve is at play. Also called the 80-20 rule, it means that a small percentage of customers will generate a large chunk of revenue and perhaps an even greater contribution to profitability. While many CEOs and CMOs may know this, their actions do not suggest this.
In the past year, I have written extensively about Velvet Rope Marketing:
- Velvet Rope Marketing
- Becoming Chief Profitability Officer
- The One Number to Predict Profits
- Rethinking Referral Marketing
- How Velvet Rope Marketing can transform Customer Loyalty
I have also done more than a hundred presentations to marketers. I found very few actually implementing the idea of differentiating experiences for their Best Customers. Many of them did not even have a good method of calculating forward-looking CLV (customer lifetime value) beyond just summing up past purchases and extrapolating.
This was a mystery to me. Here was an idea which would do wonders to their profitability. Why would it not get used? They could call it by VRM or whatever name – what mattered was the experience for their Best Customers. Some said they had loyalty programs – which is not good enough because anyone can join a loyalty program and earn points. What is needed is for the brand to proactively identify their Best Customers and then invite them to be on a VRM-like program. The CEO then needs to ensure that every department in the organisation works in tandem to create magical and memorable experiences at every touchpoint for these Best Customers.
All we have to is to think about our own lives as customers. Think which brands you believe you are a Best Customers of. What do they do differently for you? Do they recognise you on their site or app or in the store? Do they treat you differently? Do you get greater access, ease or exclusivity in your interactions? Do they make you feel so special that you want to monopolise your spend with them?
This is the transformation that marketing needs. And I realised that I needed to bring this idea to life by actually showing the impact on profits. Just showing some theoretical calculations was not working. I decided to create a VRM Calculator which with just a few inputs could show how a small increase in revenue from Best Customers can have a massive impact on profitability. Seeing is indeed believing.