Small and mighty: The untapped value of your top 1%
January 31, 2023 | Infographic
VIP customers require a unique engagement strategy.
VIPs make up only a small portion of customers
But represent a significant amount of revenue
20–50%
of total revenue
Top
1–10%
10–25×
the average customer
Give them an irresistible customer experience, and VIPs can become your greatest fans.
“
I continue to choose this retailer because they pay close attention —they personalize my shopping experience, and make me feel special with unique gifts.”
A specialty retailer saw
10-20%
revenue uplift with top 1% VIPs after launching an exclusive VIP program
“
What I like about this retailer is that they know me and remember what I like.”
Bad experiences—even just one—can cost you customers.
“
I went to my favorite store and asked for help; the staff told me to wait. I went to another store and spent thousands.”
Left unmanaged, on average
50%
of top 1% customers change their brand preference every year
“
I would much rather spend at a store that makes me feel like I am not any other client.”
A well-designed VIP loyalty strategy can significantly reduce churn.
5–10%
increase in retention of VIP customers
Five solutions that could win over VIPs and avoid common pitfalls.
Impress VIPs with unique benefits
Why
Exclusive and hard-to-attain benefits drive VIP customer interest and intrigue.
Expertise and credibility earn VIP trust.
Solutions to avoid pitfalls
Avoid thinking of VIP programs as linear extensions of loyalty program tiers
Create unique programs and benefits for VIPs—typical loyalty benefits, such as reward points are not as impactful with this group.
Wow with next-level personalization
Why
VIPs want to feel recognized and understood, with more one-on-one interactions and flexibility around certain policies.
Solutions to avoid pitfalls
Avoid an impersonal, one-fits-all VIP offering
Invest in truly meaningful benefits that let VIPs choose which they want and personalize them.
Balance the investment to optimize incrementality
Why
VIP benefits can require higher investments, but don’t always lead to incremental behaviors as audience is already highly engaged.
Solutions to avoid pitfalls
Avoid investing in benefits without considering the behaviors they will drive
Choose where to invest in higher-cost benefits that drive significant behavioral changes (eg, churn reduction, increase in spend).
Get creative with consumer research
Why
VIPs are an inherently smaller customer group that can be harder to engage.
VIPs are often less willing to participate in traditional customer research.
Solutions to avoid pitfalls
Don’t neglect to seek the voice of the VIP customer
Use creative means to incentivize VIPs to share their views (eg, discrete research at an exclusive event).
Deliver consistently to achieve VIP retention
Why
VIPs have zero tolerance for an unsatisfactory core experience.
Solutions to avoid pitfalls
Don’t design a VIP offering that is inconsistent with core brand
Create a VIP program that is consistent with your overall brand and your desired VIP positioning.
Resist jumping into execution without planning for ongoing engagement
Create a clear plan to keep VIPs consistently engaged (such as memorable marquee moments paired with smaller, more frequent gestures to build genuine, authentic relationships).
Design a VIP program that supports your key business objectives.
How are you doing with your top 1% customers?
What share of wallet are you capturing from your top 1% customers?
What is your current churn rate with your top 1% customers? Why are you losing them?
Are you winning new high-value customers or losing them to competitors?
ABOUT THE AUTHORS
This article is a collaborative effort by Julien Boudet, Lidiya Chapple, Oren Eizenman, Vanessa Karras, and Daniel Sun, representing views from McKinsey's Growth, Marketing & Sales practice. Julien Boudet is a senior partner in McKinsey’s Southern California office, where Daniel Sun is a consultant; Lidiya Chapple is an associate partner in the Atlanta office; Oren Eizenman is a partner in the Toronto office; and Vanessa Karras is a consultant in the Montreal office. The authors wish to thank Brian Gregg, Brian Lepley, and Jamie Wilkie for their contributions to this infographic.