How To Identify Your VIP Customers and Keep Them Engaged

Customers are the most important part of your business. Everything you do, from marketing to product development, revolves around their specific needs and preferences. According to the Pareto principle, about 80% of sales come from 20% of your customer base. This 20% of your customer base can be considered VIP customers. It's also in your best interest to identify them and provide exceptional service to retain them and keep driving those sales.

In this guide, we will cover everything from who a VIP customer is to how you can identify them and the 8 best strategies to help you retain your VIP customers.

Who is a VIP customer?

A VIP customer is someone who holds a special status or significance for a business due to factors such as high spending, loyalty, etc. and is given special privileges and personalized services as a result.

The criteria for designating someone as a VIP customer can vary across industries and from business to business, but common factors include high spending, brand patronage, frequency of purchases, and active participation in loyalty programs.

Why are VIP customers so valuable?

According to McKinsey, only 1-10% of a company’s customer base are VIP customers, but they contribute 20-50% of total revenue. This asserts the unparalleled value that the VIP customers bring to the table. They are highly valuable for the business for many reasons:

1. Revenue generation: The main goal of any business is to generate revenue and VIP customers generate 10 to 25 times the revenue than an average customer. This means that they are responsible for a significant amount of revenue. This makes it very clear that VIP customers should be given the priority they deserve.

2. Loyalty and retention: VIP customers tend to be loyal by choosing to always buy from the same brand repeatedly. This helps in customer retention and reduces the cost of acquiring new customers.

3. Brand advocacy: They exhibit satisfaction by advocating your brand and sharing their positive experiences with their community, friends and family, attracting new customers and enhancing your brand reputation.

4. Strategic importance: While VIPs may represent a smaller percentage of a company's customer base, they strategically influence overall brand successVIP customers also provide valuable insights for improving products and services and even allow you to identify more potential VIP customers by identifying similar traits.

How to Identify your VIP customers?

Identifying VIP customers can be hard if you don’t know where to begin. Tailor your approach based on your business, and delve into the customer's purchase history for valuable insights. Analyzing metrics is the key to identifying VIPs. Here are a few metrics you can use to identify a VIP customer:

1. Use RFM analysis

You can also utilize the recency, frequency, and monetary (RFM) analysis model to help segment your new customers based on their purchase habits. This, in turn, helps you create relevant and personalized messaging by understanding user behavior.

Through this, you will segment customers based on three criteria, namely,

1. Recency- When was your customer’s last purchase of a product or service?

2. Frequency- How often did the customer purchase in a year or any other fixed period?

3. Monetary value- How much money has the customer spent on your brand so far?

The model is built on the transactions between the customer and the business, which creates a robust data-backed method based on numbers. With tools like MoEngage, each parameter is assigned a value that ranks customers based on these values.

Imagine this: you own an online ceramic store, then through RFM analysis, a customer who visited the website 1 day ago(recency), has made 10 purchases over the entire lifetime engagement (frequency), and whose last purchase is worth $1000 (monetary) get assigned values 5, 4 and 4 on the three parameters respectively. Then, their overall RFM score is the average of these values, which is 4.33.

The above process is entirely system-driven, taking the whole manual interference out of the way. Post this, customers with similar scores are categorized into different buckets:

1. Champions: These are the most recent visitors to the website/app. They are also the most frequent and highest-spending customers.

2. Loyal customers: These customers have visited recently, visited often and made high-value purchases.

3. Potential loyalists: These are recent customers who have spent a good amount of money purchasing on the website/app.

Customers falling into the champions bucket are the VIP customers, and the following two are those you must nurture along the way.

2. Utilize customer lifecycle stages

The stages of the customer lifecycle can be used to recognize the steps that the customer takes from acquisition to retention. Key stages in the lifecycle include: Acquisition > Engagement > Monetization > Retention.

Organize data around the customer journey using Google Analytics (GA4), like the customer lifecycle report. This lets you identify and understand the customer segments as each customer moves through the different funnel stages. From the funnel report in GA4, you can divide the customers into the following segments: VIPs, loyalists, and potential customers.

3. Analyze the customer behavior

While less precise than the previous methods, you can identify a VIP customer by examining their purchase history and selecting those who consistently buy higher-priced products similar to your existing VIP customers.

1. Full-price purchase: Some customers buy only during a sale or with a coupon. At the same time, high-value customers have a history of paying the full price for their purchases. You can zero in on these customers by overlooking those who have used discounts and coupons.

2. Products purchased: Check for products that generate higher profit margins or items existing VIP customers buy. Customers who buy more products are flagged as high-value buyers. By connecting high-margin product data with repeat customers, you can quantify the value of each customer.

4. Customer lifetime value

CLV represents the total net profit a company can expect to generate from a customer throughout their relationship.

CLV enables businesses to categorize customers based on their value. This segmentation helps identify VIPs contributing significantly to revenue, allowing tailored strategies for this high-value segment.

5. Indirect customer costs - support and returns

While customers who make frequent purchases or spend generously may initially appear high-value, evaluating their post-purchase behavior unveils a clearer perspective.

Customers who engage in frequent returns or demand extensive assistance and support cost your business more than those with minimal post-purchase needs. This directly influences their actual value to your company. Moreover, these customers pose the highest risk of experiencing frustration with your business, potentially leading to either customer churn or negative feedback on social platforms.

8 best strategies to retain your VIP customers

Identifying VIP customers is just the beginning, but retaining them forms the crux of ensuring the success of your brand. Let's take a look at how you can keep your VIP customers engaged to retain them better:

1. Build a personalized post-purchase flow

Ecommerce marketing strategies often include post-purchase emails. They are an extension of your marketing efforts, where you send emails after the customer receives the order.

Here are some examples of how you can design a post-purchase flow to engage your VIP customers:

1. Give specific tiered discounts that match and also grow with their customer lifetime value.

2. Offer personalized product recommendations that complement recent purchases, combining items that align with their choices and include popular favorites for a tailored and enticing experience.

3. Send limited-time free shipping offers.

4. Create an exciting unboxing experience with freebies and branded merchandise.

With an ESP like Mailmodo, you can set up a post-purchase flow to send a recommended number of 2-3 emails, which can just be a thank you for the present purchase clubbed with an educational video on how to style it up, how to make it work in different ways, or just recommended products that go well with them.

Pickapocket employs a discreet product promotion in its email featuring a blend of exclusive items in its store. This strategy entices VIP customers to revisit the website, encouraging them to explore additional products.

2. Target lapsed customers through win-back flows

There's a possibility that some of your VIP customers may have lapsed in their purchasing habits, gradually growing disengaged. It’s crucial to prioritize these valuable customers and implement targeted reactivation workflows. If you see a VIP customer leave your website because their size is out of stock, find it for them and email them:

You must also ensure that you craft messages for your lapsed customers by maintaining a sincere "we miss you" tone.

3. Ask for feedback

Another effective tactic is sending emails to fetch various types of feedback. Some of the things you can ask them for are:

• Their impressions of a recent purchase.

• Insights into their latest purchase experience.

• A testimonial to be shared on their website or social media

This is because, with over 93 percent of consumers checking reviews before making online purchases from unfamiliar companies, the effort to generate more reviews, particularly from devoted customers, is invaluable.

The objective extends beyond merely accumulating reviews. It helps you to comprehend VIPs' perspectives on your brand, products, and customer support and guide your efforts in improving them.

4. Display on-site messages

In order to effectively communicate, you need to do more than rely solely on emails. The average open rate of emails stands at 19.66 percent. Even though VIPs are more inclined to interact with your marketing messages than the average customer, it's not guaranteed that they've opened or read your thank-you emails.

Consider incorporating an onsite element for your VIP customers to address this. This way, they'll encounter a personalized message the next time they visit your site.

A strategic move at this point is to inform them about the VIP discount you’ve sent them in the email. Also, be sure to welcome them back to your store using their name warmly.

5. Implement retargeting ads for inactive VIP customers

Revitalize cold VIP customers through targeted ads on Facebook and Google. Utilize email addresses to reconnect, particularly after abandoned carts or browsing sessions.

If standard cart abandonment workflows yield no response from VIP customers, deploy a retargeting ad showcasing the abandoned product. Remind them of what initially captured their interest. If persistent retargeting with the abandoned product proves ineffective after a week or two, pivot to highlighting other favorites or new products.

6. Use VIP loyalty program

If they're a part of your brand's loyalty program, celebrate them by moving them to a new tier or persuade them to join an exclusive program that would help you focus on retaining and engaging with them properly.

By using all the known factors that go into building the loyalty program, such as personalized rewards, hosting exclusive virtual or onsite events just for VIP customers, offer them philanthropic events or other engagements beyond purchases.