Check out how the Top 10 customer engagement trends for 2015 are shaping up in this new series. If you missed #2 last week, you can read it here!
Remember all the talk of the “one percenters?” It’s alive and well among loyalty programs.
We all know the ratios: somewhere between 10 and 20% of customers account for 60-80% of revenues, of profits, of instances of engagement. And when you start layering in influence factors such as social connectivity (or frankly, just being influential), the skew becomes even more extreme.
What the Pareto (yes, that’s what it’s called) analysis typically does not point out is that the top 1% of customers can account for 20% of revenues and profits on their own. When it comes to focus on the top of your customer base, forget deciles and start thinking about percentiles—and just a few of them.
Loyalty programs—the formal membership schemes of retailers, credit cards, airlines, and hotels—are a perfect place to see this focus in action. It’s not surprising that businesses that attract certain customers with very high spend profiles offer a top or super-elite tier. High-end retailers offer elite benefits to their top customers. Neiman Marcus’ InCircle concierge services help upper-tier members score the best seats for shows and sporting events, get last-minute reservations to hot restaurants, and offer high-end vacation planning. They will even run your errands. Tiers extend to those who spend north of $75,000 per year (though great benefits begin at more reasonable levels).
Airlines and hotels, of course, led the charge of elite tiering. The proliferation of tiers became a bit of an arms race with the U.S. legacy carriers and European heavyweights matching upgrade for upgrade (certificates, space available), economy plus access, free bags, and mileage/point accrual. As new precious metals were introduced into the mix, each carrier matched the structures and the qualification rules.
But it’s the services and benefits that remain unpublished that have become the most interesting for the top (less than) 1% of travelers. In fact, to a large extent, the airlines have chosen to keep both the qualification rules and benefits largely to themselves. Take United. For decades, the top published status had been “1K” (BTW, an odd designation that dates back to a time when United only had two character fields in its frequent flyer platform and had to abbreviate 100K miles flown). For years, hidden among a small number of flyers was a relatively secret designation of “Global Services.” Over time, the quest for GS status led United to open the curtain to a large extent—while still keeping the qualification criteria hidden/flexible and the benefits partially published, and partially kept under lock and key.
But the bottom line is that entities such as United recognize the disproportionate impact of their highest value customers (or the companies they lead) and spend a disproportionate level on delivering an experience that transcends even the highest published tiers. For example, it’s not uncommon for GS members to be personally called and rebooked whenever there is a flight delay. Upper cabin upgrades internationally are a call away when salable inventory (not designated upgrade inventory) is available within 72 hours. Connecting passengers are greeted at their gates and driven in a Mercedes across the tarmacs in Chicago, SF, and Houston. Bring a companion along in First Class on domestic flights? Never an issue for a GS member. The phone rings once and someone promptly answers. United has even built dedicated check-in rooms in key hub airports to further isolate their top travelers from everyone else. The gap between United’s top published tier and their top semi-published tier has never been wider.
There is an investment in and a return from these top customers. These types of exclusive services and rewards are far beyond the realm of regular loyalty programs and are trending high among top brands.