This article is more than 8 month old.

How Velvet Rope Marketing concept can effectively enable brand to double profits


Velvet Rope Marketing helps enterprises of diverse sizes effectively double their profits with the twin engines of increasing revenue from their best customers and decreasing acquisition costs.

How Velvet Rope Marketing concept can effectively enable brand to double profits
The Pareto Principle (80:20) reveals that 80 percent of an organization’s revenue comes from 20 percent of its existing customer base. Further emphasizing the importance of existing consumers, KPMG International’s ‘The Truth about Customer Loyalty’ report (2019) highlights that over 55% of consumers in India will buy their favourite brand even if it is cheaper and more convenient to buy from a rival company. On these principles, the Velvet Rope Marketing (VRM) strategy believes in creating exclusively unique experiences for these 20 percent of existing consumers who are your biggest evangelists by rewarding them for their loyalty.
Referring back to the Pareto Principle stated earlier, if we focus on profitability instead of revenues, the 80:20 rule reveals to be a 200:20 rule, where 20 percent of the customers provide almost 200 percent of the profit, as has been explained in the book “Building Digital Strategy” by Sunil Gupta.
VRM helps enterprises of diverse sizes effectively double their profits with the twin engines of increasing revenue from their best customers and decreasing acquisition costs.
VRM is much more than a loyalty programme. In a loyalty programme, anyone can sign-up and collect points. In a VRM programme, it is the brand that decides which customers are eligible for the differentiated experience. While many companies have a loyalty programme, very few do VRM. As the best customers can be many times more valuable than the median customers, by missing out on deepening relationships with their best customers, marketers miss out on opportunities to increase their profits. Taking cognizance of this, we will now touch upon how marketers can reap maximum benefits from VMC by getting it right.
Offer a sense of achievement & privilege with unique experiences
On July 22, 2021, audio-based social media platform Clubhouse announced the ending of its over-a-year-long, invite-only clause. However, the immense popularity its application gained in the last year is evidence of the impact that concepts like ‘exclusivity’ or ‘privilege’ have on consumers. Wikipedia notes that in less than a year of its launch, Clubhouse witnessed 600,000 registered users and there were several others aspiring to be part of the ‘club’.
Maslow's Hierarchy of Needs highlights that following the basic needs, self-esteem, cognitive, aesthetic and self-actualization are of key significance for humans. Since we are born, we love to feel special. Labels like premium or gold membership & elite tiers elicit a sense of pride and the feeling of accomplishment. If brands are looking to demonstrate gratitude to their loyal consumers, they will need to create a separate stage to gratify them. Brands will also need to go beyond expectation to surprise these consumers with ‘wow’ experiences during different stages of the consumer’s journey.
Enable your best customers to do more with ease, access and exclusivity.
Take a scenario where you are waiting for your flight at the airport which has been delayed by a few hours. While you are finding yourself frustrated about waiting for a long duration, you get approached by the staff informing you that there is a special reservation for you at the premium airport lounge so that you can wait comfortably. All of this, just because you have been a loyal flyer of that particular airline. As a consumer, this will be an experience which you will never forget. Most importantly, the airline has earned itself a cheerleader-for-life.
Easing the customer’s journey to purchase will go a long way in creating sustained revenues for any brand. As against big gestures like the one stated above, simple actions like exclusive discounts, early access to information, special privileges and access to limited edition products are some of the ways, when backed by the right anticipation of the needs, can empower brands to have a lasting impact on the consumer.
Identify & leverage the power of AI-enabled VRM
One major challenge that marketers often face is however defining who these high-spending consumers are and what are their motivations. At the end of the day, personalization when not done right can have the opposite effect. As a solution to this, today, Artificial Intelligence offers marketers the power to accurately determine the 20% of best consumers with a metric called Customer Lifetime Value (CLV). Armed by this information, marketers will then need to integrate the consumer data secured by the AI-tool. This will enable them to segment and therefore create relevant journeys or draw a ‘velvet rope’ for their best consumers. When built with adtech and martech, the VRM model leads to determine the history of a consumer’s loyalty, anticipate future loyalty, calculate the number & value of transactions undertaken and also other non-financial activities that the consumer may have engaged in which benefited your brand like positive reviews online or references.
Concluding, in the days to come marketers would need to move the needle from ‘all consumers’ to only 20% of their best consumers effectively, backed by the advantages of Artificial Intelligence in Velvet Rope Marketing, to develop a sustainable infinity pool of profitability. This will not only benefit them in the present but will also pave the way for a long-term profitable growing future.
- Authored by Rajesh Jain, Founder & MD at Netcore Cloud. Views expressed are personal
next story

Market Movers