TAPPING THE TWENTY
We know them. I mean, some of us are them – the brand devotee, or the sneakerhead, the die-hards. For retailers, these customers are not only your loyal admirers, they are quite literally the bread and butter of your bottom line.
More than a century ago, an Italian economist developed the 80/20 rule after identifying that 80% of the country’s wealth was held by 20% of the country’s citizens. This observation would eventually find truth in nearly all realms of life, but here’s the TL/DR nugget: 80% of a retailer’s gross sales come from their top 20% of customers.
In the deeply competitive e-commerce space, this one bit of data, alone, can exponentially increase revenue.
Applying laser focus to the needs and desires of your most ardent loyalists is the logical path to higher ticket averages and ever-increasing fealty to your brand.
Into The Fold
As human beings, we are constantly seeking connection. We want to belong, we long to be part of something, and brand loyalty is no different. Fostering a culture of both inclusivity and exclusivity means your customers begin to feel a sense of kinship, like they have some skin in the game.
That raw emotion can, ironically, be most effectively captured using data. Not only should you hone in on and cater to your top 20% customers, your brand should continue to zoom. Within that top 20% are additional tiers of boosters, and their revenue thrust is exponential. The importance of these buyers cannot be overstated: They are ride-or-die, they are committed, and they’ve proven their loyalty with increasing average order values.
Reward them.
Case Studies
Italian luxury fashion retailer, LuisaViaRoma (LVR), introduced a loyalty program in 2017. The tiered rewards cost the brand nearly $1M€ in the first two years, but netted a $16M€ increase in revenue. Other KPIs were impacted, as well. Eight months’ into the launch, LVR’s customer retention rate jumped 59%, and they saw a complete reversal in customer loss trends.
To see the tiered model in all its glory, consider the coveted statuses within Neiman Marcus’ InCircle program. Six levels of exclusivity, capped by “The Chairman’s Circle”, which sets the cost of membership at an annual spend of $600K+. While this pinnacle achievement offers everything from valet parking to alterations and monogramming, circles four and five include “InCircle Concierge”. Insider access to sold-out events (pre-COVID, of course), as well as curated travel experiences and itineraries allow for the full envelopment of the customer into the brand.
For those wanting to avoid the perception of freebies, jewelry legend, Swarovski, added a membership fee to their rewards program. This decision did not negatively affect enrollment, it further confirmed alignment with the luxury brand’s sense of exclusivity. Swarovski Crystal Society offers access to both exclusive products and events, free repairs, and even engagement in the brand’s charitable works.
Closing Thoughts
Without question, drilling into the data on your brand’s 20% can not only bring inevitable increases in revenue, but also provide deep insight into who your most precious assets are as a community, allowing you to appeal to them in innovative and engaging ways.
