5 Key Dimensions of VIP Luxury Marketing

Key Takeaways: The VIP client was traditionally defined as someone who enjoyed ‘privileged access.’ However, what has changed is the ability of luxury brands to turn every consumer into a VIP. Farfetch’s loyalty program, named Access, is also available in China and offers rewards across five tiers, ranging from Bronze to Private Client. This ladder provides an opportunity to use a VIP reward mechanism to differentiate higher-status luxury consumers from other social milieus. Technology has been key in developing personalization and relevancy through meaningful one-to-one relationships. Interestingly, a Boston Consulting Group (BCG) and Altagamma survey found that 76 percent of Chinese respondents would be more appreciative of personalized digital profiling and service offerings in the future. The democratization of luxury in China has pushed the red carpet toward the direction of the mainstream consumer. Very-important-person (VIP) status is no longer exclusive to the elite. And, in many cases, beauty brands are marketing VIP benefits that have become integral to their multi-tiered consumer loyalty programs. Rewards can and do build customer loyalty over time, so says an Ipsos China survey that found attractive membership benefits to be a top-three attraction of Sephora’s classification as a premium brand. The battle to win over luxury consumers by bequeathing VIP status has created an interesting outcome. The VIP client was traditionally defined as someone who enjoyed ‘privileged access.’ That is still the case as evidenced at Louis Vuitton or the Hermés Maison in Shanghai, which provide an invitation-only area devoted to the exceptionally most important customers or VVIPs (Very Very Important Persons). This boundary is often a physical (and certainly psychological) barrier that reinforces social distance: the very root of ‘social class.’ However, what has changed is the ability of luxury brands to turn every consumer into a VIP. Who does not want to feel special and enjoy the privileges of a VIP? That has created a dilemma for luxury brand executives who need to consider how democratic branded VIP offerings should become. Below, we outline five key dimensions that must be considered by luxury brands when designing a ‘VIP strategy’ that balances the trade-offs between accessibility and exclusivity. Refresh A VIP strategy is fundamental for revitalizing a luxury brand’s offerings. It provides added value by exceeding customer expectations of a brand's performance. And although there is a business logic behind focusing on your most valuable consumers, as they likely constitute a disproportionate share of profits, brand executives should also consider their most "engaged" consumers. A simple shift in metrics can help identify and target informal brand ambassadors or the "Very Important Influencers" that have become critical to word-of-mouth equity. Reward VIP status is associated with exclusivity that matches different customer tiers. Farfetch’s loyalty program, named Access, is also available in China and offers rewards across five tiers, ranging from Bronze to Private Client. This ladder provides an opportunity to use a VIP reward mechanism to differentiate higher-status luxury consumers from other social milieus. Private Clients can take advantage of a range of experiential rewards, including exclusive events like a visit to the Dior Shanghai exhibition. Retain Although a VIP rewards program can advance the loyalty life cycle, the emotional prestige of belonging to an exclusive brand community of fellow VIPs can also help lock in high-value customers. Membership as a patron of ‘Johnnie Walker House’ in Beijing, Shanghai, or Chengdu is via invitation only and provides a range of VIP services in a prestigious club-like environment. Relationship Brands can forge truly personalized relationships that place the customer at the center of brand communications. Brands like Farfetch have established exclusive communication channels for their VIP customers, and technology has been key in developing personalization and relevancy through meaningful one-to-one relationships. Interestingly, a Boston Consulting Group (BCG) and Altagamma survey found that 76 percent of Chinese respondents would be more appreciative of personalized digital profiling and service offerings in the future. Reinvent A brand's disseminated VIP customer data should not be underestimated, as they can use that intelligence to nudge VIPs into desired behaviors while further refining and developing superior product and service propositions. Real-time tracking is also a critical tool, acting as an ‘early warning system’ that identifies potential anti-brand sentiment. Big data is an opportunity for executives to uncover patterns of VIP behavior and reinvent what makes their clients not just important but very, very important (so they can treat them as such). A greater focus on developing VIP and VVIP strategies will mean a higher return on investment for luxury brands that are well informed about their clients. Maintaining exclusivity should remain a priority. There will always be a need for luxury brands to differentiate their VIP offerings across several echelons of social status. Many loyalty programs have been designed to give stepwise degrees of status. Likewise, executives need to be aware that today’s VIP perks, such as JD’s white-glove delivery service, will eventually become the norm. Although the red carpet will always be synonymous with VIP service, luxury brands need to acknowledge that every customer is a potential VIP. And amongst them, there is a proportion of VVIPs that want added status and to be exclusively recognized. That is the challenge for luxury brands. Availability and exclusivity might seem simultaneously impossible, yet there are certainly ways to have them both without losing the magical luxury brand appeal. Glyn Atwal is an associate professor at Burgundy School of Business (France). He is co-author of Luxury Brands in China and India (Palgrave Macmillan).

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5 Key Dimensions of VIP Luxury Marketing