Understanding Why Velvet Rope Marketing Matters the Most
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Understanding Why Velvet Rope Marketing Matters the Most

Published : October 10, 2023

We’ve spoken at length about how most popular digital marketing tools (like ads and promotional emails/SMSs) aren’t driving the ROI they should. Bloated marketing budgets have not produced expected returns and digital saturation has led to profits being under pressure, marketing budgets getting minimized, and marketers generally having less to work with.

But the show (or the business, in this case) must go on. Thankfully, innovation never rests and we already have the marketing strategy to shift this game into the next gear.

Enter Velvet Rope Marketing (VRM).

What is Velvet Rope Marketing?

Sunil Gupta’s Driving Digital Strategy lays out the idea: “According to the familiar 80-20 rule, 20 percent of the customers provide 80 percent of the revenue. However, research shows that if we focus on profitability instead of revenues, the rule would be 200-20, where 20 percent of the customers provide almost 200 percent of the profit!  How is that possible? Because the remaining 80 percent of customers actually destroy profitability.”

Then there are a few quotes from Peter Fader that are quite pertinent to the topic:

“The Customer does not exist because every customer is different.”

“The customer is not always right. The right customers are always right.”

“In the world of customer-centricity, there are good customers… And then there is everybody else.”

Building upon these concepts and conversations with industry leaders, Netcore founder Rajesh Jain hit upon the idea of ‘Velvet Rope Marketing’ (VRM). The plan is to emphasize the creation of a differentiated experience for a brand’s ‘Best Customers.’

Your Best Customers sign up early, stay as active customers longer, buy more, talk about your brand, and are easier to support. You can also identify the Best Customers by their customer lifetime value (CLV).

For these Best Customers, brands need to roll out a ‘velvet rope’ experience and treat them like modern-day royalty. Think of the velvet rope on gold stanchions as part of the red carpet treatment at first-class counters in airlines, or even the exclusive VIP entrances at high-end clubs or Disneyland. It signals exclusivity, generates envy, and draws the right people into an elite circle. As humans, we are geared to want to feel special and the velvet rope experience does exactly that.

Make your Best Customers feel like they are velvet rope-worthy and your brand will generate more revenue, gain higher profits, retain loyalty, and achieve positive word-of-mouth. This is the core of Velvet Rope Marketing.

How Velvet Rope Marketing actually works: a loyalty program times infinity

Velvet Rope Marketing isn’t just a loyalty program. Not just anyone can sign up and collect points to get the big rewards. In this case, it is the brand/business that decides which customers qualify for the ‘velvet rope’ treatment.

With VRM, the brand makes a decided and unique attempt to deepen relations with its Best Customers – the ones that generate most of the brand’s profits.

Best customers are 5x more valuable than the median customer - Netcore Cloud

Examples of Velvet Rope Marketing

You can certainly let your imagination run wild on how to implement Velvet Rope Marketing. But, if you’re wondering where to start, here are a few examples:

eCommerce: Offer three free exchange opportunities to Best Customers. Create a dedicated page based on these customers’ preferences – products they like, new launches, exclusive/limited offers, etc.

OTT: Ask Best Customers about their preferences for the next week, and give them early access to their chosen content.

Retailers: Collate data on items the Best Customer searched for but couldn’t buy because it was unavailable at the time. Offer them the first chance to buy those or similar items when they are back in stock and don’t forget to tack offers that encourage them to buy.

Multiplexes: Estimate what your Best Customers are most likely to order and give them an easy-buy option for those items.

Manufacturers: Give exclusive opportunities to buy from a new collection (before everyone else). If you’re feeling courageous, invite your Best Customers to send in some design ideas for new products.

Essential elements of Velvet Rope Marketing with examples

Exclusivity

  • Free premium samples from a customer’s wishlist or new launches
  • A special page dedicated to the preferences of the Best Customers
  • Instant notifications, but only on topics that interest the customer
  • A consultant role in developing new products
  • No-charge cancellation of tickets/orders

Ease

  • Pre-booked slots based on purchase patterns
  • An assigned concierge
  • Free exchange opportunities
  • Advance picking of seats (flights, movie theaters, etc.)
  • Pre-order for coveted products (like pre-ordering upcoming games)
  • Priority treatment from customer service: always get queries addressed first

Access

  • Invitations to events celebrating Best Customers
  • The first look/special preview of new products
  • First chance to book order for limited edition items
  • Special offers on orders that match previous purchases
  • Chance to book tickets for upcoming events before others

How to identify your Best Customers

One phrase: Customer Lifetime Value (CLV).

CLV is a predictive metric that can be evaluated by taking the following factors into consideration:

  • The duration of the customer relations (if a customer is churned)
  • How likely a customer relation is likely to last (active and future customers)
  • Numbers of transactions done by the customer
  • Overall value of transactions for each customer
  • Non-financial customer activities – website visits, how often they try new products, ratings and reviews given, referrals, etc.
Velvet rope marketing model using CLV - Netcore Cloud

Calculate CLV by using the transaction data of each of your customers. Segment customers into Best (top 20%), Rest (next 30%), and Other (remaining 50%).

A differentiated experience for customers who make a difference

VRM is about making choices – not every customer is the same. Not every customer treats your brand the same and the ones that prioritize you should be prioritized in return.

Using a combination of Martech and Adtech solutions, Velvet Rope Marketing makes your special customer feel truly special. Focus on creating amazing experiences for the people who are responsible for a disproportionately large share of brand profits.

It’s a hard choice and we don’t deny that. But hard choices are about to become commonplace in marketing. When they do, VRM becomes the key to retaining the right customers and driving high profits.

This blog is based on and comprises excerpts from the article, ‘Velvet Rope Marketing’ by Rajesh Jain. He is the founder and Group MD of Netcore Cloud, a bootstrapped SaaS company that helps brands create outstanding and holistic AI-powered customer experiences at every touchpoint.

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Written By: Netcore Cloud
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