One of the issues i keep running into when dealing with CRM and retention is that of the fake VIPs.
What is a VIP?
Depending on the vertical VIPs have different names: whales, high rollers, bulk buyers, or just VIPs.
These users will usually be in charge of a large share of your revenues (about 50%) while their share of the population will be extremely small (about 5% of the paying population).
Since VIPs are responsible for such a large share of your revenues, it is customary to segment them and treat them accordingly: Bigger bonuses, deeper discounts, even flowers on their birthdays are all traditional ways of making sure that this segment is kept happy (and coming back for more).
What are fake VIPs?
VIPs are usually measured by the gross revenues that they are accounted for. The assumption is that their net worth should be proportional. In most cases, the bonuses and discounts aren’t counted into the revenue metric and thus some users can get away with a negative net worth while still being counted as high valued users.
What should you do?
- Start by measuring the net profit (or as close to that as possible) per customer. This isn’t easy as it sounds for most businesses because usually the data needed isn’t centralized.
- Re-segment your customers with this new metric.
- Taking care of those negative worth customers depends on your vertical as well as other parameters, but in most cases there are ways to turn them into profitable users once again.