Thanks a million: How to recognize the ultra-luxury shopper

By Guy Dilger, gdilger@loyalty.com

When it comes to luxury store retailing, properly rewarding a customer who spends $200,000 a year could be as easy as a walk in the park, or Park Avenue. But recognizing those dedicated shoppers who spend upwards of $1 million a year takes more than diamond points -- this kind of shopper requires sincere eloquence.

It’s a high-class, and at times bewitching, problem.

After all, identifying these shoppers is not difficult. Luxury comes with an implied level of unparalleled customer service, so the top-tier shopper often develops an intimate relationship with her sales associate. That associate in turn becomes a de-facto ambassador, loyalty mechanism and extension of the retail brand.

The trick then is combining that on-the-ground intelligence with shopper data to identify a loyalty reward the luxury consumer finds of real value. These are shoppers who can literally afford anything they want, remember -- there is no question of need. Rather, it comes down to delivering a one-of-a-kind service or experience that falls squarely within their values.

This is not exactly a revelation -- wealthy shoppers have long equated luxury with their life experience. But in the past couple of years, the top-tier consumer has been changing how she shops, opting for private services rather than buying on the sales floor, and having items shipped home instead of advertising her splurge on the street. This indicates that even the exceptionally affluent are sensitive to flaunting their wealth when so many others are suffering economic hardships.

Understanding these philosophical shifts is critical. While average spending by luxury consumers rose by almost 30% in 2009, it was driven by the much smaller, super-affluent segment with a household income of at least $250,000, according to Unity Marketing’s 2010 Luxury Report.

The ultra-luxury sweet spot
The challenge is that for most loyalty programs, hard and soft benefits need to escalate in value and importance as membership levels climb. These perks are packaged to entice the customer to spend her way into that next level of recognition. But the ultra-luxury shopper is defining that next level herself -- she values the importance of being unique.

Translated into fashion, this means she wants to ensure that no one else is going to turn up at an event wearing the same creation.

Understandably, there is fierce competition to impress, woo and retain her. Those merchants winning the race are delivering the kinds of recognition that make these shoppers feel truly remarkable, even in their privileged surroundings.

For instance, I know of one retailer that partnered with a top celebrity chef who was opening a new restaurant in a major metro market. The retailer invited 100 of its best customers to attend a pre-opening dinner, giving them the exceptional opportunity -- and bragging rights -- to try something before thousands of others.

The same imagination can be applied to charity events or fundraisers. A shopper’s level of spending could benefit the symphony, or cancer research. It is simply a matter of identifying what she connects with.

Fashion secrets, top designers
The point is that retailers cannot rely on standard incentives to engage this special group of shoppers; their loyalty transcends traditional rewards.

Rather, they must pair their customer purchase data with the personal expertise of their sales associates, or brand ambassadors. While the data will hint at future shopper desires -- a diamond bracelet to match a necklace; shoes to match a purse -- it is the sales associate who can gauge the shopper’s values, her social calendar and the circles with which she socializes.

This requires a thorough understanding of the merchant’s loyalty program throughout the store, from the stock room to the register. If a retailer schools its best associates on just how their good actions benefit the entire company (as well as their weekly compensation check), these employees will strive for the next-highest tier of service. 

At Saks Fifth Avenue in Houston, for example, one sales associate offered to catalogue the closets of his very best clients, recommending what should be kept and what should be donated. A great service, but then he took it a mile higher by sharing his knowledge of the Houston social calendar to ensure his clients have an unrivaled, stylish look for an event. His in-depth knowledge of his customers, the local marketplace and fashion keeps his clients coming back.

Luxury in knowing
With such rewards, luxury retailers not only will effectively recognize the top 10% of their clients, they could expand that shopping segment to represent 15% or 20% of the total.

I believe the key here is to provide a service or an experience that causes the luxury shopper to shift her spending from one retailer to another. Straightforward reward points won’t necessarily do that -- they may simply be used toward buying an item she would have gotten anyway. But an invitation-only evening with a top designer, how do you put a price on that?

Saying “thank you” to a shopper who just spent $1 million at your stores requires creative currency of an equal amount. Not only should you do all you can to ensure her loyal business, but the offering should be one-of-a-kind, and not something that can duplicated and repackaged by a competitor a few blocks -- or key strokes -- away.

Guy Dilger specializes in retail loyalty marketing at LoyaltyOne Consulting (loyalty.com), a group of internationally recognized practitioners who design and implement loyalty-marketing strategies for Fortune 1000 clients, including Supervalu; Lennar Homes; MGM Mirage; Eddie Bauer; Best Buy; HP Software; Ulta Cosmetics and Visa International. He can be reached at gdilger@loyalty.com.