“Conspicuous consumption of valuable goods is a means of  reputability to the gentleman of leisure.” – Thorstein Veblen (The Theory of the Leisure Class, 1899)

 

I am a Miami Heat season-ticket holder. I have two seats. Each one costs me $150 per game. With 44 season games and playoffs, I spend a lot of money every year on my interest. You would think that classifies me as a VIP customer. And when the Heat moved into its new stadium last year, you’d think that management would have rewarded me and other ticket holders like me with some new, extra goodies.

 

Instead, what I got was: (1) no more private entrance, (2) no more private rest room, (3) no more private lounge, (4) no more wait service, and (5) no one to complain to. Now I get to wait in line for a hot dog, wait in line to pee, wait in line to get in, and wait in line to get out — just like people who pay $10 a ticket.

 

That may seem like a good idea to you if you believe in socialism. But if you are faithful to the free market and understand business, you see what kind of a mistake it is.

 

For every product or service, there is a range of prices people are willing to pay. To watch the Heat play basketball, you can pay a few cents a game by watching them on television, 10 bucks a game to sit in the nosebleed seats, $25 to $50 to sit in the bleachers, or $150 a seat to sit on the floor.

 

The Heat built a new stadium so they could sell more tickets and make more money. More power to them. But this also gave them a chance to reward their best customers. They blew that chance. Big time. This is bad business. You don’t downgrade good customers. You figure out ways to keep them happy … and that means upgrading them.

 

A VIP Customer Is A Gold Mine.

 

Think of what a VIP customer is, and what it takes to keep him. Think of his long-term value once you have figured out how to motivate him to spend five to 10 times what others will pay for essentially the same product or service. Think about the very small cost of reselling him as compared to the cost of acquiring a new customer.

 

If your core business fails, your best customers will keep you going for months or years. Sometimes you can transform your business to service only them and make a wonderful living doing so.

 

Take me. Somehow, some way, I had pushed myself into forking out $300 bucks a game to watch these guys play ball. It is absolutely insane . . . something that I could not possibly justify rationally. Obviously, a big part of the allure was the way I was treated. Those very expensive tickets made me feel special.

 

I was willing to spend a lot of money to get that feeling, but now I feel that I’ve been had.

 

Often, You Don’t Notice Your Customers’ Dissatisfaction When You Mistreat Them.

 

I can’t imagine that the Heat cares about my feelings. When they made these changes, there was more demand than supply — so they got away with abusing their best customers. But now that the team has flunked out of the first round of the finals for the fourth time, VIP fans like me are wondering if it is all worth it. There is a fair possibility I might cancel my season tickets and go to games infrequently next season. And if I’m considering that option, so are many other people in my situation.

 

When you sell a VIP service, you are selling prestige. The moment you forget that … the moment you withhold the perks of prestige, you are lost. The Heat doesn’t know it now and may not care to hear it, but sooner or later they will feel the negative impact of customers who feel as I do.

 

A Very Different Approach Wins My Patronage

Tonight, in Baltimore, I walked by a neighborhood cafe, recently under new management. I was immediately struck by a placard on the sidewalk that said, simply, “Welcome. Please come in. It is our pleasure to serve you.”

 

Guess what? I went in. I never liked that restaurant before, but that sign made me think that this would be a place where I would be treated well.

 

As the world becomes more of a giant supermarket (propelled forward by the likes of Costco and the Internet), privileged treatment will become more and more rare. Most businesses, having for the first time access to the larger markets, will appeal to the least common denominator by lowering prices and reducing services. This is great for creating new customers, but for every 10 new customers one will spend as much or more than the other nine put together. Unless you are committed to finding that VIP customer and providing him with something that he wants (which, fundamentally, is some version of prestige and pampering), you will never enjoy the profits you should.

 

Are You Pampering Your Best Customers? Really?

 

When was the last time you told your best customers that you appreciate their business? Do they always get priority? Do they know that? Do you give them symbols of their status? Do you thank them? Do you know them well enough to understand their desires? When was the last time you gave them an opportunity to spend more money with you? And did that upgrade come with the requisite psychological rewards?