The death and resurrection of the premium customer

Top-end service is no longer at the discretion of the management.

by John Sills
Last Updated: 12 Feb 2020
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Down to business

Back in the mid-2000s, I was a branch manager for one of the big banks. It was always busy, with a queue out of the door that seemed to last all day. 

One Saturday, I remember one of the newest members of our team chatting to a customer at the back of the queue. Seeing that she had a ‘Premium’ account with us, he casually escorted her to the front, past all those who were patiently waiting.

All hell broke loose. This was a cardinal sin against nearly all the British queueing rules of etiquette.

I was thinking about this the other day while waiting to get on a plane and watching a whole bunch of ‘Quick Boarding’ customers being ushered ahead of me. Nobody batted an eyelid.

Because while the British fascination with queuing remains, our relationship with organisations – and specifically, how we get ‘premium service’ from these organisations – has changed dramatically in the last decade. 

And this has big implications for how companies segment, design for and deliver to their customers.

Change in the balance of the relationship

Customer relationships used to be very ‘parent – child’. 

We would become a customer of a company, and if we were well behaved, or they deemed that we were financially ‘worthy’, they would offer us a better service. Banks would give better accounts based on how much money we made them. Airlines would offer a better service as long as we kept flying. Restaurants would offer the best seat in the house if you knew people who knew people.

It was all very cloak and dagger, a dark art that customers were often not allowed to understand. We were in when they said we were in. And if we didn’t behave, we were out again with an unceremonious ‘we’re downgrading you’ letter. 

But this approach doesn’t work in our ultra-transparent world, where customer choice has increased exponentially. Fairness is seen as paramount, with a need to be a clear and obvious value exchange between what you’re getting from me, and what I’m getting in return. 

Conscious consumption

The internet of the past fifteen years has offered us everything for free. Free music, free news, and free computer software, all of which had previously been paid for. But whilst free is good, it comes with its own challenges. 

Offering something for free reduces its perceived value. Suddenly paying £2.99 for an incredibly clever app that we’re going to use multiple times a day seems extortionate. The UK banking system knows this issue too well, with many of the problems it faces today caused by Midland Bank introducing free bank accounts in the early 1980s (which even it’s boss at the time now admits was a mistake). 

And more importantly, it removes our easiest default measure of quality, making it hard to choose between options. People don’t switch banks because it’s hard to differentiate the service on offer, not because it takes too long. And as we’re all being urged to become more conscious consumers, reducing what we buy whilst improving its quality, customers are starting to become more comfortable with the notion of paying for something worthwhile. 

Control of the experience

Fast following the free stuff on the internet came the adverts. Needing to find a way to make money from these eyeballs, the wonderful early internet experience of a Facebook newsfeed filled with friend’s photos and interesting articles has been gradually reduced to a war of attrition. How much do you really want to read this article? Enough to fill in a survey? To play whack-a-mole with several intrusive pop-ups? To complete this form with your entire life history? 

It’s created a sub-standard experience, a huge waste of time and energy dealing with these interruptions and intrusive marketing, whether that be in our timelines or our inboxes.

As Scott Galloway said a couple of years ago, advertising is essentially now a tax on the poor, only enforced onto those who choose not to pay. Want ad-free streaming on Spotify? It’s yours for £9.99 a month. After high-quality sports writing rather than rate-the-player clickbait? A fiver a month to The Athletic and it’s yours. Enjoying our free app? Give us a few pounds and we’ll stop asking you to give us a few pounds. 

(Incidentally, if Facebook charged £2 per user per month for an ad-free service, it would make the same annual revenue that it currently does, but be a better service, be less hated, and not be responsible for the breakdown in Western democracy.)

The combination of these three things – a shift in the balance of the relationship, a desire to pay for quality, and a wish to control the experience – is leading to people to choose when they want a premium service, rather than when the company decides to offer it. 

You want a better service from Amazon? Pay us £99 a year and it’s yours, whoever you are. Fancy first-class rail for a day? Bid for it on SeatFrog. Dinner at the Chef’s table? There’s an AirBnB experience for that.

But companies need to understand that customers will choose to be premium for different experiences at different times. There is no longer a simple segmentation split along income-earning lines, no longer a simple ‘premium’ and ‘non-premium’ customer split. Someone might want the best quality meat in Waitrose, and then buy their tinned goods in Aldi. They might want the all-inclusive TV package but be happy with the most basic banking service. Many will pay hundreds each year to get a superb music subscription, but not want to pay a penny for their daily news fix.

This means understanding customers as people, not product lines, providing them with the ability and autonomy to make the decision over the level of service they receive.

And like any relationship, they’ll be moments when you see each other a lot, and times when you don’t. If they don’t return a few of your calls, it doesn’t mean sending them a message telling them it’s all over.

They’re probably just busy.

John Sills is partner and managing director at The Foundation.

Image credit: ISHARA S. KODIKARA/AFP via Getty Images

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