Are you familiar with the 80/20 rule, also known as the Pareto Principle? As it relates to business, the rule asserts that the majority of your sales will come from a small portion of your customer base. Specifically: 80% of your revenue comes from 20% of your customers.
By understanding and leveraging the 80/20 rule, you can potentially increase your business effectiveness and profitability.
All Customers Aren’t Created Equal
From a sales and marketing perspective, it makes sense to invest time and effort in strengthening and maximizing your relationships with the vital 20% of your customers. This segment has the greatest potential for spending more money on your products or services. They’re also more likely to refer business to you.
Spend more time cultivating this core base of customers that generates the most business and profits. Create a strategy for up-selling or cross-selling to this group as you’re likely to reap the most results.
Provide these lucrative customers with preferred services such as 24/7 support, loyalty rewards, email them discount coupons, send special holiday gifts or personalized notes of appreciation, and other ways to thank your best customers for doing business with you.
Take time to analyze the characteristics and demographics of the top 20% of your customers. Understand why they buy and what drives them. Focus your marketing efforts on finding new clients who are similar in an attempt to replicate your successes.While all business is important, pinpoint your highest-return customers and devote more time to them and avoid letting unprofitable customers drain your resources. To maximize your profits, employ marketing strategies that attract more of your ideal type of customer.