Even in America, not all customers are created equal.
If you apply the "Pareto Principle" to your sales department, you're likely to make two discoveries: 80% of your revenue comes from 20% of your customers and 80% of your sales are generated by 20% of your sales team. The ratio varies by industry, and for some companies, the concentration of results is extreme:
In high-transaction businesses — financial services, retail and travel, for example — it's important to efficiently allocate sales, marketing and customer service resources to beef up relationships with the most important customers. Your long-term success hinges on strengthening the loyalty of these valuable customers. In fact, some companies have even adopted a policy of "firing" their least profitable customers and found an enormous boost in both the corporate bottom line and their employees' satisfaction.
Here are four principles to make your staff smarter and more successful at swelling your revenue stream.
Of course, you can't ignore 80% of your clientele. But you can trim the amount of time and effort you spend on customers who aren't motivated to buy.
This doesn't mean you should forget them, but if you're going to focus on your trophy customers, you need to find the extra time somewhere. Try to keep your entire customer base motivated — and informed — with newsletters, brochures and e-mails. Offer incentives to come back. And be sure to notice when some of those customers drift into the top 20%. Although they don't belong to your elite, they have potential.
Vilfredo Pareto was a 19th-century Italian economist who found that 80% of the world's wealth belonged to 20% of its population. In modern business, the 80/20 rule is applied in a variety of situations, including:
Without a strategy for concentrating on your trophy clientele and putting the rest on the back burner, you could be spinning your wheels to meet the demands of the most troublesome, least profitable customers.
Get in touch today and find out how we can help you meet your objectives.