It is an old business adage: About 20 percent of your customers produce 80 percent of your sales. In my book 80/20 Sales & Marketing, I argue that this 80/20 principle also applies to time management, search engine marketing and far more.
The funny thing is that even with sales, business owners often ignore the 80/20 rule.
We're all tempted to waste our time trying to please all of our customers instead of the most lucrative ones.
We are all conditioned to always respond to the stimulus around us. So if you obey the 80/20 rule, you are going always to feel as though you are ignoring something -- because you are.
It will be an irritating feeling at first. And it particularly gnaws at Americans because we are prone to trying to treat people equally. The phrase is clearly written our Declaration of Independence, that all people "are created equal." .
But all customers are not equal. Far from it. Some earn you an amazingly disproportionate amount of money, many make you a little bit of money, and some even waste your time. With the last group, you lose money selling anything to them at all.
Your goal should be to zero in on those 20 percent of customers who are essential for your business' prosperity.
Here are some tips on how to do just that:
Mine your customer lists. Maybe it's your email distribution list or your company's Facebook following. But I still find it amazing how many businesses don't bother to look up sales data on the customers. Apply the R-F-M rule: Check which customers on your list bought most Recently, bought more Frequently, and spent the most Money. Bingo. You've found a chunk of your 20 percent. Focus on them. Send them nicer Christmas gifts. Send them a postcard when you're on vacation.
Study your geography. Delve into your point of sale systems and find out where your money-making customers actually live. You can do it really bonehead simple with thumbtacks on a map if you want; or you can do a detailed study. Either way, odds are people or businesses from certain neighborhoods or certain cities are providing most of your business. For example, I know that most of my business consulting customers come from suburbs of technically advanced markets such as San Francisco, Dallas and Washington, D.C. This is important knowledge because you can save money on Internet advertising and other forms of marketing by narrowing it to specific geographies.
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