The 80/20 Rule - 80% of Your Profits Come From 20% of Your Customers or Clients

The 80/20 rule pops up all the time. And for good reason. It works. If you really take the time to analyze your customer or client base, you will find that 20% of your customers or clients are generating 80% of your revenues.

And the other 80% are costing you way more than they are worth in time, trouble and expenses.

So what’s the solution?

You need to really dig into that 20% and find out why they keep coming back to you. Because they are the answer to growing your business with only low cost, high return, premium clients or customers.

Doesn’t it make sense to only go after those customers or clients that represent maximum value to your business? Rather than just throwing out a big net and trying to grab everything you can get?

If you really want to cut costs in a tough economy, don’t cut employees. Cut the customers that cost you more than they are worth. And only go after the people that represent maximum value.

This will either cut your marketing costs dramatically because you aren’t casting such a wide net, or it will increase your revenues more dramatically because you’re using the same amount of marketing money to go after the premium customers or clients.

Almost any business can start a customer loyalty program of some kind. Once you have at least a years worth of data, go back and look at who represents the top 20% of customers or clients.

Contact them any way you can. Email, phone calls, letters, whatever it takes. And have each one of them answer questions pertaining to why they shop or do business with you, what they love most, what they love least, what changes would entice them to use you even more.

And get all the demographic information you possibly can. Combine that with the answers you get to your questions and profile the perfect customer or client.

Then revamp your business to give that top 20% exactly what they want and target your marketing to them. Then you’ll see a dramatic growth in your company, your revenues, and your return on investment.

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