Client Magnets Blog

We’ve all heard of some version of the 80/20 rule, and I love one of the alternate names for it – The Principle of Least Effort. You may have heard of this before, it’s also called the Pareto Theory or the 80:20 Correlation, but “The Principle of Least Effort” should be the name of choice for what we’re discussing, as that’s so appropriate for our marketing efforts.  Of course, in marketing we want the most results for the least effort.

This isn’t laziness — it’s just good old-fashioned common sense, finding a way to maximize results with the least amount of input.  That’s the basis of the 80/20 rule – 80% of situations can be attributed to 20% of the input.  It can apply to so many circumstances, both business and personal.

There are quite a few versions of the 80/20 rule that have been translated into sound business advice:
• 80 percent of results come from 20 percent of efforts
• 80 percent of activity will require 20 percent of resources
• 80 percent of complaints come from 20 percent of customers
• 80 percent of usage is by 20 percent of users
• 80 percent of revenue comes from 20 percent of customers

It’s that last version that I’d like to focus on because when we look at our revenue, you’ll realize how true it is – 80% of the revenue comes from 20% of the customers and the other 20% of revenue is made up of 80% of the customers.

So, if you want to grow your business, the best way, the most sensible way, and the fastest way is to figure out who your top 20% of customers are and provide products, services and offers for those people.  Now, for the other 80%, they’ll come along if they want to.  If they fall by the wayside, so be it.

But focus on the 20% that will give you the 80% return on revenue.

There are three key steps to making the 80/20 rule successful for your sales.

1.  Identify
Take a look at your customer base and identify your top 20%.  Who’s generating the most revenues?  When you do this, you’ll see that there’s a gap between your top 20% and the remaining 80%.  In my business, I’m seeing that gap widen.  I’m noticing a smaller group of people who are willing to pay more and more for my products and services.

2.  Focus
Focus on this 20% and think about what you can do to create offers for them.  Even during tough times, I’m still seeing a percentage of customers that are looking for higher value products and services.  I’m also noticing an increase at the lower end in that there’s a larger group looking for the lower ticket items.
Since I’ve noticed this happening in my business, I’ve responded by creating options and opportunities for both ends of the spectrum, but less within the middle ground.  I’m focusing more attention and energy to the upper end and the lower end, and if you’re seeing that in your business, that may just be the right course of action for you as well.

3. Create
So, now you’re focusing on creating low end and high end options – where do you get started?  In keeping with the “Principle of Least Effort”, I would say start with the high ticket items to make more revenues on fewer transactions.  This means you’re only going to need to find a few clients willing to pay top dollar, and you’re going to be earning the same amount as if you had ten times the number of customers with 1/10 of the revenue.  Which makes more sense?

If you’re struggling to meet goals or just looking for a better focus for your business or marketing efforts, remember the 80/20 rule.  Remember that it’s also going to be “The Principle of Least Effort”.

Bernadette Doyle is a small business marketing expert. Get more tips and advice at http://www.clientmagnets.com