The ‘80-20’ Rule of Marketing

The ‘80-20’ Rule of Marketing

Twenty percent of your customers produce 80 percent of your sales. Named the Pareto Principle after Vilfredo Pareto, this concept is a simple yet powerful idea that can save you time, money and dramatically grow your business if used properly. Pareto, an Italian economist, noticed in 1906 that 80 percent of the land was owned by 20 percent of the population.

The interesting thing about this principle, or the ’80-20 rule’, is that it occurs with astonishing frequency in other situations. Twenty percent of your time will yield 80 percent of your results. Twenty percent of your products will create 80 percent of your revenue. The list goes on and on.

From a marketing standpoint, the applications are obvious. If 20 percent of the advertising efforts produce 80 percent of the results, then your marketing needs to focus on that 20 percent. If 20 percent of your webpages generate 80 percent of your traffic, then you need to highlight those pages to make them easier to find.

When it comes to customers, how do you zero in on your best customers, and more importantly, how do you find more like them? Using the ’80-20’rule allows you to develop more targeted marketing and more effective follow-ups so you can nurture sales. 

One way is to examine your customer lists. Check your email lists, your social media following or your internal company database and cross-reference it with your sales.Look for the customers who have bought the most, and bought recently and frequently.This will likely be a good portion of your 20 percent. Once you’ve found them, you can focus more of your efforts on them. 

You can check your point of sale data so you can also cross-reference customers by other factors such as geography. Targeting your marketing to more narrowly defined geographic regions can save you both money and time. 

With additional information, you can narrow it down even further and develop a profile for your best customers. What are their characteristics? Do they share a similar demographic? What sites do people who fit that profile frequent? 

Once you know who your best customers are, you can more effectively develop follow-up strategies to keep them coming back. While customers value efficiency and value, they also appreciate a personal touch. The more you can tailor your message to them, the more likely they are to recommend you to their friends and business partners. Since people tend to associate with others who are like them, the people your best customers refer are likely to share the same profile.

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