Your best customers are responsible for the majority of your income. If you look at the last 6 to 12 months of your business income, you can identify which customers provided the most revenue to your business. At least every six months, it’s a good idea to assess your greatest sources of income. Then take action to improve your odds for greater income going forward.
The Pareto Principle, also called the 80/20 Rule, suggests that 80 percent of your sales derives from 20% of your customers. Identify the top 20% who are your best customers and develop a strategy to market to them:
1) More frequently;
2) More personally; and
3) With more expensive products.
You will be rewarded for giving your customers and clients more of what they already want.
Why does the Pareto Principle work?
1. It’s cheaper to market to customers whom you already have a connection with because there is no cost of acquisition.
2. It’s easier to market to existing customers. You already know what they want and how to reach them.
3. Customers who have purchased from you in the past are already “sold” on your product or service.
4. If you gave your clients or customers good value and good service, they believe in you and your products and will be hungry for more of what you have for them.
5. Solving problems for clients with your products or services often creates new problems as clients move to the next level of their “problem-solving”. Your customers will likely need new solutions to new problems, or tweaks on the old problem, to help them move forward.
The Pareto Principle is just as true on the other end of your income spectrum — 80% of your time is being spent with 20% of your least income-producing clients. Now is a great time to cull out and release the 20% of clients on whom you are wasting unproductive time. Refocus on the clients whom you serve well.
You may be able to identify your top 20% of clients by name. But that’s not the only way to identify them. Perhaps your best customers fall into a category. For example, single professionals may be more likely to buy your widget or service than young mothers with children, or vice-versa. Perhaps it’s men between the ages of 25-45 who love basketball who have been your best customers.
Use this month of June to assess what’s been working well in your business and what efforts have been only marginally effective. Then during the second half of this year, refocus your marketing efforts on your top 20% of customers. Create a new product or service, or tweak an existing one, and let your best customers know about it and how it can help them further solve their problems. You will be rewarded with more sales and more income.