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Home » Sales Management » Fighting the 80/20 Rule

Fighting the 80/20 Rule

May 17, 2022
in Sales Management

Fighting the 8020 Rule (1)

The majority of business professionals know about the 80/20 rule, which states that 20 percent of your customers make the majority of your profits, generally the case in a lot of businesses. However, many people don’t realize that this rule is also known by”the “Pareto Principle,” and it was named after a famous Italian economist named Vilfredo Pareto back in 1906 when he observed that only 20 percent of the population of Italy had 80percent of the riches.

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While this is an estimate, this kind of distribution is present in the majority of businesses. This is, of course, a concern due to the fact that any sudden loss of 1 of those top 20% of customers can have a negative impact on your revenue. It is possible to lose a client due to many reasons like bankruptcy, the customer changed his or her product line and no longer wants your product, isn’t satisfied with your company due to any reason and moved to a competitor and other. Thus, you must be able to expand your customer base. Don’t just accept the 80/20 rule of thumb as a fact and only focus on 20 percent? Or do we need to concentrate on the 80 percent? The right solution is not both.

Which direction should we take?

While focussing exclusively on those in the top 20% seems like a good idea at first, but the problem is that we need to create the other 80percent to grow our productive customers. What can we do? Here’s one approach to address this.

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Instead of a simple split, why not break our customer base into different segments in the following order:

Top 20%

Next 10%

Following 20%

Bottom 50%

The top 20% segment must already receive a lot of attention from the sales team, while the bottom 50% segment is typically those with fewer customers and little potential, but there are gems to be found in the rough. The details you should focus on in order to combat against the rule that 80/20 is the following 10% as well as the Next 20 percent. They are segments that enable you to quickly increase the number of customers in another part and to others over them, enhance the distribution of your client base, and help in increasing the amount of revenue you earn and your customer base. Customers from these two categories are usually those who are more knowledgeable of the services or products they offer, and have done transactions with you frequently or at times, and are able to increase their business.

How can we get these segments of the population to listen?

As is to be expected, the number of customers within each segment is significantly increased when you go down one group, with the highest number of customers being in the Bottom 50 segment.

How to connect with the segments is different from one business to the next and also based on current communications capabilities, but this is a general guideline for how customers are “touched”:

Top 20 percent – face-to-face visits from an outside salesperson, and also being contacted often by inside sales. They are also sent promotional emails.

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The following 10% is Contacted by sales representatives on occasion and also receive emails with promotional offers and face-to-face visits only when a particular possibility arises.

Following 20%, you will be contacted by sales inside occasionally and also receive emails with promotional offers.

The bottom 50% of people will receive emails from promotional companies in the event that it is necessary.

There are many variations on the above, and every firm may have a unique method of dealing with customers; however, it is a typical arrangement that is often seen. As we’re focused on the next 10% and 20 segments, we’ll be putting all-out effort to reach the customers via face-to-face visits or a telephone campaign with an appeal to action. This should be followed with an email to make it even more effective.

The goal of the call to action could be to sign-up for a webinar that provides more information, taking advantage of a promotional offer or report or whitepaper of your service or product, or directly requesting an order. It is essential to keep track of your results and contacts to determine the success of your marketing campaign.

What are the best ways to target key segments?

If the sheer number of customers within these two segments makes reaching each one a difficult task, It is possible to further narrow the customer list down to a smaller number. You might want to consider simply focusing on the Next 10% segment as a means to limit the number of customers and then use it to test the idea before adding the following 20 percent segment. This will let you discover the things that work and what does not.

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The other option is to focus on customers who have the highest potential from both segments. This could be a challenge depending on which fields and attributes are present in the CRM or database of customers. It could even require data manipulation using Excel, Sequel, or some other program for you to narrow down the result.

With this in mind, The following step would be to employ laser-focused focus to accomplish our goal. Perhaps, for instance, you are trying to increase sales of an item or service that your business is focusing on? Are you looking to increase the number of clients in the region you are targeting? Do you want to raise awareness about an innovative product or service that you provide? Are you targeting customers within the same niche? These tweaks will help you limit your customers who will be attracted by what you can provide. It’s not worth making calls to customers who focus on the network niche; if your new product is not a household electronic product, that’s not networkable.

If you’re still not able to satisfy more than the list, you could easily outsource this task to one of the many businesses that offer these types of services. However, I strongly suggest that you take the time to separate your customer base and area of expertise prior to transferring this task to a third party.

No matter what you do, you must keep fighting because it’s worth it in the long run!

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