80/20 Rule for Marketing Innovation

What is the 80/20 Rule, and how can you use marketing innovation to leverage it?

What is the 80/20 Rule?

The 80/20 rule is a sales principle that states, 80% of your business comes from 20% of your customers. Perhaps this is not a perfect science in your industry. But generally speaking, you’ll likely have a pool of customers who spend a lot more with you than others. These customers may purchase large quantities, or may purchase your most exclusive and expensive products. Or, they may be the first in line to swipe their credit cards when you launch something new.

Understanding who these customers are and how to find more of them can help you scale your business much faster. Additionally, keeping these customers happy will be key in ensuring the sustainability of your business in the long term.

How to Identify the 20%:

Identifying the 20% who account for 80% of your business can be as simple as checking your list of PO's. The top three indicators that you should look for include:

• Value: How much are they spending?
• Volume: What quantity are they ordering?
• Frequency: Is there a regular cadence to their spending?

The customers who are spending more, ordering more, and coming back frequently will make up your 20%!

What to Do Once You’ve Identified Them:

Step 1: Keep them Happy

Once you’ve highlighted your purchase orders and figured out who your top 20% of customers are, it’s time to ensure that you’re giving them all the time and energy that they deserve. This is where Sales and Marketing can really tag team their efforts to ensure that:

1) their needs are met and they stay a happy customer, and

2) they are made aware of any exciting new purchase opportunities that you might have in the pipe!

Step 2: Grow the 20%

Once you’ve ensured that this original 20% are happy, it’s time to grow this base of top customers. As part of your customer success journey in step 1, you likely will have had some great conversations with these customers. This includes who they are, why they love your product, and what else they might need in the future.

Add all this key information to your ideal customer profile. Next, consider where you might find more of these customers in the future. Happy current customers are often willing to make referrals, so don’t be shy to ask if they might be eager to join a webinar or speakers’ panel to advocate on your behalf.

Know When to Cut Your Losses:

There’s a common misconception that all business is good business, but this may not always be the case. 100%, growing your business should be a top priority, but if you find yourselves in the weeds with a couple of unhappy clients whose needs just don’t align with your offering, it’s absolutely okay to cut your losses.

This is particularly true for scaling businesses who may be tempted to add products or services based on the requests of just one or two customers. Really consider the cost-benefits of doing so, as you may be going down unnecessary rabbit holes and pinning yourself to a niche that might not be right for you. Now, if these customers are part of your 20% and adding a product unique to their needs might be worth it to your bottom line then by all means, do it – but if they’re not, your time may just be better spent elsewhere.  

In summary, while the 80/20 rule may not be an exact measurement of your customers and your business, it’s definitely something to consider in your customer success and marketing efforts. Understanding your customer base and leveraging your happiest customers can be one of the most effective ways to propel the growth of your business and stay competitive long term!