|Vilfredo Pareto - In the early 1900s, Italian sociologist, economist and philosopher, Vilfredo Pareto made several important contributions particularly in the study of income distribution and in the analysis of individuals' choices. Perhaps best known for the Pareto prinicple (also known as the 80-20 rule, the separation of the vital few from the trivial many) states that for many events 80% of the effects come from 20% of the causes. At this time in Italy, 80% of income belonged to 20% of the population.|
So then, thinking about this principle in your business today...
- Do 80% of your sales come from 20% of your clients?
- Do 80% of your sales come from 20% of your sales team?
- Do 80% of your decisions in meetings come from 20% of your time?
- Do 80% of customer complaints relate to the same 20% of your services/products
- And your ROI on advertising - would this also be approximately 20% of your spend producing 80% of your campaign's results? If only you knew which 20%!!
You get the idea. So what?
Let's take the sales source 20% concept ....
20% of your clients produce 80% of your sales.... Let's say you have four levels of client/customer: Your "VIPs" (20% approx) , your next level down, your "Rising Stars", then your "Don't Knows" and lastly "those you'd rather not have as customers"! Can you put an approximate % on the other three sectors?
1. Are you treating your top 20% tier as VIP customers and really managing their every expectation perfectly and ideally anticipating their next request? What makes them your VIPs - really important to know...Analyse
2. What about your "Rising Stars"? Based on the information you have now gathered from your VIP clients, what do you have to do to convert them? What effect would that have on your business if they were to become in your Top Tier group?
- what type of business are they?
- how did they find you/you them?
- what are their personality traits?
- how do they respond to you?
- what do they pay you?
- Really analyse this and then marry up the common traits across all your VIP customers/clients and then the next question is: How can you attract others like them?
3. What about your "Don't Knows" - those ones who buy from time to time but you've never spent much time/effort on finding out their needs, why they buy from you, what they buy from others etc.... What do you have to do to make them into your Rising Stars? What impact would that have on your business?
4. And then those who buy irregularly, not very much but want "the earth" included with the deal, but then don't want to pay for it and/or keep you waiting for payment. You need to recognize these customers and ensure you and your colleagues are not spending 80% of your time in managing them.
In my last email 'only three ways to grow your business', I showed you that, apart from finding new customers which is expensive, if you could grow your clients/ customer base to buy more (cross sell and upsell) and to buy more often, you'd have amazing results. Using the Pareto model, you can analyse your customers and then really concentrate on your 'stars' and grow with them.
Helpful? I hope so. Analyse across the other sectors of your business too, as time permits - and to your home life as well. And, next time you/the lady in your life has 'nothing to wear' or 'no shoes' then we can smile and think "Pareto"!!
|Out and About|
Twice to UWE (University of West of England) Bristol this last month giving marketing talks to a group of BizIdea & 3rd year computer students and am looking forward to speaking at the Bradford on Avon Chamber of Commerce breakfast on Wed 9th March and at the WACC Women's Network lunch on Thursday 17th March. I've also been asked to host the newly formed "The Womens Business Club" starting in Bath on 15th March, so hope to see some of you there.
UWE's Distinguished Executive Address Series - worth checking out - click here
Really thrilled with the suggestions made by some of you about where we can apply for funding for Bea (and it means you read to the end of my newsletter as well!) Still open for any suggestions If you happen to know of any trusts/ funds/businesses/ individuals where she could apply for assistance with funding or sponsorship Thank you. See Bea's website.