Have you ever heard of the 80/20 rule? Well in the business world there is an old proverb that states 20 percent of your customers make up 80 percent of your sales. According to Perry Marshall, author of the book 80/20 Sales & Marketing; this 80/20 principle can apply to time management, search engine marketing, and sales. Business owners waste a lot of time trying to meet the needs of all their customers. Instead they should focus on the most lucrative ones that will produce sales growth for the business. We want to treat everyone equally, but all customers are not necessarily equal. Mr. Marshall states that some customers earn you an amazingly disproportionate amount of money, many make you a little bit of money, and some even waste your time. With the last group, you lose money selling anything to them at all and waste time that could have been placed on more profitable customers.
So it is crucial for a business to focus on those 20 percent of customers who are vital for business success. Perry Marshall shares some tips that will help entrepreneurs zero in on this specific group of customers. First, tip is to look at your customer lists. Whether this is your company’s email distribution list or Facebook followers, you can search for your top customers. Just use the R-F-M rule: Check which customers on your list bought most Recently, bought more Frequently, and spent the most Money. In no time you will have spotted your 20 percent. Next, you should study your geography to find where your money making customers actually live. This information can save you money by narrowing your internet advertising and marketing to specific geographies.
Once you know where they live, then you find you customer niche. Usually customers who buy your specific product or service almost always fit a particular demographic. If you tailor to those customer’s needs then you will naturally attract customers with similar needs to your business. Next you need to fire your problem customers. There is still that 10-20 percent of customers who take up your phone time and take you away from servicing your most lucrative 20 percent. You need to start cutting off those customers, but in a polite and gracious manner in order to avoid bad reviews.
Last, you want to pinpoint your “silent high-volume buyers”. These buyers are those customers who send you a purchase order every two months and usually purchase high volumes of products and services. They bring you the highest return and require little maintenance. Spend your time targeting these buyers. Take them out to eat. You may even find that you can provide a service or product that they may not even know about. It may seem natural to give attention to all your customers, but you don’t need to focus on everyone. It is better to pay attention to that 20 percent who buy the most from you.
Condensed from http://www.entrepreneur.