20% Of Your Customers Produce 80% Of Your Revenue!
Think about that.
If you’re spending an equal amount of time on every potential customer, then you’re wasting most of your time.
What could you do with that extra time?
Imagine if you spent it on those 20% who are already willing to buy from you.
Then again, you could spend 80% of your time doing something else while still making the same amount of money as you are now.
Which potential customers should you focus on, and which should you let slide?
The Pareto Principle, also known as the 80/20 rule, states that, “20% of your customers will give you 80% of your revenue – if you spend your time, energy, money and personnel on the top 20%”.
In the first part of this post I will show you how to identify the top 20%
Your Top 20% Are:
- Customers who have purchased from you recently. They are more likely to buy from you than customers who you haven’t purchased from you for some time.
- Customers who buy from you frequently. They are more likely to buy from you again. Makes sense, right?
- Customers who spend more money on you. They too are more likely to buy from you again.
And just to be clear, by customers I don’t just mean people who are willing to fork out money. They could also be people who believe in your cause, people who like your message, your music etc.
Simply put, these are your friends, and should be treated as such. And remember, friends have friends. But I’ll say more about that in a minute…
So now you know who your best customers are, what do you do with them?
Step #1: Thank your customers
If someone just bought something from you, they have just given you their vote of approval. Thank them – thank them in any way you can.
This is not time to do a hard sell. You have already made a sale, so treat them as a friend. If you can, give them something unexpected. But at the very least, just a simple, sincere thank you goes a long way. They will remember it
And Now a Short Diversion…
To our surprise the girls ignored the view and started taking pictures of Kai, my 14 year-old-son (apparently someone thought he looked like Justin Bieber, much to his chagrin).
Kai had no idea what to make of it all, but in the end he just smiled and said thank you. The girls re-boarded the bus, and everyone left happy.
Kai’s 15 Minutes of Fame…
The point is a simple, ‘Thank You’ goes a long way, whether it is saying thank you for buying your product, thank you for helping to shovel the snow, or smiling for a picture for a dozen screaming girls.
Step #2: Stay engaged with your customers!
If someone bought from you once, and then they come back and buy from you again – or if they hired you once and then come back again, you can’t get much more of an endorsement than that.
This is a valuable, repeat customer. If you treat them well then they will keep coming back again and again. And this is a customer that is yours to loose if you do not show them the respect that they deserve.
It is the same with your customers/clients/fans and friends. A smile and a thank you. Isn’t that what we all want?
So thank your customer – send them a simple Thank You email and you will have put to rest any sense of ‘buyer’s remorse’ they may have had.
Step #3: Follow the Money
Sometimes you get lucky and your product fits a problem someone is having. Other times your message or product simply resonates with people. You may have nailed your customer persona and they see you as one of their tribe.
Then again, it may just be their fiscal year-end and they have a wad cash they have to get rid of, and you just got lucky. Which leads to the next point. Your goal is to find out why they bought from you.
So now you know 20% of your prospects will buy from you.
And now you know how to treat those 20% well.
Find out why your best customers they like you so much.
And what better way to find out than to ask the top 20% why they love you so much. And one of the best ways to do that is to do a survey
Chances are if they like you enough to be in your top 20% then they probably won’t mind telling you what they like about your product/service, etc.
Step #4: Create a Buyer Persona
There are many services and tools out there that will help you create a buyer persona. Some of them are quite good. Some of them will even create a nice little avatar that you can paste on your wall and look at when you think about who is buying your products.
Maybe they like to put on the ritz.
The fact is, with the information we just acquired above:
- identifying your 20% best paying customers,
- treating them well, and
- finding out what it is they like about you
Then you have all you really need to grow your business without spending a lot of time creating stick figures of imaginary buyer personas.
Step #5: Get More Customers
If someone stumbles across your product and purchases it, they very well may have buyer’s remorse (a ‘Thank You, you made the right choice’ will help with this). However, if someone recommends your product it is instantly validated.
No one wants to go back to someone and say ‘hey that product you recommended to me is crap’. Much less is someone willing to say ‘yeah, you are right, I did recommend a crappy product to you.
More people are apt to dissuade you from a bad purchase than risk loosing face recommending something they are not sure about. To build social validation companies are forever trying to convince you that your friends – who look just like you – also use their products.
The best referral you can possibly get is word of mouth from a friend. Treat your customers well, and they will bring their friends.
If someone compliments you or your product, ask for a referral. All they can say is no. And you would be surprised by how many people are willing to help you out.
Some Bonus Points
Small business tend to do a better job at customer service than large corporations – so act like a small business.
Another Diversion…
One of our customers was having difficulties purchasing one of my products through our transaction processors. When I asked the transaction processor for help, the reply I got was “maybe if the customer tried harder she would be able to figure out how to fill out the purchase form!”
Needless to say I cut that transaction processor loose.
On a similar note, we were looking to partner with a web hosting company that we thought would integrate well with our products.
When I asked some exploratory questions I got one word answers. I thought that if I was going to get that level of support, it was pretty clear that our customers would also (we ended up partnering with Bluehost. Why? Because I felt I could trust them, and if I could trust them, then I could trust them to do the right thing for our customers).
Conclusion, and a couple of final thoughts.
The customer is always right, and if they’re not, they don’t have to be your customer.
Remember, you are focusing on the 20% who produce 80% of your revenue. Let another company focus on the other 80% who are not only not going to buy from you, but will probably just waste someone else’s time instead of yours.
Often companies can do well by showing more love to the customers who love them the most. Turn your customers into a life long friends. It is really not that hard if you care. And ultimately isn’t that what we are here for?
I spend my mornings answering customer emails. Why would I farm out interaction with the most important people in my business – my customers – to someone else.
And neither should you. If you can, answer the call personally. Even if you don’t make a sale, you have potentially made a friend.
I would love to hear your opinion! Where do you get most of your customers from?
