You probably heard before the 80/20 Rule which states that :
- 80% of your revenues are generated by 20% of you customers
- 80% of your profits come from 20% of the products
In each of the above cases, 80% of your results will be achieved by 20% of your activities.
How can you use this concept to improve your business profitability? The answer is simple. You need to focus on the top 20% of your clients who drive the majority of your revenues. You need to pay extra care to those people. Our problem is that we tend to take those people for granted. We feel we don’t have to worry about these customers because they love us already. We get lazy with these customers because we know these customers are profitable. We then invest enormous effort and resources to try to make our money-losing customers profitable. We end up making those money-losing customers the focus of our marketing. The reason for this in my opinion is that entrepreneurs are usually very proud of their products and services. They cannot imagine that someone would reject them. They would go extra miles to convince others of the merits of their service. So they spend a lot of efforts trying to chase this segment of customers who really cannot care less about what they have to offer.
The truth is money-losing customers are your deadweight and you will be better off if you get rid of them. These customers will never be profitable no matter how hard you try to please them. You should fire a bad customer just as you fire a bad employee. If you do not get rid of bad employees, the good employees will leave and if you do not get rid of the bad customers, not only the good customers will leave, but many of your good employees will leave as well. This step alone has the potential of increasing your profitability noticeably.
Your next step is to give your top 10% or 20% of customers a lot more tender loving care and to offer more and more of whatever it is that makes these gold-plated customers love you so much. And treat them as the dear and loyal friends they are to you and your business, because you can’t survive and prosper without them.
About the Author
Wessam Mohie is the first Certified Guerrilla Marketing Coach in the Middle East. She helps aspiring entrepreneurs to start and grow their own successful service businesses. Download her FREE report on the 10 Deadly Mistakes Entrepreneurs Make That Can Put Them Out Of Business.