A New Look at the 80/20 Rule
By Michelle Howe
The economic recession has made all of us rethink our marketing
plans. What used to work without fail is now either working
poorly or not at all. Companies need to go back to the drawing
board and start again with the basic truths of marketing.
One of the most consistent and true basics of marketing is the
80/20 rule, also known as the Pareto principle. According to
Wikipedia, “The principle was suggested by management thinker
Joseph M. Juran. It was named after the Italian economist
Vilfredo Pareto, who observed that 80% of income in Italy was
received by 20% of the Italian population. The assumption is
that most of the results in any situation are determined by a
small number of causes.”
When applied to business
80% of income is generated from 20% of the customer base. Or it
could be stated that 20% of your efforts result in 80% of your
financial rewards. Of course, this is not true in every
instance, but it happens enough that business owners should take
a look at their marketing efforts for examples of the 80/20
rule.
Consumers
Most businesses have the mindset of looking for new customers
bring in business: advertise in a journal, buy a list and send
out a direct mail campaign, or send out an email blast. But, the
problem is that in this economy, even though your message may be
received by the right audience, sales are dismal. Consumers are
slower to spend because they are already in debt and worried
about job security. They are only making essential purchases.
Rather than constantly looking for new customers, identify the
20% of your customers who are providing the 80% of your income.
Instead of putting a plan together to reach out to loyal
customers, put a plan together for the brand to be more loyal to
the customers.
Build the Brand and Drive the Purchase
A company
building the brand, but it’s got to drive the purchase. Seth
Solomons, Global CMO of Digitas, had this to say in an interview
with Direct Marketing News, “We, as marketers, grew up on the
direct marketing side always thinking about getting the best
customers and asking, ‘How do we get them to be more loyal to
us?’ We believe that in today’s environment we need to be a
loyal brand vs. looking for loyal customers. Loyal brands are
those that deliver utility and value and listen harder and try
to serve consumers at every interaction. It goes back to every
dollar having to multitask.”
Relationship Marketing
One of the best ways to be a loyal brand is to practice
relationship marketing. Regularly demonstrate appreciation of
your customers at every interaction. Cara Wood, Editor in Chief
of DMNews, suggests, “entertaining content in marketing e-mails,
timely direct mail reminders, product recommendations in a
search, landing page or e-commerce site and call centers
equipped with purchase history and product availability
information.”
Reinforce the purchasing patterns of the 20% of your customers
who are bringing you the 80% of your business. Consider offering
that targeted group special offers along with regular
information about the brand and its products.
New Product Introduction
Brand loyal customers can be your best group to introduce a new
product or get their advice on a new product you are
considering. As an added benefit, they may identify a product
that you might have not even considered. One of my favorite
stories about this is a company that manufactured a popular
fishing tackle box in the 90′s. One of the company’s reps
discovered that the tackle box was also being used by girls for
earrings and hair accessories.
The company took this information and started manufacturing the
fishing tackle box in bright pinks, yellows, greens, and blues.
They renamed it and started marketing it to tweens and it became
an instant best seller, even more popular than the tackle box
product line.
This story illustrates the point that it pays to survey loyal
customers to get their opinion on what’s working and what’s not.
This group wants your company to succeed, so their ideas would
tend to be positive, rather than negative. Maybe they are using
your product in innovative ways that you never even considered.
Conclusion
In this economy, companies need to look at innovative ways to
market, along with clever ways to save money. Retaining your
customer base is key to surviving a recession, but even more
important is identifying those 20% brand loyal customers.
Partner with these customers to make sure that they are your
priority and not lost in the shuffle to generate sales with far
reaching campaigns. Consider setting up ongoing marketing
campaigns to brand loyal customers in addition to broad based
marketing campaigns to bring in new customers.
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Copyright 2009 Michelle Howe
Michelle Howe, MBA, president of Internet Word Magic, an Internet
marketing and PR agency. Want to know how to easily write
articles that drive traffic to your website? Go to
http://www.InternetWordMagic.com for the FREE report “The
Five-Step Plan to Article Success.” You’ll also receive a FREE
chapter from Michelle Howe’s 2007 IPPY award winning book, “Turn
Browsers into Buyers: Secrets for Turning an Internet Profit.”
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