There is a business strategy business model making the rounds lately with consulting firms, which is really cool. It’s called 80/20 and relates to the Pareto rule. They’re applying it to businesses in a very aggressive way, and it’s creating all kinds of extra profits and growth rates. What I want to talk about is how marketing fits into the 80/20 business strategy.
First, here’s a reminder of what it is we’re talking about. There’s a natural law in business – and you can look at your data and see that it’s probably true for you too – that about 20% of your customers account for about 80% of your profit. The 80/20 business strategy is about how to cull unprofitable customers or customers that don’t make sense and reduce that focus to increase profits; but also how to adjust how much time you spend on different customers. Your best-performing, most profitable customers should get more attention from your business than other customers.
So what does that have to do with marketing? There are a couple of things for you to think about. First, how much attention do you give to your customers? Do you “peanut butter” spread it across all your customers with your website, your helplines, and in general how you market and how your sales team works? If so, you’re missing an opportunity to align with the 80/20 approach. Focus your investment so that 80% of your marketing is targeted at your 20% most profitable prospects and customers. Secondly, marketing is about relationships. If you do this right, you don’t have to alienate companies that don’t fit in that top 20%.
Have a support plan for all of your customers. If they are customers that you’re deciding no longer make sense for you to sell to, you need to have an exit strategy, a transitional process with them. That’s a win for them, as well as for you. And for those in “the middle” that maybe aren’t the most profitable, but you still want to keep them, while investing less in them? You need to find ways to do that creatively so that they get what they need, even though you are spending less on them. Don’t optimize your operations at the cost of goodwill towards you from your customers and not being able to satisfy your customers the way you need to.