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Only on Are Customers Always Right?

Posted: January 11, 2012

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“When you sort clients by their profitability, this universal law predicts that the top 20% of your customers will generate 80% of your profit. Conversely, the bottom 80% of your clients will generate only 20% of your profit—and virtually all of your complaints. This means you should target highly profitable clients with a top market strategy.”

Your business can profit from the 80/20 rule by enacting these steps.

  • Distinguish your top clients. Realize that your top clients are much more profitable than your other customers. Identify ways the top 20% of your clients differ from others. What characteristics do your top customers have in common?
  • Delight highly profitable clients with a top market strategy. Create a marketing strategy that responds to the desires of your top clients. This strategy will retain top customers and attract similar prospects. Focus your resources on converting these prospects into highly profitable new clients.

“Successful spas and skin care salons use a top market strategy,” Kruger remarks. “They treat their most profitable clients as honored guests. Their staff remembers their preferences and inquires about their activities. Top customers trust the staff to keep their secrets confidential. They love being honored, so they recommend them to their friends.

“Sometimes newbies make excessive demands that upset more profitable customers. But successful spas and skin care salons do not acquiesce to these complainers. Instead, their staff refers them to a competitor that can ‘better serve their needs.’ This policy helps these businesses retain and attract more profitable customers,” says Kruger.

When you replace customers with more profitable new clients, the 80/20 rule predicts that your profit from customers will quadruple.