by Tony Vidler
Pareto’s 80/20 Rule:
You’ve heard it before, and even if you’ve never done any serious analysis to prove whether it is absolutely correct in your business or not, you instinctively know it to be true…
But are you doing anything with this knowledge?
The principle is just that; a “principle”. It is not an absolute Law Of Physics or anything. Some years ago we did an exercise in our own practice where we had close to 6,000 retail clients and found that nearly 70% of our revenue was coming from about 25% of the customer base. Pareto’s Principle largely holds true in my experience.
Knowing that means nothing if we don’t do anything with that knowledge.
Many service firms fail to adequately distinguish between those premium customers who provide the bulk of the firms revenue, and the average customer who contributes essentially a meaningless proportion of revenue. All customers deserve a minimum level of service of course, and that minimum level of service should be set at a relatively high standard when it comes to frequency of contact, providing useful information and tools, and assisting them with problem resolution. After all, many of those “small” clients do grow to become, and replace, some of the 20% of customers who are contributing the bulk of the revenue. They must be nurtured.
But those who are the top 20% now…are you doing the right things with them to strengthen the loyalty and deepen the relationship?
I am not talking about gifts, events or rewards – although they are all tangible ways of expressing gratitude and recognising the importance or significance of the business relationship, and they matter.
The thing which I believe makes the biggest difference to keeping the Top 20% happy and continuing to be the Top 20% is the same thing that goes into making great relationships with the toughest critics out there: teenagers.
Teenagers are challenging for sure, and actually way more challenging than the toughest of clients. Finding the right mix of “give them space”; let them try some things on their own while you are carefully setting and patrolling (and then continually re-setting) boundaries; but being available….it’s a tough thing to get right. What makes it even tougher of course is that even if you have 2 or 3 teenagers you are managing at the same time you find out that each of them requires quite a different mix….dammit. It turns out that these individual creatures are actually quite individual, and each needs a different blend of time and attention.
It is that different blend of time and attention which is where the analogy fits (hopefully!). The Top 20% are all different people, with different needs and differing levels of competency and knowledge of their own, and different demands. Think of them the same way as we think of managing teenagers.
With teenagers the trick appears to be get the balance of time and attention right at the individual level. Be available, but don’t be intrusive. Be responsive. When they do want to spend time with you, be right there in the moment. Nothing less than 100% attention and understanding works. Let them set the pace and intensity of the interaction and conversation. Don’t judge…they are different people to you, and have different experiences and thoughts, and they are still learning and experimenting…their perspective on any given topic may be a deeply held belief right now, but with time and education and further experiences they will shape those opinions themselves. They will make better decisions over time. That is the way of life, and it is the same way we all travelled through life and got to where we are today.
The point is that the trick to getting it right with those most highly valued clients is to manage the relationship the way we should with a teenager.
Time and attention matters more than anything. But it is the time of their choosing…and 100% of our attention at that time.
You may also find this post useful: Prepare for the 80% that your Top 20% hold0