Can 80/20 ever become 60/40?

A general rule of business is that 80% of your revenue comes from 20% of your customers. It's a naturally occuring rule, and even has a name (the Pareto Principle).

However, such a hard and fast rule may cause you to ask "Well, why should we waste time recruiting more business? We can afford to lose our smaller clients and coast on our bigger ones!". I'm sure you see the flaws in this logic. However, there are a couple of important points that not only address this misguided approach, but could actually give your business a shot in the arm.

100% of your clients have something in common. You. And although they may differ in a number of ways, you (as a service provider) are who they choose to fulfil their needs.

Also, because they have chosen you, they are comfortable to build a relationship with you, and you have their trust. However, the 20% that spend the most with you don't trust you more than the other 80% of your clients. They may simply have understood quickly that you can fulfill more of their needs.

The way to level up the Pareto Principle is to ensure that the further 80% are having all their needs met by your company, and also are aware that you can help them as service providers.

There are a number of ways to do this, and a consultant can help to implement a number of methods to address customer optimisation. However, by being intelligent with your up-sell and cross-sell offerings, whilst at the same time having effective retention strategies in place and (most importantly) learning from the data you own, you can begin to tip the balance in your favour.

CRM’s need not be complicated

The last 18 months has seen a radical shift in the priorities held by a business. Unfortunately, too many have been forced to devote the majority of their time and resources to simply staying afloat. And, really, this is totally understandable. The recession has been painful, relatively swift, and really quite violent.

For the last few months, investment in CRM has been championed by a number of sources – seen as the one dependable way to survive a recession and maybe even exit in a stronger position than a business entered. However, there’s a significant gap between large businesses who know they should tighten up their CRM practices, and those smaller businesses who don’t know where to start. And sadly, those smaller businesses are most at risk.

So what’s holding investment back? Two key factors. 

Firstly, fear; a perception that the implementation of a CRM system is incredibly expensive. Our suggestion would be that any steps taken to master your customer data are valuable. Even a little investment (maybe some data management, and some top line customer insight) can change the outlook of the business – knowledge leads to confidence.

Secondly, know-how ; a perception that implementation of a CRM system is incredibly complicated. Again, it needn’t be, and it can be done in-house. As you would expect, we’d recommend that (at least from the outset) external advice is sought on best-practice CRM creation. If this is professionally planned, then a consultant can create a system that can be handed over to the client, and to a certain extent maintained in-house. Admittedly, this isn’t best practice. However, if it allows a client to be more intelligent with their acquisition and retention planning, then it’s a positive step forwards, and a great platform to build on.

Why common sense isn’t always common sense

As a first post to this (hopefully regular!) marketing and consultancy blog, I’m hoping to start debate, or garner support…whilst hopefully avoiding outright hatred of my marketplace opinions!  But whatever happens, it’ll be great to hear all your thoughts!

So…

Marketers, data managers and consultants sometimes fail to grasp why the medium (which they’ve worked in diligently for a number of years) seems to be so difficult for other people to understand. 

However, it’s easy to sit on the sidelines and advise people to radically alter their business plans, even though they rely on the outcome for their livelihood.  With the increased pressure to squeeze a profit within an agency or consultancy environment,  I feel that an element of accountability is disappearing. 

It’s important to want to try something new, because it seems so obvious to marketers and the like to do such, if a client isn’t already.  But it’s necessary to work closely with the client to ensure relevancy and growth at the right pace.  Perhaps sometimes the risk of passing on knowledge and losing immediate profit by teaching a client a new approach is worthwhile, if it generates an atmosphere of trust.  The recession can instill a sense of need for immediacy of profit.  But those businesses that can afford to plan for the future, or at least sew the seeds of customer development, will reap the rewards in the long term.  We shouldn’t sacrifice service for the quick buck.