Your mother didn't know, so she couldn't teach you


Your mother didnt know, so she couldnt teach you

Some of the stuff your mother told you is wrong. There is much wisdom in treating all your children (or siblings) the same but there is no way that you should treat all your customers the same. Let’s explore that a little.

I am going to assume that you have some prior knowledge and that you have a specific goal in mind. Those assumptions are that you have heard of the 80/20 rule and that you want to increase your sales.

Many business owners and sales people look at the 80/20 distribution of their sales over all of their clients and think “If only I could bring the low spenders up to where the top spender is”. And there is a certain amount of appeal in that. Sadly it is just not possible.

Different customers will value what you sell in different ways. For some it is of major importance, for some it is a mere trifle. It has nothing to do with how much they can spend – we’ve all heard how Warren Buffet still lives in the same three-bedroom house he bought when he was quite young and how he drives an older car until basically he is forced to upgrade. His values are different to other people who trade up their house and car whenever they get the chance.

Your customers have a similar range of values, and that’s what makes it impossible to get the low spenders to spend more. There is however some great news. You can get the big spenders to spend even more!

They already value what you sell. They already trust you, they have a good relationship with you. They want to expand on that. If you don’t believe that then consider this: you almost certainly have at least one supplier of whom you think “I’d buy everything they can produce if only ..”. by solving the ‘if only’ you increase your sales.

For many of your best customers your current offers are only the beginning of what they need. Some want a premium solution for which they will pay extra. Some need additional assistance in a related field. Or it could be that a personalised service is the answer.

Your low-spenders have already decided to stop buying from you. The big spenders are buying everything they can because they have a bigger problem they need to solve, they value the solution more than the other guys, they have figured out how to get someone else to pay (even if that’s just the tax man) and the point is that they are the most likely to buy more.

What can you add to your product or service line that will entice them to part with even more money? The answer to that problem is: something of greater value. People buy a product for $20 because they value it more than they value $20. Same goes for a $200 product. It is perceived to have greater value to the person buying it than having $200 in the bank. Likewise a $2,000 product has more value than $2,000 in the bank.

So how do you get a customer to part with more money? Offer something of greater value. As long as the value received is higher than the cost then people with a need will buy.

What problem do your top spenders have that isn’t currently being addressed, or if it is being addressed: can you provide a better solution? If you can demonstrate your ability to fix their problem and deliver value then you have just increased the spend of that customer.

Where does the 80/20 rule come in? The people most likely to have additional discretionary spending is your top 20%. They already give you 80% of your profits, make it easy for them to do even better. By the way, different organisations have slight variations on the 80/20 rule. For some it might be 70/30, and others might be 90/10. The principle is the important part, and that is that the top shelf customer is the one most likely to spend more.

Now consider this: 80% of the 80% of your sales is likely to come from 20% of the 20%. That means that 64% of your sales are coming from about 4% of your customers.

What if you focused on them and increased their spend by 10%, then you added a complimentary product line and did the same thing? What would that do for your bottom line?

The answer to that is I don’t know either, but I do know it is a heck of a lot better than trying to get your current low spenders to do better.

Iain MacKenzie

Founder at Results In A Minute

I have studied and practiced marketing, running a business and getting things done for all my adult life. I fix your marketing issue by showing you a solution designed specifically for your business and transfer the know-how so you learn how to do it or I will refund double your fee. All this will cost you is an open mind and the ability to implement a better way to do business. Nobody else makes you this kind of promise because nobody else does it like I do.

Comments (2)
Wendy Huang

Wendy Huang, Full Time Blogger and YouTuber at A Custom Blog in 4 Minutes

Right to the point Iain! Actually in some cases it may even skew to a 10-90% rule which is crazy. I guess they call this working smarter not harder :)

Iain MacKenzie

Iain MacKenzie, Founder at Results In A Minute

Hi Wendy, I agree, it is often 'worse' than 80/20, and in fact I've seen examples that appear to be something like 98/2! Yes, the whole point is to work smarter, in this case by focusing on the high-value end of the customer-spectrum.