A New Look at the 80/20 Rule

The economic recession has made all of us rethink our marketing plans. What
used to work without fail is now either working poorly or not at all.
Companies need to go back to the drawing board and start again with the
basic truths of marketing.

One of the most consistent and true basics of marketing is the 80/20 rule,
also known as the Pareto principle. According to Wikipedia, "The principle
was suggested by management thinker Joseph M. Juran. It was named after
the Italian economist Vilfredo Pareto, who observed that 80% of income in
Italy was received by 20% of the Italian population. The assumption is
that most of the results in any situation are determined by a small number
of causes."

When applied to business, the Pareto principle will show that 80% of
income is generated from 20% of the customer base. Or it could be stated
that 20% of your efforts result in 80% of your financial rewards. Of
course, this is not true in every instance, but it happens enough that
business owners should take a look at their marketing efforts for examples
of the 80/20 rule.

Consumers Are Slow to Spend

Most businesses have the mindset of looking for new customers to bring in
business: advertise in a journal, buy a list and send out a direct mail
campaign, or send out an email blast. But, the problem is that in this
economy, even though your message may be received by the right audience,
sales are dismal. Consumers are slower to spend because they are already
in debt and worried about job security. They are only making essential
purchases.

Rather than constantly looking for new customers, identify the 20% of your
customers who are providing the 80% of your income. Instead of putting a
plan together to reach out to loyal customers, put a plan together for the
brand to be more loyal to the customers.

Build the Brand and Drive the Purchase

A company's marketing dollar needs to be spent on not only building the
brand, but it's got to drive the purchase. Seth Solomons, Global CMO of
Digitas, had this to say in an interview with Direct Marketing News, "We,
as marketers, grew up on the direct marketing side always thinking about
getting the best customers and asking, 'How do we get them to be more
loyal to us?' We believe that in today's environment we need to be a loyal
brand vs. looking for loyal customers. Loyal brands are those that deliver
utility and value and listen harder and try to serve consumers at every
interaction. It goes back to every dollar having to multitask."

Relationship Marketing

One of the best ways to be a loyal brand is to practice relationship
marketing. Regularly demonstrate appreciation of your customers at every
interaction. Cara Wood, Editor in Chief of DMNews, suggests, "entertaining
content in marketing e-mails, timely direct mail reminders, product
recommendations in a search, landing page or e-commerce site and call
centers equipped with purchase history and product availability
information."

Reinforce the purchasing patterns of the 20% of your customers who are
bringing you the 80% of your business. Consider offering that targeted
group special offers along with regular information about the brand and
its products.

New Product Introduction

Brand loyal customers can be your best group to introduce a new product or
get their advice on a new product you are considering. As an added
benefit, they may identify a product that you might have not even
considered. One of my favorite stories about this is a company that
manufactured a popular fishing tackle box in the 90's. One of the
company's reps discovered that the tackle box was also being used by girls
for earrings and hair accessories.

The company took this information and started manufacturing the fishing
tackle box in bright pinks, yellows, greens, and blues. They renamed it
and started marketing it to tweens and it became an instant best seller,
even more popular than the tackle box product line.

This story illustrates the point that it pays to survey loyal customers to
get their opinion on what's working and what's not. This group wants your
company to succeed, so their ideas would tend to be positive, rather than
negative. Maybe they are using your product in innovative ways that you
never even considered.

Conclusion

In this economy, companies need to look at innovative ways to market,
along with clever ways to save money. Retaining your customer base is key
to surviving a recession, but even more important is identifying those 20%
brand loyal customers. Partner with these customers to make sure that they
are your priority and not lost in the shuffle to generate sales with far
reaching campaigns. Consider setting up ongoing marketing campaigns to
brand loyal customers in addition to broad based marketing campaigns to
bring in new customers.

Comments

[Postcard Printing]

Great advice! I will definitely take them to heart when considering my next steps. Thank you so much.