skip to Main Content

Looking For Growth – Pareto Your Customers

The Pareto Principle

The Pareto Principle is the theory that 80% of effects come from 20% of causes. When it is applied to business theory, people say that 80% of your profit will come from 20% of your customers.

Consider Profit but a Pain

So if you are looking at how to grow your business profitably, conducting research on the customers who make you the most profit seems like a sensible starting point. Now there are some important caveats to throw in here for example are client might be highly profitable but be a complete pain in the butt to deal with ( paying late, asking for lots of changes / modifications, leaving orders late and expecting immediate delivery) so these elements need to be taken into consideration.

Lets consider how to practically do this research / analysis

Looking For Growth - Pareto Your Customers

Action to Complete the Pareto Analysis

  • Write down a list of your “Top Ten” clients by profitability
    • Now for some this will be easy, they will have the accountancy systems in place to run a report and get this list in seconds
    • For others identifying the top 10 by profitability will be a more onerous task involving discussions with your accountant
    • For many “true profitability” will be incredibly difficult to identify
      • Many of the manufacturing companies I work with initially have no idea about the “real” profit they make when designing / manufacturing a new product. With design costs, research, additional production time just being lost within the system. This often means that a project that you thought would be highly profitable, simply ends up covering costs or losing money
    • Top Tip: Make sure you have accurate information available – its pointless working to get more customers who have the profile of a loss making customer
  • What characteristics do these Top 10 customers have in common
    • The amount they spend
    • Number of orders placed
    • Type of person you deal with
    • Type of products / services they are buying
    • etc
  • Talk to them
    • Don’t Email them
    • Don’t send them a survey (printed or online)
    • Talk to them, ideally face to face, with specific time allocated to an open and frank discussion
    • Find out about how they heard about your business / product / service
      • Now I know sometimes this can be difficult (especially) when they have been a customer for a long time, but its useful information to gain
      • For more recent customers, did they find you on the web, was it via a referral etc.
    • Identify how they use your product or service ( especially important if your product is sold through central procurement, so you sell the product but have no idea about the end application)
    • Ultimately we want to be able to be able to develop a profile for these customers

Want to pick up the phone and speak to us about your Strategy, Website, Marketing or Business Development project?
Call us on: 01733 361729

Now answer these questions:

  • What do they have in common?
  • Where did you meet them?
  • How did they find you?
  • Where can you find more customers like them?
  • Do you put in significant effort to acquire more customers like them?
  • Do you have similar clients in the pipeline
    • In fact do you have a sales pipeline
    • If you do have a pipeline, how do you manage it, do you have the CRM systems and processes in place
  • What actions can you take over the next 30 days to acquire a new customer like them
    • Note: recognising that some prospects can take months / years to nurture and develop before they can purchase, unless you start the process you will never complete the sale

In Summary : Looking For Growth – Pareto Your Customers

  • Identify your top 10 most profitable customers
  • Analyse them
  • Talk to them to accurately understand why they choose you
  • Research how to find more customers that fit this profile
  • Take Action – to start finding the “right” kind of customers
  • Don’t get distracted – other orders may be eating into your time and losing you money

For more information on marketing and business development click here To contact an experienced marketing and sales professional click here

Looking For Growth - Pareto Your Customers
is your website losing you sales talk to Blue Dolphin for a free website audit

FREE Website Performance Check

  • Speed plays an important part in website performance how well does yours perform on desktop and mobile?
  • Is your site mobile responsive if not how many customers are you losing?
  • Is your site HTTPS?
  • With GDPR in place is your site legally compliant?
  • Find out about loads more website performance issues
is your website losing you sales talk to Blue Dolphin for a free website audit
Back To Top