There is an overwhelming array of marketing and sales tools and techniques available for business owners. Countless books promise to reveal the secret ingredients to success in five easy steps.
With such abundance, where should you begin? My advice, start with a simple yet powerful tool discovered by Pareto in the 1890s – the 80/20 Rule. This principle states that there is an imbalance between effort and results, often following an 80/20 ratio. In simpler terms, it means:
- 80% of your revenue comes from 20% of your customers.
- 80% of customer complaints are caused by 20% of your problems.
- 80% of new customers are acquired through 20% of your marketing efforts.
- And the list goes on.
How can you apply the 80/20 Rule to your marketing and sales plans for your small business? Here are some practical examples:
- Identify your Vital Marketing Activities: Determine the 20% of your marketing activities that generate 80% of your new clients. For instance, evaluate whether free workshops attract new clients and assess the role of networking in filling those workshops.
- Prioritize Your Time: Be selective when scheduling meetings or coffee sessions with prospective clients. Know your Ideal Client, qualify properly and adopt a ruthless approach to ensure you allocate time to the most promising leads and opportunities.
- Nurture Existing Clients: Never underestimate the value of your existing clients. Identify the 20% responsible for 80% of your revenue and focus on nurturing these relationships. Provide additional value and support to these key clients in any way possible. These are your “diamonds” and they will continue to buy and refer other like-minded clients.
- Analyze Cost Efficiency: Apply the 80/20 Rule to your costs. Examine your marketing expenses and determine if you’re allocating resources effectively. For example, if networking efforts are consuming 80% of your marketing budget without yielding significant results, consider redirecting those resources to other activities that generate new clients.
- Evaluate Return on Investment: When embarking on new initiatives, such as a website redesign, consider the point at which the additional cost ceases to have a significant impact on your marketing results. Assess the return on investment (ROI) and ensure that your expenses align with the potential benefits.
- Play the Numbers Game: Embrace a quantitative approach. Determine how many prospects you need to acquire a single new client. Calculate the number of new people you must engage with to generate each new prospect. This analytical approach enables you to focus your efforts on the most impactful areas.
Embrace the 80/20 Rule and optimize your marketing and sales strategies for your small business to enhance your chances of success and drive meaningful growth. Complete our Strategic Focus Scorecard to find out how positioned you are for your business growth.