The Rule of 80-20 says you get 80% of the distance to your goal with 20% of the effort. In the world of sales, the 80-20 would mean that 80% of a company’s revenue comes from just 20% of its customers.
Does that work? Can you apply that “Rule” to sales accurately?
Certainly, the perception exists. I hear a lot of folks apply the Rule of 80-20 to sales as scientific fact. When I was researching my latest book, Keep Your Customers, new information came to light that examined this “Rule.”
Does that hold up under the rigors of academic research? The short answer is “no.” And that’s pretty interesting. I discuss the research, the implications for customer retention, and much more on the CX Leader Podcast with Pat Gibbons, by Walker.
“Well, the numbers don’t lie. I know that your listeners are steeped In them. I came across some really fascinating research when I was starting to write the book. It showed that a company’s most loyal customers don’t necessarily follow that Rule of 80-20. It’s not, In fact, true that 80% of revenue comes from the top 20% of customers. The research showed that It was around two-thirds to three-quarters of the revenue coming from those customers.”
But when you go beyond revenue, things get VERY interesting.
The research itself is pretty jaw-dropping.
There are major implications for sales, profit, and customer loyalty. You ignore them at your peril.
CHECK OUT the rest of the podcast.