Let’s face it, as business people who are in the business of selling and marketing we spend most of our time asking ourselves different versions of the same two questions;
How can I get more customers/revenue?
Why can’t I find enough time to dedicate to selling/marketing/nurturing?
Along the same line most of us have heard of the 80/20 rule [or Pareto’s Law, for the academics]. 80% of your revenue/profit will come from 20% of your customers. Conversely 80% of your effort will be spent generating only 20% of your revenue profit.
Common current thinking says you should divest yourselves of the unprofitable customers and only keep the profitable ones. Sadly, all this means is that you are only changing the numbers in Paretos equation. Let’s not spend too much time on divestment of customers. If you want to know more the Harvard Business Review wrote a pretty good article.
How about this for an idea. Keep the other customers, build processes to reduce the drag they have on your business and target your sales efforts to gain the people you really need.
In the world of ‘digital everything’ I believe you should think about things in a different way. After all, profitability is not the only metric we should be measuring on. Customers can go from unprofitable to profitable and vice versa. We have had customers ourselves who have “graduated” from unprofitable to profitable. It does happen.
I have a completely untested, new rule I would like you to consider. I call it the 0.1% rule. It works like this:
- Determine how many good quality customers you need to keep your business happy, profitable and gainfully engaged. Let’s call this number “x”
- Multiply “x” by 1000
- Set your strategy to attract an audience of people that may have an interest in your product or service that is x times 1000
Then sit back and watch them disappear through this process.
- Educate them exactly what it is you do and what you would like to do for your best clients
- We think only about 10% of these people will be genuinely interested in further info
- Provide specific examples of work you have done and the way you think
- We think that only 10% of these people would welcome a call or meeting
- This leaves you with 0.1% of the original number. It doesn’t sound like much but it is probably your sweet spot.
As an example;
- Say you wanted 16 good customers.
- Start with 1600 for stage one
- This will decrease to 160
- Undertake stage two
- This will decrease to 16
Voila! Actively engage with these 16. Put the majority of your next phase effort into these guys. You’ll get 16 good clients and then to take the rule further probably 3.2 [20%] great clients.
Rather than the other option; 80% rubbish clients and 20% mediocre ones.
The best bit is you haven’t actually asked anyone to go, or let them think you don’t love them. They have done it for themselves. The trick is to keep doing this process and refining it as you go.
Not to build the bottom number [though it can] but to generate new clients to replace old ones and to encourage rubbish ones to be good ones.
At Cuckoo, we love numbers! Get in touch to learn more about how our savvy strategists can work with you to improve the numbers in your business.