How a New Take on the 80/20 Rule Can Boost Your Business

You’ve all heard the adage that 80 percent of your business comes from 20 percent of your customers. By this logic, someone may (erroneously) assume that if a business has 1,000 customers, it can expect to see 200 of them on a regular basis. Of course, if you’ve been your own boss for any length of time, you know better. 

Does this mean that the 80/20 rule is bunk? No. Instead, small-business owners may want to interpret it this way: At least 20 percent of the customers who enter your virtual or physical front door have the potential to make a purchase, come back or refer a friend—even if they were only browsing. All you have to do is figure out which 20 percent they are. Since it won’t be obvious, you have to create the type of experience that inspires them to take action.

To do this, you’ll first want to separate your customers into three groups: most active, existing and new. Sounds easy, right? Except that it can get tricky when you’re separating most active from active. To identify the most active, prioritize them in the following order:

• How engaged they are with your business. They may not be big spenders, but they may be vocal fans both online and in person.
• Whether they refer business. See if they’ve taken you up on a recent deal or offer, or if they’ve sent a new customer your way. (By the way, if you’re not tracking referrals, now would be a good time to start.)
• Frequency of purchases and average amount spent on each order. 

Next up are six recommendations for engaging these different audiences based on their relationship with your business. You’ll find that some of the tips are more appropriate for your most active customers, some are aimed at new customers and still others work well across the board.  

1. Create awesome loyalty programs. While loyalty programs are relatively easy to set up, they don’t always drive repeat business. Make sure yours is successful by including the following three elements:

• Make the goal attainable. For example, if you run a spa, offer a free service after five visits, not 10.
• Make it valuable. Reward customers for their loyalty with deals on your most popular items.
• Be creative. Go beyond punched cards and loyalty apps to create a memorable experience. For example, one restaurant presented an offer in a sealed envelope at the end of the meal. Only when the customers returned were they able to open the envelope. Inside it was a special offer, which ranged from a glass of wine to a free dessert to a free meal.

2. Break out the velvet ropes. Host a private event for your VIP customers such as a wine tasting or meeting a celebrity author or chef. 

3. Think outside the office. Surprise and delight your top customers with special thank yous that have nothing to do with your business. For example, offer them great seats to the theater, concert or a sporting event.

4. Create the kinds of offers you’d kill for. When done right, deals and offers are a great way to engage customers and inspire them to refer business. Just be sure that the deal is really terrific and it’s only presented to existing customers who introduce someone new to your business.

5. Be cool online. Make your social media presence fun and interesting by combining great content and exclusive offers only to online followers. This will prompt customers to look forward to engaging with your posts and it will increase the likelihood of future purchases. Not to mention that each time they interact with you online, your business will be on the radar of their network of online friends.

6. Refill the quill. Maybe your business doesn’t lend itself to private events or front row tickets. There’s still a lot to be said for handwritten, personal thank you notes to express your appreciation.

If you take these extra steps to recognize your most active customers, you’ll see more than 20 percent of them respond, engage and publicly support your business.

Read more articles on customer service.

Photo: iStockphoto