The 80/20 Rule of Loyalty
This rule is derived from the Pareto´s Principle which specifies that the 80% of the results comes from 20% of the effort. This idea has been extrapolated from economical demography to business and other fields and seems to show a similar behavior.
If we use this idea to our advantage we can spot the fraction of customers providing the company with the biggest slice of the year. You probably already know who the major customers are for your business. But do you know in detail such thing as:
- What fraction of your total customers they represent?
- If they are “seasonal clients”? (Appearing in a particular time of the year).
- How much of your staff is working with them?
- How´s the credit history they have with your company?
- Do you have a “task force” for their requirements or anyone in your staff can jump in the account?
- Have you provided the proper training to your staff to support them?
- How well are your communication channels? (Are you getting in touch with the decisions makers regularly?)
- Do you “stop the presses” when they have an emergency? (If so, are you putting on hold any other client?)
- Are you responding on time to their dead lines? Are these realistic?
- And most important: What number ($) they represent in your working year?
These questions and many more need to be answered to assure you are getting closer to know your 20% most important ones. This doesn´t mean you are sending to end of line the rest of your clientele, but it does mean that you have to establish a clear set of protocols to work with them.
Here at Gould Design, Inc. (GDI) we work to attend with quality methodology to every single one of our customers. To start, we designate a veteran team member to attend to new customers, ones with large-sized projects and others to attend a high volume of work but less in complexity. GDI keeps growing and investing its own resources to enhance our Professional Development program to assure the proper satisfaction our customers. As we continue to adhere tot the 80/20 principle, our client base continues to expand.
The advantages of attending your core of business is the same of having a healthy heart: How much this one muscle represents in comparison with the rest of your body? A heart beating properly is what keeps you alive. That´s why it is necessary to assure the loyalty of this fraction of your customers: They could be supporting a big part of your operation.
The main reason you need to establish a way to understand and deal with this important sector of your customers is also is a way to be aware of not depending only on a few of them to be your main revenue stream. Why? This makes your company vulnerable to major shifts such as:
- Credit limits
- Payment history
- Software updates
- Managerial changes
- Terms of negotiation
- Working conditions
- Expectation changes
- Increased (or decreased) workflow
So if you dig deep into this information (which is already in your hands) maybe you will find unexpected surprises you did not anticipate. Allowing your business to depend on 20% of your clients could leave the other 80% looking for a new source in the future. Or maybe a client you didn’t used to pay too much attention is actually adding an unforseen block in your income structure.
Have you given this proportion of customers to focus on a special loyalty policy? Do you have another number? Please share your thoughts in the comments section.
Javier Dominguez – Design Professional
Gould Design, Inc.