Pareto and You

Posted by in Customer Service


As I understand it, Vilfredo Pareto (who is credited with being the mentor of Benito Musillini, and was the inspiration for getting the trains to run on time) was gardening one day and noticed that 80% of the peas in his garden came from only 20% of his pea pods. Being an economist, he cogitated on this observation and postulated that 80% of wealth was situated in the control of about 20% of his fellow countrymen. This observation led to further study by one, Joseph Moses Juran, who took it a step further and claimed some universality to the 80/20 rule and named it the Pareto Principal. Juran took note that (give or take a percent or two) the 80/20 rule applied to a vast array of situations in the workplace. 80% of productive work was said to be done by only 20% of employees. 20% of employees on the other hand caused 80% of employer problems. 80% of profits were generated by 20% of customers, only 20% of sales came from 80% of sales efforts and so on. There’s a book Richard Koch's book, " The 80/20 Principle: The Secret of Achieving More With Less," that might be worth checking out. Do you know who your best customers are? Don’t get me wrong, I’m a strong proponent of excellence in customer service for all your clients. However, your top 20% are the lifeblood of your existence. They need to be treated like royalty. Exceed their expectations. Why? Because they are not only your foundation they are your future. There is an old saying in marketing that if you treat a customer badly they will tell 10 to 12 people, treat someone great and they will only tell one or two. So for starters, treat everyone great, but taking that a bit farther, if 80% of your business comes from your top 20% of customers, don’t you want them telling their friends about you? From a marketing standpoint, what can you do special for your special customers? You don’t have to give away the store either. Here are a few thoughts to get you started… Know your customers. Harvey Mackay sends out his sales force with a customer profile questionnaire called “The Mackay 66” (you can download a copy from his website, harveymackay.com). Now unless you are selling high dollar products this is probably not practical for most sales people. The concept is however, valid for every business, the better you know your clients, the better you can serve their needs. Exceed expectations. Don’t make promises you can’t keep. Make promises you not only can keep but can out perform. Anyone who has taken a day off work to sit home and wait for a service call no-show will be more than happy to tell you about it. Warren Buffet talked about spending a lifetime developing a good reputation only to blow it in 5 minutes doing something stupid (I don’t think you need to do a Google search to come up with the name of a politician or two for some examples there). Touch base, early and often. Don’t you just love it when folks don’t return your phone calls…me neither. If you screw up, fess up, the sooner the better. The longer you avoid the issue the worse it gets. If you are in contact with your top 20% on a regular basis you not only avoid problems you maintain good relationships. People naturally like to do business with people they like. Find reasons to stay in touch. Got a special offer? An email to your clients to let them know wouldn’t hurt. And for goodness sakes, ask for referrals! I’m about out of allotted space here so we’ll touch on more in the future. A quick point for both start-ups and ongoing businesses…take the time to identify your top 20% of both customers and prospective customers. It will multiply your returns by a factor of 10.
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  • Sundance
    Sundance
    Great post!
  • lil'bro
    lil'bro
    Yeah, Pareto's rule works... and makes some of us happy. Or not.

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