Research verifies that the 80/20 rule summarizes the stable relationship of inputs to outputs—including the impact of customers on the profit of a business. According to this universal law, a business can predict that the most profitable 20% of its customers generates 80% of its profit from customers and that customers in this top market segment are 16 times more profitable than customers in the bottom market segment. Thus when a business replaces all customers in the bottom market segment with new customers in the top market segment, the business can expect to quadruple its profit from customers.
Virtually any business can achieve this amazing outcome by fully implementing the three steps of a top market strategy:
- Segment customers by their profitability, and distinguish the most profitable 20% of customers.
- Select this top market segment as the target market, and focus resources on these loyal, heavy users.
- Execute research-driven marketing strategies to attract and retain customers in this target market.
This book reveals insider secrets for business success by demonstrating how to dramatically multiply profit from customers:
- Part I reviews the fundamentals of marketing and survey research.
- Part II describes the 80/20 rule and its previous applications.
- Part III applies the 80/20 rule to profit from customers.
- Part IV illustrates each of these steps with a practical case example.
- The Appendices document how to accomplish these steps using Microsoft Excel software.
This new application of the 80/20 rule empowers managers and marketers to attract and retain highly profitable customers, thereby quadrupling their profit from customers.