👑 Should you focus on your top customers?

Neiman Marcus makes 40% of it’s sales from the top 2% of it’s customers. It is like the Pareto Principle on steroids. If you look into your business, you will almost certainly find a similar pattern - often, a tiny proportion of people create an outsized proportion of results.

1. But would you be right to ignore the other 98%?

   
   

2. How can we best leverage this effect? Particularly across more aspects than just revenue.
   

The first question has a fairly simple answer: It depends what stage of business you’re at (check out the business hierarchy of needs). If you’re just starting out, you need to focus on revenue. If you’re established, we shift strategy to focus on profit. This need to shift strategies is something most entrepreneurs miss - they forever stick with the same strategy they started with, which leads to stagnation and misery. Your business evolves, you evolve, your strategy needs to evolve too.

• If you’re optimising for revenue, then you usually want to continue to cater for the 98% at the moment. The 2% might not be big enough, or easy enough for you to find, to support the revenue goal you need at your stage. Besides, you will learn a lot of lessons from the 98% that will help you to move your business to the next stage.

  
  

• If you’re optimising for profit, then you often want to focus on that 2%. That doesn’t necessarily mean you reject the 98%, but it does mean you should be more ruthless when dealing with them and they are not your primary focus. Something many people neglect is that you can influence customers to become part of the 2%, which leads me to my next point.

How can you leverage this effect?

In my experience, people are too narrow in their focus when applying the pareto principle. People normally apply pareto to daily productivity (what 20% of tasks lead to outsized rewards) or offers (what 20% of my offers or customers lead to profit). There is a galaxy of options to usefully apply pareto in your life and business, here are some of my favourites:

• Relationships: Who are the top 20% of people in my life that make me happy? Who are the bottom 20% who make me most sad? I analyse this every year from both a personal and professional point of view as part of my favourite end of year exercise.

  
  

• Wellbeing: What are the top 20% of activities that lead me to feeling fulfilled, happy, sad, relaxed, energised? How can I do more or less of them?

  
  

• Quality: What are the top 20% of things I do which signal quality in my offer? What things do I do that my customers most appreciate? How can we offer a 5 star experience most simply? Applying this one lesson with focus on quality is how I helped Ghayth go from $2k per month to $23k per month within 8 weeks.

  
  

• Referrals: Who are my top 20% referrers (who sends me the most clients, or the best)? How can I help that top 20% to refer even more? How can I make the 80% act more like these top 20%?

  
  

In each case, I find it useful to analyse what makes that top 20% different from the rest. What characteristics separate them at a personal level? What did I do differently with them? What do they do differently than the others? Why was it different?

Then, we can look to implement the lessons: How can I help the 20% to become even better? What can I do to help the other 80% be more like the top 20%?

It is a simple question, with profound implications. I regularly go through this fairly quick exercise with clients, and it invariably leads to great insights and results.

Give it a go today, pick one “arena” to focus on (relationships, wellbeing, quality, referrals, or other), and identify the top 20%. It will be worth it.

I shared this in my Work Smart Wednesday newsletter. Want the full set of related insights? You can read them here: https://worksmartwednesday.substack.com/p/work-smart-wednesday-october-23-2024

👋 Want to work together?

When you’re ready, here are 2 ways I can help you:

🔍 Clarity Call - We will discuss your situation and create a step-by-step action plan together so you know exactly what you need to do next for maximum impact

🧩 Are we a good fit together? - See whether you and I are a good fit together by answering this short quiz. You will immediately see whether or not we are a good fit, and receive a personalised answer for what the next best step will be for you based on your answers.

💡 Want more from me? Find more on my LinkedIn profile.

🎯If you found this useful, don’t stop here. Sign up for Work Smart Wednesday and get smarter work tips every week.