When I was operating a full-time accounting practice in Auckland, I once did a Pareto analysis on the business. That exercise confirmed what Pareto always tells us that 80% of my fee base (or turnover) came from 20% of my clients. But then I took it further and found that 50% of my turnover came from 12½% of my clients. That was pretty scary stuff when I first saw it but then I decided to use that to my advantage.
Simply put, I used the knowledge base of that top echelon of clients to help to grow my practice and this can be done in any business. If you know who your top 12½% are, there will almost always be a common thread between them. Once you know what that common factor is, you can glean a wealth of information which can be used in marketing your particular product or service. Not only that, those customers themselves can help you to grow your business.
A USA women’s clothing retailer used that same strategy to identify or profile their ideal customer which they called Mary. They found out what Mary’s habits were, what her likes, dislikes and other idiosyncrasies were, so that in the end they had a real picture of what Mary looked like.
From that point on, everything they did was centred around Mary to the extent that in sales product meetings, the question was always asked “Would Mary like this?” or “Would Mary like that?” “Would Mary buy that?” And every time they made something that they thought Mary would like, it sold like hot cakes. And the company grew from a suburban-based retailer to 465 stores.
So it is worth the effort and if you do a quick sum on a small business with say $500,000 turnover from 500 customers, you will soon see that if the top 12½% purchase $250,000 then just by gaining ten more like customers, you can increase that turnover not by the average spend of $1,000 per annum but by $40,000 – that’s 8% from only ten customers. So it’s worth the effort to find out who your ideal customer is so that you can increase your turnover with the very minimum effort.
Call me if you would like a Client Advisory Panel facilitated for your business. It’s fun and can be very enlightening.