Fight The Lure Of The 80/20 Rule!

If you are a brand marketer, I can almost guarantee that at some point in time you have invoked the 80/20 Rule.  To be clear, this is different than the 5 second rule which allows you to safely eat any food that hasn't been on the floor for more than 5 seconds.  The 80/20 rule is what happens when marketers say "80% of our sales come from 20% of our customers - so if we can just find and focus on that 20% we can get better bang for our marketing bucks."

Admit it - you have a slide in a deck (or multiple slides in multiple decks) that invoke this rule.  Here is my advice - throw those slides away.  They are the manifestation of everything within us that biases us towards the path of least resistance.

I submit that the 80/20 Rule and the subsequent search for the holy grail of that 20% is indicative of a big problem in brand marketing today.  Forget about the fact that most of the time folks focus on the 20% that deliver 80% of the SALES - as opposed to 80% of the PROFITS (in reality - those 20% are actually your LEAST profitable customers as they are the most price sensitive and buy mostly on deal or with huge discounts).  The real problem is that the 80/20 Rule, by definition, focuses on the status quo and limits your view of your potential market.

Look at it this way - if you buy into the fact that 20% deliver 80%, you are then predisposed to protecting that 20%.  You become scared of doing anything that jeopardizes that 20% and you become biased towards the status quo.  I mean, if what you have been doing is right for those 20% what impetus do you have for change?

The real question you should be asking is "Why can't I get more from the other 80%?"  And, if you start asking that question, you will start looking at the 20% that are your heavy users in a completely different way.  You will start looking at them to try to figure out how they are different than the other 80%.  How do they think differently about your brand?  How do they use your brand differently?  Why do they use so much more than your light or non users?

The goal of asking those questions is not to protect the 20%, but instead to take those learnings and use them to try to convert the other 80% into heavier users. 

So, fight the lure of the 80/20 Rule.  At the very least, turn it upside down.  Don't be content with having 20%.  Learn from them and uncover the secrets to unlocking the potential in the other 80% of your market.

Comments

[Gabriel Rossi- Branding]

Len,

We should also not ignore the real value of each customer (referral value). Some of your clients might end up being more valuable than they seemed.

Most companies and brands have yet to internalize what it is in the first place anyway.

Cheers

Gabriel Rossi- Brazil

[Dan]

I'm a big fan of the 80/20 rule... Or should I say thinking?

When it's treated like a rule, you focus too much on useless measurements and make bad decisions like you demonstrated above. When you just look at one set of stats you're blind to what's really happening.

I love taking a pass at several factors. Size of deal, expectations of repeat deals, the real cost of the deal, etc. and apply the 80/20 rule to them all. If there's any overlap negatively, get rid of it! If there's overlap on positives, push that angle a little more.

That minimizes your chances of killing off something that may be valuable from different perspectives.