The 80/20 Rule and Customer Experience

Working with many kinds of retailers and brands, Loyalty Builders knows customer buying patterns are different for every company. But they all have one thing in common. A relatively small number of loyal customers deliver a disproportionate, and typically eye popping, share of revenue. It’s not always 80/20, i.e. 80% of revenue coming from 20% of customers. Sometimes it’s 60/20, or 50/20, or even 90/10. The point is, there’s always a core group of loyal customers underpinning the stability and growth of every retailer.

Customer Experience is Remembered
What makes a customer loyal? Product selection, quality, and price, of course, but then what? It often comes down to customer experience – things like, product availability, ease of ordering, delivery time, shipping costs, hassle-free returns, rewards, help desk experience, and personalized attention. Losing any customer due to a bad experience is bad, but losing a core loyalist could mean losing 5x or 10x more revenue per customer in just one year.

Limited Resources Should Not Be Shared Equally
When predicted future revenue potential is compared, it does not make financial sense to invest in all customers equally. If supply-chain disruptions mean fewer customers can obtain a popular product… if extended delivery times mean some customers would prize expedited delivery… if prompt access to customer care reps is getting harder… if the resources required to reward and personalize a customer’s experience are limited… then it’s important to know which customers are most likely to fuel that loyal core revenue engine around which the rest of the business depends.

Acquiring new customers is essential, but it’s an expensive treadmill. Turning new customers into Tier 1 loyalists pays compounding long-term dividends. If you don’t have an accurate way to predict revenue potential and churn risk, we can help. Book a free consult here.

Peter Moloney is CEO of Loyalty Builders, a cloud-based predictive analytics service enabling marketers to get revenue lift from more relevant communications to their customers.

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