Strategic Business Development - 80/20 Strategy

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Often businesses focus their attention on new customers in a business development strategy, even though they have the highest acquisition cost.  By instead focusing on current customers, sales happen more quickly.

The problem we run into is that not all customers are equal. Statistically, we estimate 80% of customers drain 80% of organizational resources.  Yet we know that only 20% of the customers provide 80% of company income. 

In an 80/20 strategy, we delineate our present customers to identify the 20% providing 80% of the income and the 80% providing 20% of the income.  We then develop customized plans to sell more solutions to the top 20%.

80/20 Target Analysis: (example)

Customer:

Internal customers

Analysis:

  • Top products/services in the company
  • Top buyers of products/services in those companies
  • Identify why the top 2% and 20% of customers buy products

Message to Customer:  

"We are very happy to have you as a successful customer.  We understand that our <product/services> benefits your company <company metrics that are improved by product>.  We’ve put together a custom offering just for your company…"

Process

  • Identify business product and services by income
  • Identify customers by individual product and service based on purchases per year
  • Calculate the amount of time and resources spent per customer per year
  • Calculate the income, time & resource spent by customer
  • Based on the top income spending customers
    • Meet with customer representatives to understand why they buy
    • Analyze the business value they receive
    • Develop a custom offering that is a Win/Win offer that will <improve bottom line or reduce costs> for the customer
  • Present this offer to the new customer, based on increased spending levels.

Keys to Success

  • Strong understanding of top customers
  • Strong Relationship with customer representatives
  • Strong Win/Win offering for customers

Why this works

Most businesses attempt to sell to all customers because they haven’t identified their top customers.  The cost of selling to happy customers is generally less than a quarter of the cost of selling to non-customers.  The returns on selling to internal customers quickly go up. 

Statistically:

  • The cost of selling to a current customer is seven times less than a new customer
  • Selling to the bottom 80% of customers
    will cost four times more than selling to the top 20%
  • Selling exclusively to the top 2% of customers will return a 16:1 ROI when compared with selling to other companies.
  • Selling to the top 2% will lead to 10 times the referrals of the top 20% and 55% more referrals than the average internal customer.

The Business Development Executive Review is a report designed to identify what works and what isn’t working in an organization’s message and marketing process.

In the report we investigate questions like,

  • Who is your 20% customer (who could be and who is definitely not!)
  • Are you pricing your product/services correctly?
  • What is the message that attracts 20% customers?

The final report includes an executive brief which identifies risk, missed opportunities and recommend cost efficient: short term, mid-term and long term tactics to move the company in alignment with company goals and projections.

Learn more about the Business Development Executive Review here >

Topics: Business Development 80/20 Strategies Strategy