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JJPAssociatesDuring the early 20th century the Italian economist Vilfredo Pareto observed a fascinating phenomenon. He found that 80% of Italy’s land was owned by 20% of the population. Following from that he discovered that about 20% of the pea pods in his garden contained 80% of the peas.

Thus the Pareto principle was born or the 80/20 rule as some call it.

Now you’re probably asking yourself what pea pods and early 20th century Italian property ownership patterns have to do with business and marketing.

A great deal actually.

Because understanding the Pareto principle could literally turbo-charge your profits.

And the point about the Pareto principle is that it appears with remarkable frequency. It’s not always 80/20. At the extremes it can be 1/99 or  30/70.

For instance, over a time a portfolio of long held shares will eventually see most of the profits generated just by a very small number of holdings. I know that from personal experience.

But what about business?

Well you’ll often see the same kind of patterns reoccurring. So for instance nearly all your profits come from just a small number of your customers and a small number of your products / services that are purchased far more often than the others. If you use many marketing channels you’ll probably find most of your business comes through just a few of them.

The trick is to home in on those 20 percenters, which are creating 80% of your business.

The super-profitable minority
So a good exercise is to clearly identify that small band of hard core customers, your real fans, who generate most of your profits.

And ask yourself: Who are they? Why are they such good customers? And then…. ask yourself how can I take better care of them and sell more to them? Next how can I find more customers like that?

The needs of that small group should therefore dictate your marketing and offering. It could even take you down the road of specialisation. And that’s a good thing because specialisation usually equals higher profit margins.

Clearly if that minority became 80% of your client base you’re going to start making a lot more money. The ROI on your marketing will go through the roof!

The vampires
At the same time there will be a persistent minority who generate most of the complaints and cause you the most problems, such as refunds. You want to get rid of those people as fast as possible. Ideally you want them to avoid you even.

One of the best ways to do that is to raise your prices. Over and over I’ve observed that most of these whingers are cheap skates, penny pinchers and people who love nothing better than complaining.

If you get too many customers like that they’ll bleed you dry and kill your business. You don’t need their business – let your competition have the pleasure of dealing with them instead.

Premium pricing is a great deterrent for these sort of people.

The 80/20 rule is so powerful that you can hardly afford to ignore it. Embrace it and it could quite literally transform your business and your marketing.


logoSquareA great deal of attention is dedicated to creating compelling copy and an enticing offer that will drive sales. Entrepreneurs and marketing professionals spend a lot of time and money searching for that ‘magic’ ingredient, that holy grail, which will make sales fly.

Without a doubt the offer and the way it is delivered is extremely important. If you don’t get that right you’ll be leaving a ton of cash on the table.

But it’s not the most important factor.

In fact, it’s probably number three on the list.

What matters more – is the quality of your e-mail list. Secondly, it’s the relationship you have with those people. Get those two factors right and the sales process becomes a whole lot easier and more profitable.

Let me illustrate:

Imagine you have a list of IT purchasing managers from the insurance industry. You then decide to target them with a new bottle cleaning device for beverage companies, because you thought it was revolutionary and brilliant.

Even with most compelling offer in the world it will bomb. It’s completely the wrong audience.

Your offer will be viewed by those people as irrelevant or even as spam.

Now think about your relationships:

The people who matter to you most in your life. Your family. Your best friends.

When they e-mail you, do they need a killer headline? An enticing offer? Ensure that ‘you’ is mentioned at least 3 times more than ‘I’ in the copy? Of course not. They have a relationship with you and you’re naturally interested in what they have to say.

Now bring that to your e-mail list of prospective clients and it’s not that different. If you have a good relationship with them, say by regularly providing them with great content, they’ll be much easier to sell to.

So right from the start it is crucial to qualify your leads and disqualify those you don’t want. From there you build a relationship with those people.

Some prospects will be ready to buy from you now. But many won’t be. Either they don’t yet need what you’re selling or they don’t yet trust you. And that’s where the relationship building phase comes in. That also applies to the people who are buying from you now, because hopefully they’ll buy again from you.

So if you attract the right prospects on to your email list from the start, you nurture relationships, then the rest falls into place. You potentially have the basis of a great business.

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You can re-publish this blog post on your website providing you credit it to Justin Pugsley, Managing Director of JJPAssociation and provide a link back to: www.jjpassociates.co.uk


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