Tuesday, April 16, 2013

Few Things Really Matter in Your Marketing -- What Are They?

If you know the 80/20 Rule, you know that a handful of causes lead to most results.

In other words, only a few things matter. Most things don't.

The 80/20 Rule, like gravity or electricity, is a weird natural law that nobody truly understands:
  •     about 20% of clouds produce about 80% of rain
  •     20% of U.S. states produce 80% of home foreclosures, and
  •     you wear 20% of your clothes 80% of the time (especially if you're a man)
... and on it goes.

My corollary on that, which I call 80/20 Marketing, holds that only a few things matter in your marketing. Most things don't.

In any business, about:
  •     80% of sales come from 20% of products or services
  •     80% of complaints come from 20% of clients
  •     80% of profits come from 20% of your marketing activities
That last figure is important.

Because, if 20% of what you do to promote your business produces 80% of your profits, then 80% of your marketing is largely a waste of time -- and money.

So, how do you find out what's important -- so you can do more -- and what's not important -- so you can do less?

Try this ...

Start by examining your latest P&L statement in Quicken or whatever. Calculate the profits produced by each of your products or services, clients (or client types), and marketing methods.

Now add up the profits produced by each until you find areas totaling 80% or more of all profits. (You may only get to 60%-79%, but that’s okay.)

Next, look at the profit sources to see what proportion of each accounts for the 80% of total profits. You are looking for 20% Areas -- disproportionately small causes.

Product/Service example: If 2 of 9 products produced 80% of profits, 2/9 = 22.2%. That ratio is 80/22.2 – 80% of profits come from 22.2% of products. So, those 2 products are 20% Areas. Your task: Sell more of them.

Client example: If 5 of 30 clients produced 80% of profits, 5/30 = 16.6%. That ratio is 80/16.6 – 80% of profits come from 16.6% of clients. So, these 5 clients are a 20% Area. Your task: Treat them like kings/queens -- sell more to them, and never let them go.

Marketing example: If one of 5 marketing methods produced 80% of profits, 1/5 = 20%. That ratio is 80/20 -- 80% of profits come from 20% of marketing methods. So, that marketing method is a 20% Area. Your task: Do more of it.

Finding 20% Areas in your marketing is fun, profitable, and always surprising.

Because most business owners rarely -- if ever -- invest time to uncover the vital few profit levers that lie hidden in their financial data.

Now that you know what to look for, simply start doing less of the 80% crap and more of the vital 20% that really builds your business.

To the extent that you practice this 80/20 Substitution, and replace low-value marketing activities with high-value ones, you will work less, earn more, and have more time left for yourself and your family.

Can I get an "Amen" on that?

Note: If you want to go deep on this idea, my 80/20 Marketing course can help.

Otherwise, if you want to more clients like your best clients, my free Client Cloning Kit can help. Grab your free copy now, while they last.

1 comment:

  1. Great points Kevin.... most of us know these facts but your simple formulas help us more quickly identify them. It really sheds light and reminds us staying focused on the clients that make our businesses profitable should one of our main goals.