The 80/20 Rule: the key to maximize your profitability
MTI Selling
In the B2B marketing and sales environment, efficiency is crucial. Each move counts and each resource used must result in a substantial return on investment (ROI).
And this is where the Pareto Principle —also known as the 80/20 Rule— emerges as an essential tool to boost results. Today, from MTI Selling we would like to share with you how the Pareto Principle factors into the B2B sales strategy.
What is the Pareto Principle?
The Pareto Principle, developed by the Italian economist Vilfredo Pareto at the end of the 19th century, establishes that roughly 80% of the outcomes result from 20% of the causes. In terms of B2B sales, this means that 20% of your customers or prospects probably generates 80% of your revenue.
How does this principle work in reality?
Imagine a technology company offering software solutions to other companies. By using the Pareto Principle, this company may identify 20% of its most valuable customers, those who generate most of its revenue. Then, it could focus its sales and marketing efforts on addressing the needs of this selected group.
Additionally, the company could analyze these customers’ behavior in order to identify common patterns and trends. This allows them to develop highly effective marketing campaigns that resonate with their most representative customers while facilitating customer retention, taking into account that the engagement of current customers is a factor that will be prioritized by 34% of LATAM CMOs over the next two years, according to The B2B Marketing Benchmark shared on LinkedIn.
By focusing their efforts on this strategic group, a company could experience a revenue growth of up to 80% without increasing their expenses in customer acquisition or sales team expansion. We should remember that gaining customers is 5-25 times more difficult than retaining them (HBR).
Now… How can you apply the 80/20 Rule or Pareto Principle in your strategy?
Check out some simple steps:
1. Identify your key audience: Invest time and resources to understand their needs. Remember that your audience accounts for 20% of the installed base that generates 80% of the total turnover. To do this, you need to have a lead generation strategy that helps you gain new contacts.
2. Segment your customer list: Focus on your customers’ characteristics and divide them into segments so that you can design specific strategies per group, tailoring your message to their particular needs.
3. Optimize the sales cycle: Align your resources to provide exceptional support at those critical stages, speeding up the sales cycle and increasing customer retention.
4. Relevant content: Use information that you have gathered about your customers to create content and highly relevant messages. One way to do this is by creating blog articles on your website. In this sense, according to a HubSpot report, 69% of the company’s success is based on leads generated from their blog.
5. Optimize customer retention: In order to foster customer retention, it is important to create positive experiences that make your customers want to come back, create messages that address your most valuable customers’ needs and preferences. To do this, you can implement upselling and cross-selling strategies by means of which you can increase customer perceived value.
6. Focus your marketing strategies to boost profitability: Create new opportunities using the 80/20 Rule to identify which efforts result in a higher ROI. For example: A company selling IT services through networking strategies could identify that 80% of its revenue comes from 20% of their reached customers. In this case, the company could focus their efforts on increasing their participation in fairs, webinars, workshops or any other collaborative environment.
Finally, remember that in MTI Selling we have a senior team that can help you optimize your profitability and sales scope by developing, creating and implementing digital selling strategies.
Each one of our experts is willing to contribute to your company so that your efforts are truly effective. Contact us and let’s schedule a call.
