Everyone knows the 80/20 rule. Prevailing wisdom says that 80% of your revenues and profits come from 20% of your customers. That being the case we are advised to focus our attention on this 20% and not worry about the 80%, perhaps even going to the extent of firing them.
Matthew Syrett of LinkShare Corp., writing at marketingprofs.com, turns this idea on its head and says that if you have a few large volume customers that use their bargaining power to drive the margins out of the business they do with you, then perhaps your profits are coming from the other 80%. His belief is that the opportunity lies in selling to the large volume buyers at near cost and funding overall business growth through higher margins and lower volumes with your sales to the 80%. He believes you should pay attention to all of your customers and not abandon any, unless the margins are similar for both high and low volume clients.
What do you think? Do you believe in looking after the big guys and not worrying about the little guys, or do you think in your business you should be worrying about every client? Tell us what you think.
Source: Globe and Mail and marketingprofs.com