Co-Authored by Kimberly Miller, CMO, Chief Outsiders and Chris Dohl, President, The Alias Group
The conventional wisdom of the 80/20 rule is that 80% of your company sales come from 20% of your customers. If you believe that, then you might believe that those top 20% of customers would guarantee success. And from an operational standpoint, maybe the 80/20 rule could turn into the 20/80 rule, meaning that those 20% of customers should take up 80% of your sales team’s efforts.
Now more than ever, businesses should be appreciative of their entire customer base—not just the top 20%. The 2020 coronavirus lockdown has shown us that diversity in service and product offerings and diversity in clients and prospects helps any business weather the storm.
Can you afford to neglect 80% of your customers? That’s what some of today’s conventional business wisdom is telling you to do. But why would you discard potential business so carelessly?
There’s a simple flaw in the 80/20 rule logic: If you ignore that 80% of customers, very few—if any—will move into the top 20%. And… 20% of a shrinking pie is always less than 20% of a growing pie. So unless you like shrinking pies, you need to pay attention to that 80%, consistently and efficiently.
In manufacturing, the 80/20 rule has caused sales managers to mostly ignore the bottom 80% of their customers. They are forced to focus on the activity from the “whales” they already have. The outside sales team treats these captured whales well, but they’re not able to spend time fishing for new whales. In the real world, the new whales often come from those 80% that are already customers.
Of course, this argument is often moot because manufacturers simply don’t have the resources to allocate toward nurturing leads, tracking prospects, and qualifying every warm contact. Businesses look at the fixed costs of keeping business versus the variable costs and uncertain ROI of developing new business. Then they decide, to their peril, that they don’t have time to deal with the uncertainty.
But it doesn’t have to end up this way. Companies that take this route miss out on opportunity creation that is essential to maintaining steady sales growth year over year. Successful companies keep tabs on the smaller customers of this year to feed the bigger customers of next year, or this month for next month, or today for tomorrow.
There are many advantages to keeping the 80% engaged. For one, lower volume customers often have higher margins compared to whales that have squeezed the margins tight over the years. Also, potential whales can turn into actual whales at any time, but you have to be ready to strike while the iron is hot. Some simple examples of “hot irons” would be if a competitor’s price goes up or their service level goes down. You can be the first alternative only if you are top-of-mind, have already presented your value proposition, and have established a rapport.
The efficient way to keep the 80% engaged is to keep meaningful interactions cost-effectively. The coronavirus lockdown has changed the way we think about time. In many ways, people seem to have time because they aren’t travelling and dragged into in unnecessary meetings like they were before Covid.
But nurturing the 80% still takes resources, personnel, and planning. You have to have a management system in place and proven sales processes that are followed to truly nurture those smaller customers. But sales managers who often wear multiple hats in a company have too many distractions to make sure the processes are working, and the sales processes become inefficient.
Many times it makes better sense to have a dedicated person, even part-time, backed with persistent phone strategies combined with digital support. We have seen success stories time and again where a dedicated inside salesperson creates 25 or more meaningful interactions per day with the smaller customers in the 80%.
The fact is, one person simply cannot manage hundreds of contacts without the digital support of a CRM system like Salesforce. CRM systems are indispensable because they can keep all sales efforts on track, as well as segment markets and categories in an appropriate way. A sales process integrated with a CRM forces salespeople to collect data in a way that can be utilized by everyone in the company. Operations can track demand, marketing can target messaging, R&D can monitor trends, and sales can stay focused on moving customers through the sales funnel.
The key to making every interaction meaningful is maintaining relationships built on rapport and trust with customers. And you do that by being responsive to their needs and pain points. Many times, customers just want to feel heard and appreciated. These are the elements of “quality calls.”
In the manufacturing field we specialize in, we’ve seen dramatic ROI on dedicated inside sales campaigns targeting the under-served 80% with quality calls. These campaigns often have a single person with laser focus on a single segment serving a single product category. The process combines old-fashioned phone work with diligent CRM application. In one raw material lead-to-qualification case study, 98 sales-qualified lead opportunities were returned to the client’s sales team in a few months. That’s because the campaign completed 892 quality calls in the same time period existing sales staff completed just 82.
There are many reasons why regaining control of your sales team and refining your sales process are so difficult. One is that day-to-day distractions inevitably arise that steal time away from the important work of keeping the 80% engaged. What often works better is having “separation” from the company so that distractions can be eliminated.
One person needs to “own” a customer base, with a completely dedicated focus on nurturing that 80%. They need to be immersed in the worlds of loyal and potential customers every day. And that only happens by having a process and dedicated dialect to efficiently and cost effectively guide those customers through qualification, tagging them for outside sales attention when ready.
About our Authors
See below for Kimberly's bio.
Chris Dohl is the president of The Alias Group, committed to delivering proven sales processes by delivering lead generation services and Salesforce CRM implementations for small and midsize businesses in a variety of industries. Before Alias, Chris was Manufacturing Leader in the Electronic and Industrial divisions for over a decade at W.L. Gore & Associates, and then Vice President of Sales for 11 years at Intech Services Inc., the sole distributor of Teflon™ coatings in the U.S. and Canada.