The 80-20 rule says that says that 80 percent of an enterprise’s business comes from 20 percent of its guests or clients. Recently, loyalty program startup company FiveStars studied thousands of small businesses and found the 80-20 rule to be quite accurate. Across the board, 20 percent of an enterprise’s guests or clients drive over 72 percent of its business, with many businesses actually receiving more than 80 percent of sales from those “vital few” guests.
So how should this inform your business strategy? These three steps will help you capitalize on the 80-20 rule.
1) Value the Vital Few. Keep track of who your regular guests are through a loyalty program or guest management system and deliver excellent service, extra rewards, or special perks just for them.
2) Make More of Your Guests Part of the Vital Few. Turn your occasional guests into regulars. Studies show loyalty rewards can significantly increase visit frequency, as guests are likely to visit an enterprise more frequently as they get closer to a reward. “In some verticals like restaurants,” said FiveStars CEO and Co-Founder Victor Ho, “loyalty programs can drive customers to increase their visits by 25 percent per month.”
3) Turn New Guests Into the Vital Few. A great first impression can turn a new guest into a regular one. Make sure you know who your new guests are– either through a loyalty program or guest management system– and go the extra mile to welcome them.
Lastly, be sure to spend 80 percent of your time on the 20 percent driving your business. Focus on maintaining and acquiring new regulars and your enterprise will continue to grow.
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