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Using the 80/20 Rule to Prepare Your Marketing Plan!

Throughout of our years of assisting numerous customers with their marketing efforts, one question continually pops up on a regular basis. "How do I get started on creating a markeeting plan for my company, and how do I determine where to focus my marketing efforts."


Well, the basic truth is that you are better off focusing your limited marketing budget on pursuing prospects who exhibit similar characteristics to your very best current and past customers.

Of course, just like our clients, we at mdi have struggled with trying to put together an effective marketing plan with a limited budget. We've found that using a variation of the 80/20 rule is a simple and effective method to compose a good marketing plan.


Basically, it is very likely that 80% of your revenue, comes from 20% of your customers. Using this premise, we compile and sort our list of customers for the past two years from best to worst in terms of profit and revenue. From this sorted list, we can determine the top 20% in terms of mdi's earnings. We then determine the characteristics of these top 20% customers and design our marketing plan to find and actively reach out to prospects with similar characteristics. Using this information, we would allocate around 60% to 80% of our marketing budget towards relationship building with the top 20% of our cuatomer list, and seeking out customer prospects with similar characteristics.

 
 

We then split the rest of the customer list into a group of the middle 60% and the lower 20%. Of course the bulk of the remaining budget would be primarily allocated to marketing and maintenance efforts for the middle 60% of the customer performance list. We then would be very selective in the allocatation of efforts to customer when it comes to the lower 20%; this will typically consist of less expensive marketing efforts when appropriate. In essence, we don't expend much of our limited budget and effort marketing to the types of customer that make up the bottom 20% if they are clearly indicating low potential of earnings and profitability for our company.


At least once a year we do review the entire customer list to determine any significant changes in profit and/or revenue status or postioning of customers within each of the three broadly defined customer groups. Based on our findings, customers may be moved from one group to another.


This approach is simple and effective and provides a good starting point for the development and management of our annual marketing plan. Our course, along with this approach, we perform regular reviews on the return on investment for our marketing dollars to determine whether changes need to be made to improve effectiveness and return on invetment.


For help with your marketing planning needs, just call us at (513) 563-4900 or email at info@marketdirectinc.com. You can also visit our website at marketdirectinc.com.

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