Loyalty Countdown #2 – Practice the 80/20 Rule

in May 04, 2018

In building customer loyalty, the 80/20 rule is alive and well. Roughly speaking, 80 percent of your revenue is being generated by 20 percent of your customers. All customers are not created equal. Some represent more long-term value to your firm than others. A smart company segments customers by value and monitors activities closely to ensure high value customers get their fair share of special offers and promotions. Unlike many firms that simply measure overall redemption, these savvy loyalty builders pay close attention to who redeems.

Action Step: Rank your customers according to actual revenue generation, with your highest-ranking customer contributing the most revenue over the past year (or some other relevant time period). Next, rank your customers regarding lifetime value. If your company is like most, you must develop a lifetime value formula by which to calculate this value. Compare the two lists and make sure you are adequately investing in customer appreciation programs that provide for high-ranking customers on both lists.

Source: Griffin, Jill. Customer Loyalty: How To Earn It How To Keep It. 2002.

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