Applying the ’80/20′ Rule in Marketing and Sales

For the first Marketing Smarts podcast of 2018, best-selling sales and marketing author, business consultant, and AdWords expert Perry Marshall joins me to talk about how the 80/20 principle can help you to optimize your marketing efforts and focus on the 20% of prospects who will bring you 80% of your revenue.

His books—including Ultimate Guide to Google AdWords—helped to lay the foundation for the pay-per-click industry.

I invited Perry to Marketing Smarts to talk about 80/20 Sales and Marketing, and how you can optimize your marketing efforts so they attract the right 20% of prospects, as well as how applying 80/20 can enhance nearly every aspect of your business.

Here are just a few highlights from our conversation:

Prospects and customers are not all of equal value: find your top 20% (09:31): “In sales, [the 80/20 principle] says that 80% of your sales are going to come from 20% of your customers and the other 20% of your sales will come from [the remaining] 80% of your customers. When I first encountered this…I didn’t grasp the significance of it. I thought it was just a ‘rule of thumb,’ but what I later discovered was that it’s a law of nature. It’s going on all over the place all the time…. Most people are unaware of it…conditioned and trained by the education system to ignore it and pretend it doesn’t exist. They’re taught by their superiors to treat everything equal when it’s not. It will kill you if you’re a salesperson or a marketer and you’re not obeying 80/20.”

If you want to identify your best prospects, do something to get their attention (13:28): “John Paul Mendocha trained me on a lot of sales [techniques]. When he was 17, he dropped out of school and hitchhiked to Las Vegas and became a professional gambler. They had a gambling bookstore [where he met another] guy named Rob…a professional gambler…. John’s like, ‘How do I win more poker games?’ So they walk into this club and Rob sits John down…and pulls a sawed-off shotgun out of his jacket and holds it under the table and opens it up and slams it shut. And a few people look up like, ‘Hey, what was that.’ And he says to John, ‘Did you see those dudes who turned around when they heard that noise? Don’t play poker with them. They’re not marks. Play poker with everybody else.’ That was John’s first lesson in 80/20. I call it ‘racking the shotgun.’

“You just did something. Which people turned their heads and which people ignored you? Which people clicked on the ad, which ones did not? Which ones searched for a plumber today, which ones did not? Which ones got on your webinar? Which ones subscribed to your podcast? Which ones listened to your podcast? Which ones went and clicked on the link when they heard the spot in the podcast? It’s all ‘racking the shotgun,’ and it’s all going on around you all the time. Everything in marketing is racking the shotgun. It’s all elimination.”

For subscription products, embrace that 80% of your churn will result from 20% of your users (27:37): “Know before you even get started that 80% of your churn is going to come from 20% of the subscribers, but 80% of your longevity is going to come from [another] 20% of the subscribers.

“There’s going to be a 20% where they subscribe today, cancel tomorrow, charge back on their credit card, ask for a refund, and stalk your customer service people. Then there’s this other percent, where most people are only members of your [subscription service] for three months, but [these 20%] stay for two years and love everything.

“Generally, especially in niche businesses, everything is contingent on the hyper-responsive customer. It’s the person who wants to buy everything, consume everything, read every page of the magazine, or download all the files and listen to them, or they listen to all the podcasts.

“Almost all businesses fail to focus and capitalize on that elite, high-quality 20%. They get obsessed with the time-wasters and the tire kickers and the ‘squeaky wheels.’ A lot of times, your very, very best customer isn’t a ‘squeaky wheel’—they just turn smoothly and perfectly.

To learn more, visit PerryMarshall.com or follow Perry on Twitter @PerryMarshall, and pick up a copy of 80/20 Sales and Marketing to learn more about what we discussed on the podcast.

Perry and I talked about much more, including discovering your “marketing DNA type” and applying 80/20 to social media, so be sure to listen to the entire show, which you can do above, or download the mp3 and listen at your convenience. Of course, you can also subscribe to the Marketing Smarts podcast in iTunes or via RSS and never miss an episode!

Music credit: Noam Weinstein.

This marketing podcast was created and published by MarketingProfs.