A fresh perspective on marketing that challenges traditional beliefs. Learn how to drive brand growth and why focusing solely on loyal customers might hold you back.
Have you ever heard of the 80/20 rule or the Pareto Principle? The Parerto rule was popularised by Italian man named Vilfredo Pareto, an economist who over a century ago observed that over 80% of the the country’s wealth was owned by only 20% of the population.
This imbalance has now been translated into to many contexts since, especially business. You might
have heard that over 80% of sales come from less than 20% of customers. The 80/20 rule has now become a strategic tool that many companies use today to hone in on the most reliable customers – the 20%, in order to get the 80% of results. But does this hold true for modern day marketing?
Enter Byron Sharp and the Ehrenburg Bass Institute. Their research into consumer trends and brand growth shows us a more nuanced picture. Their extensive empirical studies have revealed that the 80/20 rule isn’t as skewed as it may suggest. Sales are, in reality, more spread out over light and more occasional buyers.
This is where the Law of Double Jeopardy comes in, which shows us that larger brands see better loyalty rates, and vice versa, smaller brands from their fewer customers have lower loyalty. So what does this mean for brand growth? It means that in order to grow we need to reach more people, broadening market penetration, rather than focusing on the few of loyal customers.
The 80/20 Pareto rule has valuable insights but it can’t be applied in all contexts. The research we have today has implications on marketing. We need to reach a much bigger and broader audience. We need to engage and be remembered by light and more occasional buyers.
