Working in my father’s butcher shop taught me about the 80/20 rule — 20% of your customers usually generate 80% of your business. This is called the Pareto Principle. In my consulting experience I have actually seen small businesses where the ratio is closer to 90 percent of revenue coming from just 10 percent of customers.

My father’s Butcher Shop focused on the top 20% of our customers by rewarding them. It might be with an extra few pounds of roast here and there, but it was the predecessor of a customer loyalty program — like Delta Sky Miles. Think about your own shopping experiences. How many times have I flown Delta for the sky miles, even though I didn’t want to deal with delays in the main Delta hub — the Atlanta Airport? Using this same customer reward tactic, you can generate repeat business and earn referrals.

Many years ago I returned from college as a marketing expert having just made an A in Marketing 101. I suggested to my father we would create new business by rewarding new customers. But in the Butcher Shop my dad said, “Why reward people who have never shopped here before?” That’s when I realized the Butcher Shop already had a loyalty program, which was also creating new business through the referrals from our best customers. And hopefully referrals from your best customers will add new best customers to the top 20%.

So, what can you do to review this concept in your business? Here is a quick way to define the 80%. Start by reviewing your customer list. If you are a retail and/or food and beverage business, you may want to review this list by category, due to the amount of unknown customer characteristics. For example, a retail store might combine customers by geography or type of product in he point of sale system. Rank each customer in the following categories.

1. Hassle factor — we are pretty sure you know what we mean….
2. Payment history
3. Profitability of the products sold to this customer

If a customer ranks low in all categories — they are definitely part of the 80% and you should consider ways to create changes in their ranking. How can they buy more profitable products? Can you get them to pay on time? If you can’t change the customer behavior, it may be time to reduce the time you spend on these customers so you can spend more time on the top 20%