Did you know that the Pareto Principle, also known as the 80/20 Rule, states that roughly 80% of a firm’s revenue comes from 20% of its customers. When considering the magnitude of this statement, then it should highlight to managers the value of their core customers and importance of brand loyalty. Keeping those customers happy and engaged with your brand is critical to your success. This is especially true for small markets, because we do have a limited population base, meaning more than ever those primary customers are so very important to our continued success.
The strategic question is how do companies create brand loyalty and grow this 20% and resulting contribution to revenue generation?
In the marketing world, there are 4 primary marketing strategies, which are based on Ansoff’s Opportunity Matrix: Can you identify what you should be doing or are doing with your marketing strategy?
1) Market penetration-strategic focus on increasing market share among existing customers
2) Market development-strategic focus of attracting new customers to existing products
3) Product development-strategic focus on the creation of new products for existing markets
4) Diversification-strategic focus on increasing sales by introducing new products into new markets.
When applying the 80/20 rule to these strategies, marketing penetration represents the core of this statement. Marketing strategies that target increasing market share among existing customers are so important and involves increasing brand loyalty.
Read next week for more marketing insights by Sabrina Pack-Professional Marketing Consultant.