October 20, 2003

The 80:20 Rule

Why is it that the majority of the brands insists on chasing customers they don't have instead of focusing on selling more and creating stronger loyalty bonds with the ones they already have? Aren't these brands familiar with Pareto's Law (also known as the 80:20 rule)? Shouldn't they know that as a general pattern 80% of the profit is achieved with 20% of the customers. Then why wasting their resources, time and effort on new customers that most of the times are potencial brand switchers?

"A 5% improvement in customer retention rates will yield between a 25 to 100% increase in profits across a wide range of industries." - Bain & Company

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