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Summary:
0:02 How to make your business recession-proof
- Learn how to identify and serve your target market.
1:03 Why vague marketing doesn’t work
- The dangers of trying to serve everyone.
2:01 The 80/20 rule for finding customers
- Focus on the 20% of customers who matter most.
3:08 Key insight: your top 3 customers
- They generate 83% of your sales.
5:01 How to find high-value customers
- Target the top 20% who bring in 80% of your revenue.
- Use demographics and psychographics to find more like them.
Welcome to another episode of The Simple Marketing Show! In this post, we’ll dive into how you can make your business more resilient to economic downturns. With warnings about potential recessions, it’s crucial to prepare your business to weather tough times.
Here’s how you can recession-proof your business by identifying your target market and leveraging the 80/20 principle.
The Importance of Identifying Your Target Market
If you try to serve everyone, you often end up serving no one. This is because vague marketing lacks clarity and focus, making it hard for potential customers to know if you’re the right fit for them.
Instead, you need to define exactly who you serve. Whether it’s 40-year-old accountants in California or dentists looking to grow their practices, being specific makes it easier for people to refer the right clients to you.
How Specialization Simplifies Customer Acquisition
When you have a clearly defined niche or target market, finding customers becomes significantly easier.
Specializing in a specific group of customers—or what some call creating a “customer avatar”—helps you stand out in the market. It also makes it easier for your ideal customers to find you.
Applying the 80/20 Rule to Your Target Market
If you’ve been in business for a year or more, you can use your existing data to identify your most valuable customers.
What Is the 80/20 Rule?
The 80/20 rule states that 80% of your results come from 20% of your efforts. In business, this often means 80% of your revenue comes from 20% of your customers.
Analyzing Your Customer Data
Here’s an example:
- List your customers along with their revenue contributions.
- Sort them by revenue from highest to lowest.
- Calculate the cumulative percentage of sales for each customer.
Key Insight:
In many cases, the top 20% of your customers contribute to 80% (or more) of your sales. For instance, in a recent analysis:
- The top 3 customers generated 83% of the sales.
- The top 6 customers accounted for 96% of sales.
This means you could let go of the bottom 50% of your customers and still retain nearly all your revenue.
Why Focus on High-Value Customers?
Targeting high-revenue customers is more efficient because:
- They contribute significantly to your sales.
- It takes the same effort to acquire a high-value customer as it does a low-value one.
To find more high-value customers, focus on their demographics (age, location, profession) and psychographics (values, interests, challenges). Use this data to replicate your top customers through platforms like Facebook, LinkedIn, or cold calling.
Steps to Recession-Proof Your Business
- Analyze Your Customer List: Sort customers by revenue and identify the top 20%.
- Define Your Ideal Customer: Understand the traits of your high-value customers.
- Find More Like Them: Use targeted marketing strategies to attract similar customers.
- Adjust Your Focus: Prioritize serving and retaining your top customers.
Next Steps
In the next episode, we’ll explore how to specialize in a product or service that is in demand, further recession-proofing your business.
If you’d like a step-by-step process to book more appointments and generate leads, check out the Simple Retention Formula. This blueprint can help you book 30+ appointments a month and strengthen your business during challenging times. Download it now through the link in the description or comments.
Share Your Feedback
Have you applied these strategies to your business? What results have you seen? Let us know in the comments or send us your thoughts.
Thanks for reading!
Mostafa Hosseini
Host of The Simple Marketing Show
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FAQs
What does it mean to recession-proof a business?
Recession-proofing a business involves strategies like identifying your target market, focusing on high-value customers, and optimizing resources to maintain stability during economic downturns.
How does the 80/20 rule apply to business?
The 80/20 rule means 80% of your revenue often comes from 20% of your customers. By focusing on these high-value customers, you can maximize efficiency and growth.
Why is targeting high-value customers important?
High-value customers contribute significantly to your revenue and are worth the same effort as low-value customers, making them a better focus for growth.
What data should I analyze to find my top customers?
Review your customer list, sort by revenue contributions, and identify the top 20% who generate the majority of your sales.
How can I find more high-value customers?
Use demographic and psychographic data from your top customers to replicate their profiles. Then, use platforms like Facebook, LinkedIn, or cold calling to connect with similar prospects.
