The 80/20 Principle

The 80/20 principle says that 80% of our profits come from 20% of our customers.

In customer-relationship management or CRM, that leads us to believe that we should therefore concentrate our resources on those 20%.

But what happens in the long run if you dedicate more and more resources to the top 20%?

• You get fewer customers overall, as budgets for recruitment of new customers decrease
• You become extremely dependent on those top 20% — which is all and well if that’s your strategy, but a highly risky one
• You get fewer new customers who are likely to be part of that 20%
• Some in the 80%, whom if you had continued allocating adequate resources to (i.e. maintaining a level of service/support before shifting the focus to the 20%) might have become some of your biggest customers, thus you lose opportunities

This is not an extensive list of what may happen after the focus shifts from the overall good service/support of the company to a more hierarchal method of resource-allocation, but it provides some insights into what might happen.