You now have a choice.
You can watch the short video or read on, as the email below is similar to what’s on the video (It’s worth looking at the video as the graphs get the message across really well).
Click here for the 3 short video
Or read on for the email message.
If you’re involved in marketing in any way, then this message will be of particular interest to you.
If you own a business and are responsible for marketing, you will also want to read on.
The following case study shows a marketing campaign after an 80:20 analysis versus one done without any analysis and there is a huge difference.
This particular company supplies refrigeration equipment to hotels. Last year they ran a marketing campaign, where they spent €20,000 attracting new hotels.
The campaign was quite successful as they grew profits by €100,000.
After this, we conducted an 80:20 analysis which produced the following results.
The total profit from the marketing campaigns was €100,000, as shown above.
The trend here is very similar to what I see when finished other 80:20 analysis.
There is a small number of very profitable customers, whales (hotel 1 profits of €70,000) and a number of loss makers, sardines (hotel 10 loss of €20,000).
Most marketing campaigns don’t have this 80:20 information to hand, so the marketing is often a scattergun approach, where they target all customers the same. You could say that the marketing campaign above caught some whales, some sardines and others in between.
Now that they know their really profitable customers, what would results look like if they targeted them in a marketing campaign?
I have come up with 3 scenarios here and I will try to explain this as best I can and not cause too much confusion.
Last year’s marketing found 10 new customers and this mix of whales and sardines gave a profit of €100,000.
Scenario 1 – what if the marketing campaign targeted only hotel 1 types and found 10 new ones – what would the results be like?
Those financially minded of you may already have worked out an extra profit of €700,000 (hotel 1 made a profit of €70,000 x 10 new ones = €700,000).
Remember the original marketing campaign which got 10 new hotels with the mix of whales and sardines, grew profits by just €100,000.
So the marketing campaign with 80:20 and focused on the biggest whales was 7 times better than the original.
You might be thinking “Well ok, Neil, but that’s a very optimistic view”.
And I would say “Agreed Test First Name , so what if we try a less optimistic view”.
Scenario 2 – what if the marketing campaign only targeted the 2 biggest whales so 5 new hotel 1 types and 5 new hotel type 2 – what would the results be like?
The answer is an extra €525,000 profit (profit hotel 1 types €70,000 x 5 = €350,000 plus profit on hotel 2 types €35,000 x 5 = €175,000 giving a total profit of €525,000).
And I won’t go through all the numbers again but if you said we only target the top 5 profits types and ignore the sardines, your marketing campaign would give a profit of €145,000 (45% higher than the original).
Hopefully you’re still with me and not drowned by all those numbers.
A marketing campaign without 80:20 profits €100,000
Marketing after 80:20 targeting only hotel 1 types – profits €700,000
Marketing after 80:20 targeting only hotel 1 & 2 types – profits €525,000
Marketing after 80:20 targeting only hotel 1-5 types – profits €145,000
The message is pretty clear.
If you’re doing any kind of marketing without first doing some 80:20 analysis, you’re leaving lots of money on the table.
Doing an 80:20 analysis and then carrying out your marketing will give you much higher sales and profits.
Of course this is just my view.
But the figures above are pretty convincing.
If you have an alternative view, I would love to hear from you.
P.S. If you like you chat with me on this, you can click the link below
P.P.S. the most recent 2 clients I worked with on 80:20 were done remotely by phone/email, which makes it much more affordable for you.