Top 15 Lessons - Perry Marshall's "80:20 Sales & Marketing"

1.???? 20% of our customers are responsible for 80% of our profits. Sometimes 20% of customers actually come from fully 100% of profits and the rest are loss makers. You would be better off without them.

What’s even more interesting, is within that 20%, there is another 80:20. This means that 20% of the 20% (4%) account for 64% of our profits.

If you identify this 4% and double their sales, you can add 64% to your profits.

2.???? Very often these sales are not consummated, simply because businesses don’t have the very expensive products that these ultra-valuable customers really want to buy. Sales and marketing, therefore, begins with product development - for your very best and most enthusiastic customers. This is a huge insight.

?3.???? ?“Your best new customers are your existing customers”.

Bill Bain’s approach to business was to identify his most profitable customers and work with them to develop additional sales. His logic was as follows

4.???? Your customers are not all the same. Some are much more valuable than others and as a business owner, one of your most important tasks is to identify these valuable customers, sell more to them and focus your marketing on finding more like them.

Example - if a business has 30 customers, then their value looks something like this.

1 customer gives you 20% of sales

2 customers gives you another 20% of sales

4 customers gives you 20% of sales

8 customers gives you 20% of sales

15 customers gives you 20% of sales

?One of the main principles in this book is that there are multiple levels of 80:20. If a business has 100 customers, 20 of them account for 80% of the profit. Within those 20, 20% account for 80% of the profits. So 20% x 20% (4 customers) account for 80% x 80% (64%) of profits.

?Just 4% of customers account for 64% of profit. Identify these 4%, double their sales and you can add 64% to your profit.

?If this sounds like the theory, I can assure you, Perry has hundreds of real-life examples to back up this principle.

Case study - from my own experience, I saw something very similar the first time I calculated 80:20. This Electronics company had 36 customers. When I calculated the net profit per customer, it emerged that just three of those customers were responsible for over 90% of net profit. Of those three customers, one of them accounted for 60% of net profit. This example verifies Perry’s principle that there are multiple levels of 80:20.

5.???? Rack the shotgun

Perry uses the term “rack the shot gun” quite a lot. In marketing terms, here is what it means. You send up one calculated signal that most people ignore but some respond to. Focus on the ones who respond. This approach to marketing is also termed “Direct response marketing”. Imagine an accountant who sent an email to 100 people offering a free e-book on “Top 10 tips to reduce your tax bill”. If 10 people respond to this email and download the book, then these are good prospects for the accountant and he should focus his follow-up on these people.

Perry as a salesman

In the early part of his career, Perry worked in sales. One of his competitors had written a book, which he often spotted on prospects desks during sales meetings. Later he realised this book positioned his competition as authorities. They were the folks who “wrote the book”.

To counter this , Perry developed a cheat sheet. A cheat sheet is a one page document that super summarises a complex topic- and prospects love them.

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6.???? Some cardinal rules of 80:20 sales

?? Never cold call - ever. You should attempt to sell only the warm leads.

?? You will dramatically enhance your credibility as a salesperson by speaking and publishing quality information.

?? Generate leads and information about solving problems not information on the product itself.

?? The most valuable asset you can own is a well maintained customer database, because people who have already bought from you are way easier to sell to than strangers.

In various sales jobs, Perry identified his top 10 customers and focused most of this time on them.

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7.???? The 80:20 ‘Power Curve’

Perry has developed an amazing model that will allow any business to predict the number of people that will buy a product at various price points. If fully utilised, this can be used to help companies generate a range of products for these different price points and dramatically increase sales.

Example - a business has 100 customers. It develops a new product which sells for €50 and 40 customers buy it. If the product was €200, how many people would buy it?

According to Perry’s model, the answer is eight. 8 people X €200 = €1,600. The original product sold 40 units X €50, a total of €2,000. By having a more expensive product, this business could almost double its sales. If it had five products and five different price points, it could increase the sales even more.

This is another one of the key principles of Perry’s book.

If you don’t offer your customers a super deluxe experience, they’ll buy one from somebody else. Therefore, the role of the marketing person in any business, is to ensure that the range of products is available to match customer needs.

Here’s a little marketing secret for you.

“Almost everybody has at least one passion, one interest, one obsession where they gleefully spend irrational amounts of money”.

For some it’s make-up or shoes. For others it’s sport.

Just think about a sports stadium for a moment. Stadiums like Croke,Park in Dublin, Wembley in London or the Yankee Stadium in New York.

Let’s say for example, tickets for a match start that $40 increasing to $200 for the best seats in the stand. Companies will pay half $1 million dollars per year for a corporate box.

The 80:20 power curve is the most important chart in any business.

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8.???? The power triangle – traffic, conversion and economics

Traffic = you have to get human bodies, eyes and ears to sell to

Conversion = you have to convince the person what you have will solve their problem

Economics = you have to give them something that’s valuable and get their money

During most of my consultations, economics is the first thing I seek to improve. Begin with the end in mind. Make every transaction more valuable.

Maximise the willingness of top customers to spend more money. Create new offerings, new experiences and new products.

The most valuable assets of all is the customer list you build yourself.

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9.???? Sales is, first and foremost, a disqualification process.

Here are five disqualifiers.

1 Do they have the money?

2 Do they have a bleeding neck? Do they have a burning need?

3 Do they buy into your USP?

4 Do they have the ability to say yes?

5 Does what you sell fit in with their overall plans?

Three steps in selling: problem – agitate – solution

When you find pain or sore spot, hit it with a hammer (figuratively not literally).

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?10.? Make more from every customer

You may have the best product in the world but if your pricing strategy is lousy, you will still go broke.

The power curve shows how much money each customer is willing to spend with you. If you have 100 customers, who spend an average of $100 each - the least interested person will spend $27, while the most interested will spend $1,426 (50 times more).

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Handy rule of thumb: 80:20 says that 20% of people will spend four times the money. It also says 4% of people will spend 16 times the money. Memorise this - it’s one of the most powerful facts you could ever know about business.

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11.? The principle of the $2,700 espresso machine

Let’s say 1000 people walk into a Starbucks today. The least anyone will spend is $1.40 and the Power curve tells us that one person is willing to spend $537. How can somebody spend $537 at Starbucks? Do they buy 100 lattes?

No - they buy three lattes, two scones and one espresso machine. Starbucks sell espresso machines on their website.

Where most businesses lose sales is not having the full range of products so people can give them their money. Most businesses are leaving all kinds of money on the table and the power curve shows them where it is.

If you sell a product for $29, the power curve says you should also have a product for $290 and won the $2,900, because some people are willing to spend that money.

That means most businesses need a 100 to 1 ratio in the range of their selling prices.

If 10 people are willing to spend $1 for a couple coffee, two of them will pay $4 for a better couple coffee.

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12.? Power guarantees

Guarantees are very important in the sales process as they can help get a customer over the line.

If somebody buys a $50,000 software product, someone is taking the risk. The question is who is taking the risk? Without a guarantee, it’s the customer who takes the risk.

If you won’t take the risk, why should your customer?

Your ability to take this risk is everything to do with disqualifying customers who do not fit. If you’re going to make a guarantee, some of the disqualifiers are:

?? Is the customer willing to follow all the steps necessary to use and install the product?

?? Do they obey instructions?

Nobody else makes a guarantee like this. If you qualify and obeyed instructions, I guarantee you this will work.

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The power guarantee gives you the ability to charge more than everybody else because you deliver results.

It forces the customer to demonstrate his worthiness to be your customer in the first place. It makes them chase you is that if you chasing them. It’s take away selling.

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13.? Hourly rates

A typical person earning $100,000 per year spends a lot of time on trivial $10 per hour tasks, a decent amount of time doing $100 per hour tasks and occasionally $1,000 per hour tasks. Even highly paid executives spend lots of time on low value activities.

The power curve applies to everybody and the value of tasks they perform in a typical day. $10 per hour tasks are on the left hand side, $100 per hour tasks are in the middle and $1,000 per hour tasks are on the right hand side.

Invest time and money in those areas where you’re very strong.

Find other people to do everything else

?14.? Some or all of these should work for your business:

·??????? A super deluxe version of your product at four times the price.

·??????? If you perform a service, sell a product that teaches them how to do it. If you sell a how-to product, perform the service.

·??????? If you sell a service, add a physical product. If you sell a physical product, add a service.

·??????? Repackage your product or combine it with other products to create more dimensions of value.

·??????? If you sell something on a one-time basis, turn it into repeat purchases with a membership.

·??????? Many business owners have so many e-book’s, have listened to so many tele-seminars and attended courses,they are overloaded with ideas. My job is often to eliminate options and narrow things down to 3 or 4 actions that will get them the greatest results.

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?15.? Recency, frequency and money (RFM)

?Recency - how recently have your customers purchased?

Frequency - which customers have repeatedly bought things from you?

Money - which customers have spent the most money with you?

RFM is a matrix.