Do you know where your 20% rests? The year 2020 has provoked dozens of comments and articles relating to 20/20 vision and the importance of having that same clear vision and focused direction for the future. No doubt, vision and strategic planning are important, but there’s another “20” I’d like you to consider.
In case that college course isn’t fresh in your mind, take a minute to think about what you remember regarding the Pareto Principle. You may recall that the principle was suggested by Joseph M. Juran, a management consultant. He named his branded principle after Italian economist Vilfredo Pareto. Pareto was an economist who found in 1896 that 80% of the land in Italy was owned by 20% of the people. The principle has shown to be true in a variety of fields over the years and has become known to some as the 80/20 rule.
What does it mean to you? It is likely that whatever field you are in, 20% of your customers, donors, or clients are responsible for 80% of your revenue or income. Perhaps 20% of your employees are responsible for 80% of the productivity or maybe 20% of your sales force generates 80% of your sales. With that in mind, isn’t it imperative that you know who those 20% are?
I’m often surprised in consulting with nonprofits or small businesses that their shops have no “official” recognition of this concept of the 20%. One of my first questions in working with groups seeking to raise funds is “Do you know who the top 20% of your donors are? How do you segregate your database?” Typically, the responses are either “not formally,” “we have a good feel for who they are,” or “we haven’t taken the time to look at that.”
Well then, maybe 2020 is your year to take that step and check off one of the most important actions you can take to help grow your organization or business. Here’s five steps that all organizations need to consider:
Identify your “top 20.”
With today’s technology it’s not difficult to identify this top 20% of donors or customers. It’s the perfect time, following end-of-year reporting, to consolidate your sales figures, and take a strong look at who contributed the most dollars to your bottom line in 2019. Calculate what 20% of your donors, contributions or customers look like. Do your total donors or customers number 100, 500, 1,500? Apply the 20% rule and identify who are those top 20, 100 or 300 donors or customers. Look at their total giving, or purchases, and you’ll probably find that their gifts or sales represent close to 80% of your total dollars raised or sales revenue.
Categorize your list
An additional layer of effort should be given towards the top 20% and breaking them down into three groups.
- Significant donors or customers – the donors or customers you feel you couldn’t do without.
- Major donors or customers – this “second tier” group is making major gifts and purchases.
- Valued donors or customers – these are steady givers or buyers who form a solid base.
Naturally, all donors and customers are important, and the remainder will compile the rest of your database. However, this group of 20% will be valued for its ability to stabilize and grow the 80% of your donations or sales.
Segregate the group
Once again, technology makes this an easy process. You want to segregate this group for a variety of uses, so assign them in the aforementioned categories, or as an “A” customer, top prospect, or VIP, whatever your database allows. This step will allow you to engage with them differently and deliver exceptional service.
Establish your “benefits.”
Being a top 20% customer or donor should carry some benefits. Remember, they are responsible for 80% of your revenue or sales. Take some time to establish what those will be. Maybe they receive special offers, personal notes from your board members, or special communication. This unique communication could take place more frequently, provide them tailored content, or add a special value. You get the idea.
Once you’ve identified and segregated these key individuals and businesses make certain you are delivering the benefits and added value to them. If you are communicating with the “regular” donors 4 times a year, maybe this group gets six touches. Track your follow through and make notes in your database. Use these follow-through opportunities to build relationships and engagement. It can only help to solidify growth and loyalty.
What are you waiting for? It’s time to make 2020 the year that you prioritize and identify your 20%. It may seem time consuming, but the initial efforts can pay big dividends for your business or organization.
David J. Fry is president and CEO of Effective Advancement Strategies in Greensburg and consults with businesses and nonprofits throughout Indiana.