We have all heard it – focus on your best clients and give them special treatment because that small proportion of your clients accounts for the majority of your revenue. It is called the Pareto Principle after the Italian economist who in 1906 noted that 80% of the nation’s land was in the hands of 20% of its population.
Ideally, that means that you would cut back on the attention that you pay to the 80% of your clients who provide 20% of the income. Maybe you would even find ways of getting some of that 80% off of your books so that you would have more time to attend to those “A” clients in the top 20%.
But most advisors I work with have real trouble in putting this idea into practice. They don’t want to hold back some services from any of their clients. And they would have even more trouble in letting clients go. Well, there is good news – it is not an all or nothing proposition. You can still establish a difference in how you treat your “A” clients from the rest of your client base without actually having to say “no.”
Peter Philippi is CEO of Strategex, Inc., a research and consulting firm based in Chicago. In a recent interview which you can link to here, he describes a more clever approach. Philippi’s firm consults with all kinds of companies to implement the 8020 rule in their own customer bases. He makes a point that you do not necessarily have to get rid of the 80% of clients who are providing 20% of the revenue. What is critical, however, is making sure that everyone understands that their “A” clients get treated special. And one of the main ways he does it is through the strategic use of “yes, but…”
Rather than simply deny services to some of your smaller or less profitable clients, go ahead and provide them the services they are looking for while clarifying that they will get them on different terms than your best clients.
Yes, but…
- It will come at an additional cost.
- I will not be able to provide it to you as soon or as frequently.
- We cannot provide it in person but we could do it by phone or through e-mail.
The two biggest opportunities I see in Philippi’s approach are that you do not box yourself in to providing the same service to everyone regardless of how important a client they are to your firm or how many resources of yours it consumes, and you repeatedly reinforce the great treatment that your best clients receive. Saying “no” may just turn people off and drive them elsewhere. Saying “yes, but” may help provide some encouragement for clients to strive for “A” status if they have the resources to do it.
If you struggle with dedicating too much time or resources to your bottom 80%, give a little thought to how “yes, but” may help you.
Have you tried this approach? Please share with us how it worked out for you by submitting a comment below.
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