Get to Know and Protect Your Vital Few CustomersWe have all heard the term “80-20 rule,” which postulates that 20 percent of causes drive 80 percent of results.

It is also called the “Pareto principle,” named for an Italian economist who noted that 20 percent of the people in his country owned 80 percent of the wealth.

Victor Ho, CEO and co-founder of FiveStars, and a contributor to Inc., believes there is a similar “vital few” when it comes to your customers. Armed with this knowledge, Ho contends, business owners can take a few simple steps to maximize their customer base.

Our company analyzed data from thousands of small businesses and our observation is that on average 20 percent of a small business’s customers drive over 72 percent of their visits.

By “vital few,” he is talking about customers who visited these businesses more than 10 times. These are the people who drive “the vast majority of visits and thus revenue for these small businesses.”

According to Ho, the implications of this analysis are three-fold.

Protect the Vital Few

A small business’s “VIP customers” (those who come more than 10 times to a business) are responsible for most of that business’s revenue.

As a result, losing a VIP has disproportionate impact on a business.

The conclusion is clear: A small business must identify its VIP customers and be sure to consistently provide them with the best possible product and customer service.

Studies show that quality products and customer service are the top two drivers of customer loyalty.

Turn More of Your Customers into the Vital Few

The more Vital Few you have, the stronger your small business can become. To make this idea a reality, Ho advocates implementing a customer loyalty program.

Loyalty programs generate what he calls “frequency compression” for visits:

… as a customer starts earning points and getting closer to a reward, their visit frequency increases, which turns them into VIPs faster.

In the restaurant business, for example, a loyalty program can spur customers to increase their visits by up to 25 percent a month.

Another proven technique is the use of “timely and regular promotions,” which drives occasional customers back to your business more often. Over time, they, too, become one of your VIPs.

Turn New Customers into the Vital Few

Why wait until a repeat customer achieves “Vital Few” status? Try to establish loyalty with the first transactions.

Ho suggests giving a special reward that recognizes customers on the first occasion they use your loyalty program.

This will set your relationship off with them on the right foot and hopefully, you will have set them off on a path to become your regular customer.

When it comes to the 80-20 rule, it makes good sense to spend 80 percent of your time on the 20 percent of customers who drive 80 percent of your business.

Are you paying attention to the Vital Few or still catering to the many?