After COVID-19 every customer counts...
In the 19th century, Italian engineer and economist Wilfried Fritz Pareto observed that 20% of Italians held 80% of the country’s wealth. Expanding on his ‘law of the vital few,’ Pareto held that a multitude of different events and social structures follow this same principle. This theory, which came to be known as the ‘Pareto principle’ or one that is more popularly referred to as the ‘80/20’ rule, has proven to be absolutely accurate when applied across nearly every facet of human activity.
Today, (i.e. up until COVID-19 came), none will dispute the well-known business adage that 20% of your customers produce 80% of your sales, and conversely the majority of your customers (80%) contribute only 20% of your revenue. So, looking after that 20% became an obsession and Pareto’s nugget of wisdom influenced sales and marketing teams to focus on that 20%, rather than dilute their time and energy by trying to make everyone a customer.
Consequently many businesses concentrated on their top customers, paying little heed or ignoring the bottom where the small spenders were.
Picture your customer volume in the form of a pyramid, where the high spenders make up the pinnacle, while the small spenders occupy the base. And if you lose the bottom of the pyramid - your volume base is gone; meaning your sales drop by 20% and 80% of your customers are gone. Which type of business says “I can survive with my top 20% only?”
We consumers live in a world where businesses can discriminate between their high-value and low-value clientele at will – preferring to pamper the biggest spenders and marginalizing the rest. While most companies cannot get away with deciding the order of treating its customers in this way, some do it openly: airlines.
Every now and then, airlines keep adding an expensive new amenity – such as picking up passengers’ luggage from home and chauffeuring them to the airport in a limousine, offering cabins with beds, private showers and personal service to name a few. But these airline perks are not for ordinary people like you and me. They are only available to the elite flyers or the mega-rich. The rest of us must endure nano-size seats with near extinct service.
On some flights I have found myself being treated like a stowaway, and yes…on that Boeing 777, I was at the bottom of the pyramid, seated in the economy class section – jocularly referred to as ‘cattle-class’. Airlines have somehow invented a flying caste system that is embarrassingly acceptable to everyone. Does this not seem odd?
How often have you read about hotels claiming “our goal is to make every guest feel like at home… blah blah blah”. This has me confused. Because we all know that the homes of guests are not the same. So, how does the hotel do that? It simply cannot and doesn’t. In my experience most hotels treat some guests as more equal than other guests. It’s all to do with whether you are a ‘high’ spender or ‘low’ one.
COVID-19 has since wiped the slate clean by shutting down every restaurant and hotel. As the recovery takes place, re-opening operations after closure is like opening a new business – starting from zero.
There are several positives one can take from the 80/20 rule when re-opening during COVID-19:
Re-opening a restaurant for instance is different in the new normal. Say, you have a 1,800 sq. ft. outlet that prior to COVID-19, accommodated 52 seats with tables and main fixtures. Given the new spacing measurement requirements, you would just about fit 20 covers. All the health and safety aspects aside, can your restaurant make money with 20 seats? Maybe…maybe not.
One thing though is for sure, to get to those 20 customers…every customer counts.
Noorhem Arahoz - writes on ‘this and that’- especially matters that spill forth from the world of hospitality having travelled extensively by road, train, boat and up in the air to several countries.
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