One of the first areas we focus on with new clients is RFM (and no, it’s not the popular acronym you might be thinking of).  I’ll get to why in a second.

But first, I’m sure you’re familiar with the Pareto principle.

In 1906 Italian Vilfredo Pareto observed 80% of Italian land was owned by 20% of the population.

80/20 has been shown to work in almost every circumstance from population density, income distribution and you guessed it, how much your clients are worth to you.

In other words 20% of your clients give you 80% of your revenue.

However what most don’t realise is the 80/20 is fractal. There is an 80/20 of the 80/20. Which means 20% of the top 20% (i.e. 4% of your customers) give you 64% of your revenue.

Take it one step further and 0.8% of your customers give you 52% of your revenue.

So what’s the point?

All customers are not created equal. And you shouldn’t be treating them as such.

But I’m willing to bet that most of you don’t know which of your customers fall into each category.

Enter RFM – or Recency/Frequency/Money

Recency: How recently has this customer bought

Frequency: How often have they bought

Money: How much have they spent over their lifetime with you

Do this exercise:

Create a 4 column spread sheet.

Name | Recency | Frequency | Money | Value

Rank each customer from most recent to least recent, most frequent to least frequent and most money to least money.  Then you score them on a scale of 1 to 10 in each column RFM.

Now focus on anyone where R+F+M is greater than 20.  These are the people who are paying you the most and deserve your attention.

Now let’s look at practical ways you ideally use this information.

• Call up your best clients and tell them you appreciate them! They’ll love you for it.  Take the top few to lunch.  Ask them why they buy from you.  What they love, what they don’t like.  Areas you can improve.
• Find out what else they may be aspiring to or struggling to find solutions for. There may well be areas you can help, but your client’s had no idea you could.  This market intelligence will help you create new higher value products/services which you can promote to other clients and prospects.
• Look for similarities in values/beliefs/behaviour/demographics so you can create a “high value client avatar”. This avatar will help you target other prospects of the same ilk.
• The biggest reason clients leave is feeling the business is indifferent towards them. Or something could have happened.  Maybe a product fault, issue with a staff member etc.So if you notice that someone has spent considerable money but not done so recently, call them up and find out.  Trust me, they’ll appreciate your call and you may just get them back as client.

What’s next?

• Dissect your client list and see exactly what they’re buying and more importantly, why.
• Figure out which 20% and then 4% give you most of your revenue and profit.
• What your most profitable client Avatars are and how to target them.
• What products/services you can add to maximise the money these top clients spend with you.
• How you’ll need to communicate the additional value encouraging them to buy.

By doing this I guarantee you will significantly increase your revenue/profit while you actually work with less people.