Do you assume everything in this world is equally distributed? Well, we might be wrong in that assumption! In this blog, we talk about how the 80/20 Pareto rule is applicable to customer success. But first, a little backstory.
Hear the interesting story: Do you know the man whose head was struck by an apple? I say, it is Isaac Newton and if you recollect, there’s one of the laws of motion on that incident!
But either way, a curious man like him was struck by a profound observation in Italy. This time, with this man the trigger is from wealth and not an apple!
An individual who is a great economist, Vilfredo Pareto, came up with the Pareto Rule also named the 80/20 rule and sometimes known by the name ‘The principle of factor sparsity”.
I haven’t come to the story yet! Do read on…
The storyline of the Pareto principle
The curious man figured that 80% of the wealth in Italy was owned by only 20% of its population. He didn’t stop there, the journey continued to test out in different countries as well.
That derived the obvious reality of the measurements and management that fell under the 80/20 rule and proved, not all things are distributed equally.
Now, it makes sense what the 80 20 rule suggests, “ 80% of the outcomes are the result due to 20% of the causes!”
This theory now holds good for every arena and why not apply it for customer success? Let’s call this an “80 20 rule customer success”.
It’s this fact that the Pareto principle in business has a huge impact, get’s us to dig deeper into our use case.
How does the 80/20 rule for customer success work?
Every business or organization is keen on reaching maximum productivity. But how to get there?
It’s that every action on a thing that takes 20% of your precious time has to yield a reaction or an outcome that is 80% (To the maximum!).
Identify the thing that takes 20% of the attention of our time.
In our case, it’s those customers in the segment who are willing to pay the price of the product that is higher than the actual. And is contributing to 80% of the revenue that your business makes.
Practically the process is based on two types of customers:
High paying: white-glove services aka high touch
The customer journey is as follows:
It’s these customers who compel dedicated customer success managers and need high attention to ensure 20% of the efforts are rightly executed.
- Sales promises
There is no denial why the sales team is great at their duty of making a lead to a customer. And during this stage, they make a clear point to the customer on what to expect and about the delivery.
The customer success teams involve in most cases to ensure the promises are practical and to reassure the customer that it will be to fruition after the contract, to stay rest assured!
- Onboarding delicacies
The most crucial part after the hand-off is this which can make or break the contract. Assuming the customer success team is taking care of this process in the organization, it’s these 30 – 60 days that are crucial for giving the first value to them with the use cases they bought your product for.
They have used all the features, licenses, and functions by this time. So they can continue to deliver value in the next stage.
- Support services
Nonetheless, there are no operations where there arises no issues or doubts in mind. Issues didn’t spare Isaac Newton even!
That’s where the support team acts to rescue people in such situations. Well, when the issues no longer stay within the limit of support, customer success has to pitch in.
And in other cases, the frequency of interaction with the support indicates their health. This can take your attention to get things sorted and buckle up those who are not engaging with your product!
- Professional service offerings
Sometimes these additional services with custom implementation can add value to improve the solution that was carried out. And when the involvement deepens with the customers, the technical expertise gets obvious of a thing.
Customer success must understand this additional feature implemented to know how it is impacting delivering the value that makes product adoption easier.
- Product adoption monitoring
Is the responsibility over yet? No this is not it! Only when value is delivered the product is implemented well. You don’t need to remind but their minds are already knocked!
Helping them adopt the product by guided training or resource utilization aids in engaging them and is crucial to monitor if they are using your product well or not for their use cases to avoid churning.
Customer success gets them right with the help of the customer success tool!
- Renewal repetitions
You took care of them being engaged. But the business runs with the revenues, right? It has to make monthly or annual revenues. And the point of making them renew the subscriptions is the ultimatum.
Customer success teams with the relationships they have built over the year get to deliver value effectively. And there is no way they reject a renewal but although a sales team or the customer success team ensures this process is carried out.
Check out the Renewal template to learn more about step by a step action plan for a confirmed renewal!
- Upsell opportunities
By spending time with the customers the customer success team knows the depths and breadths of the customer requirements and it isn’t hard for them to upsell the product.
Low paying: Automated services aka low touch
The automation steers clear the majority of the processes for low-touch customers.
It’s almost all the processes in the customer journey are automated with the intervention of a Customer success manager when needed and it’s hard sometimes, yet the automation is effective!
The use of the playbooks in this scenario is to the fullest allows tracking where they are in the product adoption process and the auto emails to remind them of the renewals go right on the set days. These are just a few uses case but automation can do more than this!
Now when the customer journey is clear it’s up to the customer success team to identify 20% of the important things to get the 80% of the outcomes as Pareto suggests.
Monitoring is the key to staying proactive
Monitor all the touchpoints to which the customers have to be engaged. Whether it is the resources that were made available to them or the support they seek or the playbooks they followed or the renewals they made. All have to be in your visibility.
Do a demographic study on them!
Depending on how you want to segment your customers based on the business requirements, segregate to target the customers specifically to keep them engaged. It can either be on the basis of revenue or region or customer lifecycle or use cases.
Put every effort into retaining them.
They are the ones you need to retain after all. Stop putting effort into something else that steers your way from giving attention to the bigger chunk!
Remember that the 80-20 rule customer success isn’t about keeping the percentage of the same number. That’s not what Pareto explains too. The point here to note is that the distribution is unequal and that the major outputs can be seen with little effort as well.
80 20 rule for customer success in increasing the productivity
We certainly are laid back in prioritizing the tasks that are important rather than end up doing everything that is least important. But in some ways, the 80-20 rule in business can cut down the habit and increase the productivity level to be impactful in achieving success.
- Identify all the tasks that are on the plate each day.
- Prioritize the tasks that are more impactful regardless of the type of work. For instance, the project that is blocked due to your dependency or the tasks that are short but still helps others to continue the process, or the tasks that need collaboration with other teammates.
- Finish these priority tasks before time, because they have a higher impact when done.
80/20 rule for customer success in upsells and renewals
If you are wondering how this works, I get that curiosity! It’s easier to think from the perspective of 80 20 rule actually if you get it right!
Let’s say there are three different subscriptions you are selling in your business. Get this into visibility for a clearer picture by graphing it out against Sales by product type vs Profits. Get an idea of what subscription is selling the most.
Further, put this to an analysis by tabulating the Sales in the previous month after working out all the costs with the Profits and filtering the data with respect to Return on Sales (i.e Profit/ Sales) * 100%.
|Product||Sales||Income||Return on Sales|
Now coming to the second table, tabulate the answers with the percentage of group sales for each subscription with the cumulative sales percentage and the same with profits having group and cumulative percentages.
|Product||% of sales in the group||% of sales in cumulative||% of profit: group||% of profit cumulative|
From this, you can figure out what subscription is making higher profits and what subscription needs to double the sales. Thus increasing the overall output.
Note that this can be one way to go about renewals.
For expansion or upselling one can go by customer segmentation.
Consider these use cases;
- Identify the 20% of the repeat buyers that contribute to repeat purchases of 80%.
So, here’s what you do, reconnect with them!
- Figure out the 80% of the overall revenue coming from 20% of the customers.
You shall caress the relationship with them.
- Identify the 80% of the complaints coming from 20% of the clients.
Guess what you’ll eliminate them.
Leaving to the conclusion that 20% of those repeat buyers are ready for upselling!
80 20 rule of customer success in decision making
Did you know this can aid in solving the problem? It’s the biggest quest we all work towards being in the business.
The idea is to simplify the problem-solving ability!
- Figure out the problems you want to find the resolution for.
Of Course, the problems aren’t just a few in this world but rather many.
- Get to the roots of these problems.
Solve the problems as there may be too many to ignore. get to the root cause and do it differently.
- Segregate problems into different groups.
Put them into categories where they belong or are close to.
- Assign them a priority number according to the impact it makes.
Of all, it has to make a major impact when solved.
- Plan out a solution that solves 20% of the problem.
One solution that covers the major problems.
The good part of the 80 20 rule for customer success
- Divides the work into tiny segments.
- Sets clear priorities.
- Gets the focus on important things.
- Increases the curve of productivity.
- Creates a higher impact with less effort.
Limits of the 80 20 rule for customer success
- The idea is to not focus on the number 80/20 rather is to convey it is the less effort that gives larger output. But even the 20% of the area takes 100% of our efforts to seek an 80% impact. That’s the setback.
- The much important tasks negate the consideration of less important tasks. The less important ones are still a task that can’t be ignored. And hence the 80/20 rule customer success has to find the balance to handle the less significant tasks too.
The striking moment!
The moment has come to conclude the hit of a striking basic principle! The 80 20 rule customer success is more like a smart plan for lazy people. That takes not much effort to change the entire system but rather aids in focussing on the right things at the right time to strike that winning moment.
So why miss your team not using this principle right? Get them to try the 80/20 rule for customer success now! Well, that struck one more thing in my mind, “Right thing at the right time” in customer success asks for a customer success tool to get 80% of the outcomes with 20% of the efforts from the customer success managers. So, try CustomerSuccessBox!