Pareto’s Principle, also known as the 80/20 rule, states that 80% of your revenues will be generated through 20% of your customers. A successful small business is one that has learned how to maximize this 20%.
Picture a funnel, wide at the top and then steadily narrowing down to narrow bottom. All of your potential customers are at the top of the funnel, and at the bottom narrowest part of the funnel, you have the customers from which you will generate the bulk of your revenue. Let’s take a look at some ways you can optimise the sales funnel for your small business.
Identify Bottlenecks in Your Sales
Step one is to identify where bottlenecks occur in your funnel that lower the number of customers you receive or the amount they spend.
- Where are you underperforming?
- What opportunities and improvements are you overlooking?
- Analyse marketing and lead generation activities. Do you have a consistent and effective lead generation campaign in place?
- Are you effectively utilizing email, mobile apps, social media, YouTube and other technology driven resources?
- Are you running long term as well as short term campaigns?
- Do you make it clear you are selling something up front so as to not waste time with those looking just looking to schmooze?
- Are you willing to do real work and not rely heavily on gimmicks?
- Are you making a great offer, putting that offer out there, and giving people a reason to act now?
These are all questions you should ask yourself when analysing how you generate your leads.
Keeping Warm Leads on the Back Burner
Step two is identify whether you are proper identifying and nurturing leads. Many times, your website and other sales channels bring in leads that are not yet quite ready to buy, but are nonetheless promising leads. You have to build trust and foster the relationship at different stages of the process.
Determine how you define which leads are nurture-worthy and which leads you should simply cut loose.
Define your ideal lead and determine how you want to treat them. Are your ideal leads within a certain industry? Are they at a certain income level? Do they have a need of the product you offer? What can you offer to nurture your needs along? Consider white papers, videos, blogs, articles, premium items, monthly newsletters, follow phone calls and meetings. Anything that continues to garner their attention and further pique their interest in your product is of value.
Selling All Along the Way
Step three is analysing your selling and closing activities. The ABC (Always Be Closing) technique is a tried and true selling principle, but it is just one part of a multifaceted strategy that can be employed for selling and closing success. This principle holds just as true online as it does offline.
Evaluate your closing process and ratio. How many visitors came to your business in the last week, month or year? How many of those resulted in sales? If you realize you are actually just engaging in more conversation than actual selling, then you may not be utilizing your sales opportunities effectively. Analyse what may be preventing you from making a sale. Are you really addressing your prospects questions and objections and asking for the sale, or have you been chalking a slow period up to a bad economy? Are you putting in the required prep work before you attempt to close? Are you attracting the right leads in the first place?
What Is Your Surplus Value to the Customer?
Step four involves reviewing how you deliver value to your customers. Think of your business in the terms of a “value delivery system.” From the customer’s perspective, they are looking at “what is the value of what I’m buying compared to the price? This is the surplus value to the customer, or how much they will enjoy the product once it’s paid for.
Evaluate what is the impetus a customer would have to purchase your product. Why would a customer want to purchase your product over a competitor’s product? What would motivate a customer to switch to your product over one they are already buying from another vendor? What value can you give them that someone else can’t? These are key questions you must have answers to in order to successfully drive sales.
The value you add could be an intangible, such as honesty and integrity, outstanding customer service, follow-up, a solid relationship built on you anticipating and responding to the customer’s needs. Are you offering a good quality item for the price? It is often tempting to try to offer a customer a lower price point to be more competitive, but to a customer, real value is often measured in the much more than “did I get this item at the lowest price?”
The Bottom Line
Remember that the 80/20 rule often holds true, whether we are talking about online sales or not. Your challenge is to most effectively identify who that 20% that generate your revenue will be, and position yourself in a manner to optimise your opportunities with that 20% – at every stage of the sales funnel.
Small businesses generally operate on a small margin, and you’ve got to keep it lean and efficient. That requires critical and ongoing analysis of your business and marketing strategies. Measure how many visitors make it to each level of your sales funnel, and cross-check to see whether these visitors are the ones most likely to make you the most profit in the long run.
One last suggestion – consider sitting down with a successful businessman you admire and reviewing your strategies and asking for feedback. Give them your pitch and let them tell you what they consider your strengths and weaknesses. There’s no substitute for experience and the wisdom and insight it can provide.