The top 20% of a company's customers can generate 50% to 80% of a company's revenue. How can we identify these customers? What sets them apart from lower-value customers? And, is it possible to identify them in advance?
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When it comes to customer revenue, does the 80/20 Rule hold? Do 20% of customers really generate 80% of revenue? This article addresses the question by examining the Pareto Principle and demonstrating visualization techniques to help uncover how much revenue top customers generate.
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Early in my career, I was working in a finance role at an e-commerce company. I had the following discussion with the head of customer acquisition. Me: What's up with all the new customers from partner X (a bargain website)? Customer Acquisition: Yeah, we're getting a lot of traction there. That paid marketing program is important for us to hit our new-to-file customer acquisition targets. Me: Discounts for those customers seem pretty high. [concerned look on my face]
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Clearing up confusion about Customer Lifetime Value (CLV).
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