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80/20 Rule, Fire a customer?

Discussion in 'Business Operations' started by Team Gopher, May 19, 2004.

  1. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Posts: 4,041

    The 80/20 rule states that 20% of your customers account for 80% of your hassles. Try as you might, you just won't be able to please all of your customers.
    Before you 'fire a customer' remember to talk with the customer and find what's bugging them.

    Read more here.

    You can read more about this 80/20 rule in The Guerrilla Marketing Handbook by Jay Levinson & Seth Godin.
  2. Turf Medic

    Turf Medic LawnSite Bronze Member
    Posts: 1,073

    This theory has been tossed about the business world for many years.

    You will make 80% of your profit from 20% of your customers.

    If you run a sales organization 80% of your sales will come from 20% of your sales people.

    In customer service 80% of your problems will come from 20% of your customers.

    The problem with this theory is that people will get the idea they can just fire the bad 20% of the customers, sounds like a good idea. But the 80/20 rule will still be in effect. Example if you start out with 100 customers and decide to cull the 20% that are causing 80% of the hassles. Now you have 80 customers but you will soon find that you are back to the 80/20 ratio. But now instead of having 20 customers causing you 80% of your promlems and 80 customers causing you 20% of your hassles. You will have 16 customers causing 80% of the hassles and 64 customers causing 20% of the hassles. You can 80/20 theory yourself clear out of business.

    The best thing that you can do with this information is to use it to learn where to place your attention.

    Understand that the 20% customers that make you the most money also deserve the most attention. Understand that the 20% that cause you the 80% of the problems, deserve just enough attention to keep them as a customer. Don't let problem customers eat up all of your attention, don't dwell on the issue, quickly fix the problem, then move on. Get back to the people that make you money.
  3. Hawkeye5

    Hawkeye5 LawnSite Senior Member
    Posts: 295

    Actually, what is called the 80/20 rule is Pareto's Law. Named after the 19th century Italian political economist Valfrato Pareto. The law is concerned with the disproportionate distribution of significant items.
  4. nuchdig

    nuchdig LawnSite Member
    from oh
    Posts: 43

    There's always a few that spoil the party. I keep a full schedule and weed out the jerks whenever possible (meaning after a number of new accounts make it possible to easily lose a bad account). I work too hard for a buck and don't have any patience for that "20%". However, they are not fired until they are replaced.
  5. Woody82986

    Woody82986 LawnSite Silver Member
    from DFW, TX
    Posts: 2,128

    I try to drop my owrst or least profitable account after every four new accounts I get. This helps keep things flowing smoothly and I get less and less stressed about things until one of those new accounts winds up being a pain in my side...
  6. tiedeman

    tiedeman LawnSite Fanatic
    from earth
    Posts: 8,745

    that is what I have always known it as, and to me it holds true

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