Back in the late 1800′s, an Italian guy named Vilfredo Pareto discovered one of the most powerful principles of business and economics…
It sort of works like this:
- 80% of your revenues come from 20% of your customers
- 80% of your problems come from 20% of your employees
- 80% of your sales come from 20% of your marketing efforts
And so on.
But that last example…where 80% of your sales come from 20% of your marketing efforts…is one that trips up a lot of business owners.
It silently forces you into being overly dependent on particular advertising media or sales channels. And being too dependent on any one source of customers – or any one customer – is a recipe for disaster.
Just ask any automotive supplier who had GM and Ford as 80% or more of their business back in 2012-2014.
Just ask any internet marketer who was using Google PPC advertising last year.
Just ask any local business that was dependent on Yellow Pages for their incoming calls.
When you are having success in one media or customer acquisition method it is easy to rely on it.
And that is one of the big reasons why – in direct response marketing – we are always testing against controls. Testing to see how and where we can drop our customer acquisition cost. How we can boost lifetime customer value.
Bottom line: even though the 80/20 rule will almost always be true, you should always be testing new advertising media and continually testing new strategies. Even if you have a proven winner that works over and over again, you just never know how or when that will change. It most assuredly will.
A Personal Experience
Last year was a bonanza for me in generating leads from Google PPC for a particular information product. My cost per lead was so low I had a very high front-end ROI. Back-end was enormous. I was very happy. My only regret was not having a bigger market, so I could spend more money on these ads.
Then it all changed…
One day Google decided that my landing page was in violation of their guidelines. They sent me an email stating this. I attempted to address this issue, but the changes I made were not sufficient to their approval team. Suddenly, I was no longer able to advertise my page.
Suddenly, the source of 75% of my leads for that particular product was gone. Evaporated in an instant. Thousands of dollars a month in revenues disappeared like a ship in the night.
This “Google slap” happened to a lot of marketers last year. Many people were up in arms about this. I was upset as well.
But after a while I realized Google could do whatever they darn well pleased. If you want to use Google for advertising, you gotta play by their rules. If you don’t know or cannot discover the rules of the game you better find somebody that does.
And this was my biggest regret in losing this source of leads for my product: I should have hired an expert to help me.
I thought I had it down like clockwork, but I didn’t. Changes were on the horizon that I hadn’t foreseen. I’ve since learned a great deal more about this advertising medium.
Some forms of media and advertising platforms are VERY nuanced. They require more than even specific marketing and advertising expertise. They require insider knowledge and sometimes valuable connections.
Eventually, after some fits and starts, I began testing new media and was able to crank the lead generating machine up for my information product.
But this was tough medicine to swallow.
It reinforced a lesson I had learned in the past…which had snuck up on me again..
Never be overly dependent on one source of business.
And…never be dependent on a certain media.
Here’s a newsflash along those lines:
With the heavy investment many companies are making in social media (like Facebook, Twitter, etc.), some caution is warranted. Mostly because you are building a community of followers or customers on platforms which you DO NOT OWN and on a platforms which you do not make the rules.
What if Facebook changed their Fan Page guidelines one day and your page disappeared because they took it down or required you to make significant changes?
If this would put a huge and permanent dent in your business shame on you.
Remember: Facebook can do whatever they want because you are advertising on their platform (be it with Fan Page or Display Ads, etc.) They built it, they make the rules.
Take some advice from Pareto and from me: always be working new angles and marketing tests into your “80%.”
(And quickly discard your 20%, too!)
You’ll be glad you did.