Revenue: Fanatics, Casuals, Irregulars
The most important analysis in marketing is ‘segmentation’. One of the great marketing mavens of all time, Seth Godin, writes extensively about segmenting customers according to their passionate support for your organisation and product. His most prominent work on this subject was his book ‘Tribes’.
He also wrote a blog post a while back that didn’t explicitly talk about 70-20-10, but implicitly referred to it which I have adapted here…
- 70% of revenue comes from Fanatics – top customers (buy dozens of books each year.
- 20% of revenue comes from Casuals – mainstream customers (buy a book regularly once or twice a year)
- 10% of revenue comes from Irregulars – infrequent customers (buy books for special occasions)
Seth’s post was more about trend-setting, but within it belied this critical segmentation of most businesses customer base…
“iTunes and file sharing killed Tower Records. The key symptom: the best customers switched. Of course people who were buying 200 records a year would switch. They had the most incentive. The alternatives were cheaper and faster mostly for the heavy users. Amazon and the Kindle have killed the bookstore. Why? Because people who buy 100 or 300 books a year are gone forever. The typical American buys just one book a year for pleasure. Those people are meaningless to a bookstore. It’s the heavy users that matter, and now officially, as 2009 ends, they have abandoned the bookstore. It’s over.”