• Restaurant Marketing

Increase Your Customer Lifetime Value with the 80-20 Rule

by: Robin Johnston
3 min read

One of the most important business metrics is the lifetime value of customers. In short, it is the expected amount that a single customer will spend at your business during their lifetime of patronage with you. Customers with a high lifetime value tend to spend more per purchase, spend more often, and remain loyal for years. The more high-value customers you have, the better your current and future business prospects.

Acquiring these customers may take a long time. This depends on whether increasing lifetime value is an active goal and on the methods used in the customer acquisition and retention processes. However, achieving rapid improvements in customer lifetime value (CLVs) is doable with a concept that was discovered over a century ago.

What is The 80-20 Rule?

While there are many ways of stating the 80-20 rule, the most useful of these for businesses is that 80% of your results will come from 20% of your X. X can be words such as efforts, investments, employees, advertising sources, customers, etc. Your “results” with respect to customers could be sales dollars, profits, or other metrics. For example, 80% of your sales dollars will come from 20% of your customers.

To some, it might seem mysterious why the rule should work at all. But the reason is that most things are unevenly distributed. Some apple trees grow more fruit than others. Some employees are more productive than others, and some customers are more profitable. The ratio is not always 80-20 and the percentages do not always add up to 100%. Nevertheless, a minority of inputs, sometimes called the vital few, will usually have a disproportionate effect on your business. In addition, the 80-20 rule can be used to find the causes of businesses problems. For example, 80% of your customer service headaches will be caused by 20% of your customers.

Increasing Your customer lifetime value With the 80-20 Rule

Rather than dividing your resources equally between different types of marketing campaigns, let the 80-20 rule tell you which of these campaign types yields the best results. If 80% of your high lifetime value customers come from only 20% of your marketing campaigns, you should determine the commonalities between these successful campaigns. Perhaps they have a single demographic in common, or perhaps it was a specific promotion. Greater focus on this commonality will increase your marketing ROI.

For example, if a marketing email was responsible for acquiring 80% of your high lifetime value customers, you might want to commit more resources to your email marketing strategy. Note that campaigns bringing in high lifetime value customers will not necessarily bring in the most initial sales. Initial sales and CLV are different business metrics.

The 80-20 rule applications discussed so far, will efficiently increase the number of high lifetime value customers. However, you can also apply this rule to increase the lifetime value of your current best customers. If you are using a large variety of reward programs, upsells, and cross-sells to increase customer lifetime value, look for 80-20 patterns in your data.

For example, if 20% of your reward programs were responsible for most (80%) of your customer lifetime value improvements, then committing more resources to these programs and reducing resources to the other 80% is worth your while. Look for 80-20 patterns in your upsell and cross-sell data as well.

Note that the 80-20 rule works best with a large amount of data. Online sample size calculators are available for determining the minimum sample size that is statistically meaningful. The main takeaway here is that for long-term business success, you should seek to improve the lifetime value of your customers and that the 80-20 rule provides an efficient way to go about it. 80-20 patterns are (almost) everywhere. Look for them in your business data, especially when seemingly inexplicable spikes in sales or CLVs occur.

 

Restaurant Marketing FAQs

What is Restaurant Marketing?

Restaurant marketing is the process of getting people to visit your restaurants. Restaurant marketing creates loyalty, provides data to research, analytics, and allows restaurants to gain a better understanding of their ideal customer profile. It utilizes all customer channels: guest WiFi, website, social, rating sites, mobile apps, email, text, and advertising.

Learn More About Restaurant Marketing Here

What is WiFi Marketing?

WiFi marketing is a marketing technique that uses guest WiFi to collect & clean customer data such as names, emails, phone numbers, customer behavior, and demographics. This data is used to personalize marketing campaigns to increase customer loyalty, build online reviews, and save at-risk customers. The performance of every campaign can be tracked down to the tangible ROI of a customer walking back in your door.

Learn More About WiFi Marketing Here

What is Restaurant Reputation Management?

Restaurant reputation management is the process for restaurants to manage customer feedback and creating systems to improve customer experiences, passively build positive online reviews, and save at-risk customers. It is a very important aspect of running a successful restaurant business.

Learn More About Restaurant Reputation Management Here

How Does Bloom Identify and Bring Back Lost Customers?

Bloom Intelligence uses machine learning to identify at-risk customers. When one is recognized, the system will send them a message with an incentive to get them to return and re-establish their visit pattern. Bloom users are seeing up to 37% of churning customers return.

Learn More About Saving At-Risk Customers Here

SAVE TIME, INCREASE CUSTOMER LIFETIME VALUES, CREATE NEW CUSTOMERS

What our happy customers
are saying

“SaaS that covered so many bases for us instead of having to use multiple software products. Bloom Intelligence has simplified our responses to reviews, customer feedback, and more. I highly recommend Bloom Intelligence.”

Robert Sanderson

“Bloom Intelligence really is a step ahead in terms of marketing software and metrics. Their product is reliable, fast and innovative and has helped the company I work for really grow.”

John Marchetti

“Working with Bloom Intelligence has been amazing. They assist you every step of the way and work with you hand in hand to make sure you are optimizing your advertising potential. We are excited to use this tool to help learn more about our customers so that we can personally engage with them and understand our strengths/weaknesses.”

Ariel Ramirez

“In these challenging times, it has been a pleasure working with Bloom Intelligence to help facilitate our service offering to our clients. They were extremely responsive and provided support to mitigate risk and minimize revenue loss. Great partner!”

Stefan Kim

“We’re extremely pleased with the wealth of customer data that we’re able to gather, at a very attractive price.  In addition, we’re able to communicate our new product promotions by using  the landing page as a digital billboard.  A “no-brainer” for anyone working with limited Marketing $$.”

Bob Cross, Vice President of Operations

Subscribe Here for the Latest Updates

Never miss a post! We'll keep you up-to-date on the latest restaurant and retail WiFi marketing information.

Drop us a line!

We would love to hear from you! If you have any questions, comments or ideas about our restaurant marketing blog, drop us a line and let us know.

Or call us at 727-877-8181.

Contact Us