Halve your Budget; Double your Revenue

That’s how Joseph Jaffe introduced his new book, “Flip the Funnel”.

The 80-20 Rule (a.k.a. Pareto principle) is far from new. The rule can be simply explained as “20% of your customers generate 80% of revenue” but it has somehow evolved into the new buzz term in marketing is called “Flip the Funnel”. There’s this new book about it and Seth Godin also wrote about it back in 2006. The main idea is to look at marketing as a funnel and when it is upright, that’s how traditional marketing is done – sell one to many.  Target the mass and shove them through the funnel to squeeze out the few good customers at the end, rinse and repeat. While this approach has worked for many decades, the effects have been severely diminished due to the increase number of marketing avenue and market saturation. But what if you flip the funnel upside down -  you can sell many to one. But how?

By making customer retention the new customer acquisition. Focus on your few (well, 20%) good customers. Retain and reward them, make them your brand ambassadors.

Set Godin wrote in 2006, “Turn strangers into friends. Turn friends into customers. And then… do the most important job: Turn your customers into salespeople.”

Joseph Jaffe, wrote, “It’s time to ask this question, “what if we got it all wrong?” What if all of marketing was completely backwards? If 75% (or more) of our revenue comes from returning customers, why on earth are we only investing 25% (or less) against them? If 20% (or less) of our customers are responsible for 80% (or more) of our revenue or volume, why don’t we know each and every one of these customers by name? What are we explicitly doing for them?”

If it is hard to look at marketing differently, just look at the picture.

What do you see? A funnel that can be used to squeeze masses or a megaphone that can be used by your loyal customers to talk about your brand?

“Spray and pray” vs. “retain and reward”. Which end of the funnel are you using?