The Italian scientist Pareto observed that only twenty percent of an effort usually produces eighty percent of the results, and that the eighty percent of effort producing only twenty percent of the results is terribly wasteful. Of course, Pareto was not a marketer, but his observation is as accurate in marketing and selling today as it was in science when he made it years ago.

Here are some observations about service firms and enterprises that sell intangibles:

• Most firms focus their marketing efforts primarily on acquiring new customers

• Activities to retain existing customers are usually considered part of the "service" function, not a formal part of the marketing plan

• The acquisition cost of new business is generally greater than the cost to acquire additional business from existing customers

• Revenue from new sales is a primary business measurement, and continuing or sequential business (renewals, persistency, repeat business) is rarely considered an equally significant measurement

In a nutshell, by not emphasizing current customers in the marketing plan, service firms are living Pareto's Law and losing profits at a fairly steady rate.

It is easy to understand that service firms of all kinds can benefit greatly from a formal marketing effort to keep current customers as well as acquire new ones. You probably have experienced a pleasant surprise like a client calling to ask for your help or your calling a client just to say hello and discovering that there is a problem you can solve now with your products or services. The cost to acquire this type of business is minimal, but, if you are like most service firms today, your formal marketing strategy does not include specific efforts to maintain and develop existing clients. It should.

It is crucial to build your marketing plan around the fact that it is critical to have customers, not just find new ones.

Questions? Email jhmco@melchinger.com

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This newsletter is designed and distributed by Kirk Lowe of Freedomarketing (faWebProfiler.ca). Content by John H. Melchinger - The Marketing CoachT