80/20 Quad 3: Thinking Is Required

Quad 3 consists of B customers, customers who don’t make it into the top 20 percent, the A customers, who are responsible for some 80 percent of your net sales, profit, or whatever other value metric you prioritize. The B customers in Quad 3 are those who buy at least some A products.

The challenge in this quad is to neither overserve nor underserve this group. The simplest way to avoid overserving might be called the blunt-instrument approach—that is to heed the descriptive label often applied to Quad 3: “Sell Only Transactionally.” Accordingly, most 80/20-driven managers count this segment as offering good transactional business, business that is very much worth running if you can do so with minimal resources. You certainly don’t want to alienate these customers, because they often do produce significant sales and profits. But they are not nearly as productive as Quad 1 customers. So, you literally cannot afford to overserve this Quad 3 by devoting to them resources that could be used more productively serving Quad 1.

The answer is to serve your best B customers but to treat them differently from your A customers. Even good B customers do not routinely warrant dedicated sales personnel, who devote time selling consultatively. In fact, if you can sell even your best B customers totally online, so much the better. You may even want to set minimum-order quantities or introduce quantity-based pricing designed to incentivize larger orders.

Many businesses probably can get along reasonably well by strictly applying this transactional, minimum viable resources approach. But, as with most aspects of management, things work better if some thought is judiciously applied. In fact, if you want to take full advantage of your Quad 3 customers, you will find that thinking is required.

By definition, 80 percent of your customers are B customers. That is a large number, large enough to invite further segmentation within the quad. Identify your highest-performing customers within Quad 3 and take steps to convert them from B customers to A customers. Reach out to them with promotion offers, cross-selling, and quantity pricing—not to force them to buy more, but to reward them for doing so. By looking more closely at Quad 3, you stand a good chance of promoting a portion of your good customers into raving fans. Quad 3 should not be thought of as a receptacle for your also-rans, but as a category of customers with real potential to create more business for you while putting you in the position to create more satisfaction for them. In a well-managed business, Quad 3 will not be your top-performing quad, but it will be your most dynamic one. This segment of customers presents the greatest opportunity for improved performance.