Why Do I Care About The 80 / 50 Rule?

Lifetime Value is a function of customer diversity.

When a customer buys via email and search, the customer is typically worth an additional 10% vs. a customer who buys via just search.

When a customer buys two $50 items the customer is typically worth more than the customer who buys one $100 item.

When a customer buys from multiple product categories the customer is typically worth more than the customer who buys multiple items from one product category.

When a customer buys in Spring and Christmas, the customer is typically worth more than a customer who buys twice at Christmas.

Companies that are UNIQUE or who are ultimately looking to SELL are companies that do all of these little things well. And as a consequence, they have a "beefier" customer base - a customer base willing to spend more in the future.

That's where the 80 / 50 rule comes into play. All companies have zealots. Not all companies harvest adequate profit from the middle of the 12-month buyer file. If you generate more than 80% of demand from 50% of the twelve-month buyer file, you're not harvesting adequate profit from the middle of the 12-month buyer file and consequently you are not generating sufficient lifetime value (meaning that it is harder to acquire new customers due to ROI constraints).

Make sense?