Brands should focus on big spenders to make profit
New research re-enforces the validity of the Pareto Principal during the recession, and shows that UK brands can see their profit increase if they stay focused on the top 20% of their consumers.
According to a new study from Bain & Company the top 20% of spenders on consumer products generate the majority of sales, or 60% to be precise. This trend holds true across all types of products, as big spenders are around six times more valuable than the remaining 80%. In certain areas, like jewellery for example, the top 20% of customers carry 12 times the regular net worth.
The impact of top customers is lower in other sectors, such as clothing, but analyses show that even there it should not be underestimated, as the top one-fifth of spenders accumulate nearly half of all sales.
The study, which monitored the shopping habits of 6,000 UK adults, revealed that, depending on the sector, the most active shoppers have a different number of preferred brands. In clothing, for example, the top 20% consumers typically shop from 6.4 brands, while the remaining 80% choose from four.
Where cars, jewellery and tobacco are concerned, the big spenders select from two brands, while the figure falls to 1.9 brands when buying personal technology items, mostly due to Apple’s dominance in this sector. By contrast, the number of brands from which consumers pick chocolate and beer is much larger.
Tory Frame, head of consumer products at Bain & Company, notes that never before has loyalty played such an important role in marketing, both for consumers and brands.