What’s the 80-20 Rule in Jewelry Marketing?Laryssa
Developed by Italian economist Vilfredo Pareto in the early 1900s, the Pareto principle, or “the 80-20 rule”, states that approximately 80% of the results come from 20% of the causes or efforts. While observing land-ownership patterns in Italy, Pareto noticed that only about 20% of the population – the most powerful and wealthy people – owned about 80% of the land.
Over time, scholars who learned about the Pareto principle realized that they could apply it to many different scenarios and activities, including gardening, sports, sales, crime, productivity, workplace hazards, healthcare, and more. We can see real-life examples of the Pareto principle all around us. For example, the top 20% of earners in the United States paid approximately 80-90% of federal income taxes in 2000, 2006, and 2018. Can you think of any way that this principle manifests itself in your life?
Pareto principle in jewelry marketing
Did you know that the Pareto principle has a place in jewelry marketing? When it comes to marketing, a common trend among many jewelry businesses is that 80% of revenue will actually only come from 20% of customers because that minority consists of the best and most loyal customers who buy frequently. Do you find that’s true with your business?
Furthermore, many jewelry businesses find that 80% of revenue actually only comes from about 20% of their product assortment. Most jewelry businesses have their “hero” products or best-sellers, the ones that are guaranteed to sell again and again. As a result, those products will maintain a firm place in the product assortment. Does your jewelry brand have tried-and-true customer favorites?
Use the Pareto principle to your advantage
Knowing these likelihoods about your jewelry brand, how can you make use of the Pareto principle? First, you must identify your top customers and decide how you can get more customers like them. You must also brainstorm ways to improve your customer service offerings, so you can maintain customer loyalty. Next, you must identify your top-selling products and not only decide how you can design and manufacture similar winning products but also strategize about how you can price and promote your hero products accordingly.
Have you ever combed through all your customer data and actually identified the top 20% of your customers? Why haven’t you designated these people as VIPs? Once you compile a list of your top customers, you’ll be able to comb through your data and ask yourself the question, “Do these customers have anything in common?” For example, they may all live in or near big cities, or they may all seem to have the same average order value when they complete their purchases. How are your top customers finding your brand? How long does it typically take these customers to make a purchase after they discover your brand for the first time?
After you’ve identified some commonalities about the top 20% of your customers, then you’ll want to get to know them even more intimately. If you’ve never before leveraged the power of surveys for your jewelry brand, then now’s a great opportunity to do so. Use Survey Monkey or Google Forms to create a survey that will gather any information you’re currently lacking. For example, if you don’t know your customers’ ages, then you should definitely include a question about that. As long as your top customers have all given you permission to email them, then you can email them your survey.
Finally, you can segment your marketing efforts, so your top customers will receive special promotions and updates. If you want to treat your elite customers like VIPs, then you can send them special email marketing campaigns, offering them exclusive discounts and other incentives like early product and collection previews. Alternatively, you can implement a rewards program for customers who reach a specific spending threshold with you. VIPs may get access to perks like birthday discounts, free shipping, customer referral bonuses, and more.
Now that you know how to make the most of your data about your top customers, you should also examine your top-performing products and observe how much weight they’re pulling for your business. Nearly every jewelry business has its “hero” product, whether it’s a pair of essential hoops, an everyday cigar band, or a simple and easy-to-layer pendant necklace. What are those products for you?
Once you identify your top-selling products, you’ll want to adjust your product development strategy to help you create and produce more winners instead of duds. For example, let’s pretend that your top-selling product is a pair of bezel-set diamond stud earrings. If you’re not already offering this product in multiple metal colors, then you may want to manufacture it in yellow gold, rose gold, white gold, and maybe even silver. In addition, if customers seem to like the size and comfort of the stud, then you may want to also offer it in other gemstone colorways, if you’re not already doing so.
Knowing your hero products can also help you with pricing. You likely use a pricing formula that helps you determine the pricing of all your jewelry products. However, you may have a little wiggle room with your hero products, especially if you know they’ll be selling often. Price your hero products slightly lower than your pricing formula may dictate, and you’ll be able to outprice your competitors. Alternatively, offer special bundle discounts or other discounts just on these best-selling products and watch them sell like hotcakes!
The Pareto principle obviously isn’t always true – it’s a trend more than a law that’s written in stone. However, even if your individual results don’t match 80-20 exactly, you can still use the principle to make educated decisions about your brand and set realistic goals. If you struggle with setting priorities in your marketing strategy, then the Pareto principle can help you stay focused and use your time efficiently.