The 80/20 Rule is Misleading for Service

The The 80-20 Rule (Pareto Principle), which states that 80% of sales come from 20% of customers, can be dangerously misleading when applied to service strategy. A blind application of this rule might lead a company to focus all its best service on the top 20% of customers and neglect the rest.

This is a mistake because customer size defines the nature of the service required, not just the quantity.

Different Service Needs for Different Customer Sizes:

• Mega-Customers (The Top Tier): These customers don't just need more service; they need a different kind of service. They often require a deep, strategic partnership, sometimes called a "co-destiny" relationship. This involves:
  • Joint quality programs.
  • Access to advanced product roadmaps.
  • Shared capacity planning and dedicated production.
  • Long-term agreements on pricing and supply.
  • High-level management relationships.
• Small and Medium Customers: These customers have shorter design cycles and cannot make the massive investments required for a co-destiny relationship. They need efficient, reliable service through standard channels like direct sales and distribution. It would be ridiculous and cost-prohibitive for them to demand the same level of integration as a mega-customer.

A successful service strategy requires a careful analysis of the customer base and the implementation of a tiered service offering that matches the unique needs of different customer sizes. It's not about giving everyone the same service, or only serving the biggest customers well. It's about providing the appropriate service for each segment.