An excerpt from Chapter 13 of Change is Good…You Go First:
After analyzing the purchase histories of customer groups, Brad [Anderson, CEO of Best Buy] discovered that 20% of his customers were responsible for virtually all the transactions in which the company lost money, while an entirely different 20% accounted for the bulk of store profits. To prepare for the change, Brad trained his "on the floor sales staff" in 100 pilot stores. He got them to quickly recognize and accommodate their high-profit customers.
Surprisingly, price was not the issue to this group of customers, yet they were responsible for most of the revenue in the company; hence, the importance of recognizing your customer's value.
Hechanged the way his salespeople talked to these high end customers. He trained them to describe the benefits of their products and to upsell them on additional features, warranties, and options in a way that this highly targeted group would appreciate.
At the same time, he eliminated all discounting and price driven promotions to deter the 20% of customers that resulted in unprofitable transactions. Within a few months, Best buy's 100 pilot stores posted double the sales gains of the other stores. Promptly, the change was exported to the remaining stores with great success.
...Brad had no guarantee his strategy would work, but his courage to try it paid off.
This is just another example of the 80/20 rule showing itself in real life. 20% of your best customers generate 80% of your revenue, and 20% of worst customers generate 80% of your losses. Fire the 20% on the bottom and focus on the 20% on top.