80% from 20% rule – alive and well

QUESTION – how do I maximise repeat business and referral rates?

THOUGHT – embrace lifetime value

Donald Trump, like many commercial property developers, is often described as transactional – viewing business on a deal by deal basis rather than a ‘lifetime value’ basis.

I will resist the temptation to get into this debate and suggest only that being transactional is not the best way of maximising long-term performance. The lifetime value of a customer is a critical consideration if performance is to be optimised.

The facts are:

  • Returning customers have a lower acquisition cost
  • Returning customers are easier to convert again
  • Returning customers spend more than first-time customers
  • Referred customers are easier to sell to, given higher trust
  • Referred customers spend more and refer again more often

These benefits of looking at customers in terms of their lifetime value – leveraging repeat business and referrals will be addressed in detail in the THOUGHTS to follow. Suffice to note here that referral and repeat business rates are critical issues and maximising them can directly impact:

  • The cost of acquisition
  • The expenditure per enquiry

A recent survey in the United States confirmed the old maxim that 80% of profits come from 20% of clients and those 20% of clients invariably represent repeat purchasers and referrals. Further, another study found that the success rate in selling to a repeat customer is 60 – 70% while the success rate for a new customer is just 5 – 20%.

Businesses not only need to focus on the lifetime value of each customer, but they need a documented strategy to ensure that the lifetime value of each customer is maximised – addressing repeat business and referrals – and indeed, the average sale per customer. This issue will be the focus of a future series.

Research has found that:

  • Referred customers have a 16% higher lifetime value
  • Consumers are four times more likely to purchase when referred by a friend
  • Referral tools can boost revenue by as much as three times

This series will highlight many similar statistics.


Stop viewing customers in terms of transactions and start looking at them in terms of long-term value – focusing on referrals and repeat business.

Document a strategy that will help ensure that you maximise the lifetime value of every customer.


Super Office, Shaun Buck, Saasquatch, Hubspot, ShareSomeFriends, Journal of Marketing, Nielsen, Texas Technical University, INC and Customer Experience Insight

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