I’m a huge believer in the 80/20 rule, i.e., 80% of output results from 20% of your efforts. As much as we try and diversify our marketing channels and revenue sources, it’s unavoidable that we find a disparity in results. But that’s not to say we should stop trying to branch out beyond the 20%. You never know when a small revenue driver could one day blossom into a massive opportunity, or when one of your “bread and butter” products will stop selling.
The question is how much we should invest in growing this 20%, and no, the answer is not always 80%, smart@$$. Some businesses have a toxic dependence on one particular revenue source, leaving them overly exposed to forces outside their control.
Very often, this source is Google. I’ve seen many companies that were overly dependent on SEO traffic crumble following the release of a Google algorithm update. I’ve also seen companies whose sales were primarily driven through Google AdWords take huge hits when a new competitor outbid them. And let’s not forget Google Plus and Twitter. Some companies have invested heavily in building audiences on these platforms, which are currently in virtual hospice. Other notable 20 percent-ers include Amazon Marketplace, Facebook Ads, eBay and email marketing.
Sometimes the 20 percent is not the marketing channel, but the actual product or service. If you sell a line of products, but 80% of sales come from 1 product, what happens when the manufacturer discontinues it, or when market forces render it obsolete? If you’re in the service industry, and 80% of your customers come to you with 1 particular need, what happens when technology eliminates that need?
And it doesn’t end there. Consider your star salesperson, the lease on your prime retail space, your largest client, or any other factor responsible for an out-sized portion of your business.
The point here is not to surface an additional threat business people should stress out about. Being overly dependent on too few contributors to the bottom line is something most businesses contend with, including Google (AdWords), Microsoft (Office) and Coca Cola (coke). But the one thing that can help avoid or at least mitigate this dependency is branding. If you own a brand with loyal customers and strong market positioning, you’re more likely to recover when your main revenue driver goes away. True, brands can lose their luster over time, or experience PR nightmares which can hurt their reputations. But those things are still within their control and you can always leverage your brand to develop a product or sales channel. Branding is the answer.
Netflix is one great example of company whose brand equity allowed it to change direction when their core business changed. They built a successful DVD rental business that emphasized the values of convenience and selection. As online video replaced DVDs in 2007, they pivoted their mail order DVD business into a online streaming company. By sticking to the core values represented in their brand, they were able to successfully enter and redefine a multi-billion dollar market
This is not an endorsement for losing focus on your main revenue drivers. It’s a call for making more of an effort to please your existing customers, invest in content marketing , associate your brand with other reputable brands (co-branding), and use all available marketing channels to expand your reach and nurture your reputation. On a strategic level, this would mean allocating more of your budget to projects aimed at brand awareness. The team at Sellside Media has been working more and more on these types of projects for our clients, leveraging many of the same tools and technologies we use in performance marketing, to help them amplify their messages to their target audiences. The motivation behind these initiatives is always the same, establishing a brand is like building a moat around your business that can shield you against market forces.
The bottom line is that while investing in your brand may seem like a risk because it does not deliver an immediate ROI, it’s the safest long-term investment you can make.