1 Niche Theory

Hey. Welcome back. Richard Petri here, your coach, and we're gonna go through this module, the 80/20, and targeting is about coming up with a niche. Peter Drucker once said, "It's not about doing things right, it's about doing the right things," and what he meant by that is you could be doing a great job of climbing the ladder on a wall and you get to the top and you look back and go, "What a great job of climbing this ladder," then you look over the wall and say, "Ah, I'm on the wrong wall," and that's what [niching 00:17:40] is about, it's about making sure you're on the right wall. And the power of a niche is possibly one of the most ... do this well, it's possibly the most powerful thing you could possibly do in marketing.

Marketing is all around understanding the 80/20 principle and being focused and targeted. So one of the sayings I've got is you need to have separate niches and have a separate marketing approach for each niche. You want a clear and consistent message for each niche. When people do this right, here's one from Co Govers, and she's based in Barcelona, Spain of all places, but you can be very, very, successful. So she's someone who has applied this and I read this just before, she's getting the results after you read the third paragraph, "When growing a business, I don't even want more marketing right now because I can't deal with the influx yet. I don't want to grow from two to ten antics in one big blow. Currently we're growing from two to five and that's just about manageable. I like to keep it well," so by focusing, she focused on English speakers in Spain, that was her target niche. It doesn't have to be I'm residential, I'm commercial, as broad as that, you know, you can be a lot more clearer than that.

So she's English speaking clients in Spain, and there's a lot of English that go to Spain and want to set up their holiday house or dream house, and so she carved that off doing really well. [inaudible 00:01:58] too many people in the newsletter, three jobs from this newsletter, she spent 42 dollars, potential 30,000 dollars return, just saying, she's bragging to me. It's that shameless bragging but good honor, and she certainly niched. She niched as a heritage house renovator. It can make a great difference. You gotta get it right but it can make a great difference. So what is a niche? It's just a sub-market, right? So if you mention, it's almost like fishing spots, is how I like to imagine it. There's a big pond and the pond is everybody. But within the pond there's certain schools of fish swimming in the little specific areas.

Now often the fish tend to stick together a little bit, and that's good, and often they tend to swim in their part of the pond. So I know with Blue Cod here in New Zealand, once they're born they don't go more than 100 meters from where they were born. It would literally look like this, and if you were to put a fishing rod with some bait just anywhere in the pond you'd probably hit the blue area where there's nothing. Okay? And that's what people do with their marketing, they just put something out there somewhere and chances are most of the water is blue with nothing in it, and they miss. And they might turn around and go, "Marketing doesn't work, fishing doesn't work," well, that's ridiculous. You have to be targeted. So imagine if you dropped the perfect bait right over that little red circle and dropped it in there, you would be pulling them out as if you were fishing from a bucket. And the person who said there's no fish in here would be looking and going, "Well, what are you doing that I'm not doing?"

You can't catch fish if you're not in the right spot, so you gotta be in the right place but you gotta know who you're trying to catch and you've gotta have the right baits and the right message and the right hook and then the right line to reel them in. Get all that right, people won't believe how successful you can be, but if you just go anywhere you'll probably miss. Make sense? Marketing is like fishing. So the 80/20 principle, I'm gonna take you through that in a minute, it's an incredibly powerful principle and certainly applies to marketing. The promise here is how to get extraordinary results without extraordinary effort or expense. Does that sound too good to be true? Well, in this case, with the 80/20 principle it's not, it's actually common sense. I'm gonna take you through it, but first some questions.

Are all clients equal? Well, clearly not. You know they're not. How can we identify the best clients? Which is what we're gonna do, and then how can we be attractive to the best clients, get them coming to you? Because if we could do those three things ... let's just go through it. Are all clients equal? No, some are more equal than others, as Orwell said. Okay. We need to identify the best ones and then turn ourselves into something which is very attractive to the best ones, however you define best. Okay. Because there are riches in niches. Now, let me tell you about this 80/20 principle.

I need to tell you a story about an Italian economist. His name was Wilfredo Parieto and he had a bed, as they often did those days, and it's coming right back in now. In 1906, he made a famous observation that 20 percent of the people owned 80 percent of the property in Italy. Okay, he was an economist, that's what he was studying. And he thought this was very unfair. So then he studied England, France, Germany, Spain, and found the same distribution of wealth, he thought it was gonna be different. He thought it was just Spain. Now he's scratching his head going, "Well, it's not just Spain, it seems to be most of Europe. So maybe it's a sign of the times we're living in," so he thought, "What I'll do is I'll go back in history 100 years," and guess what he found? The same thing.

80/20, 20 percent of the people owned 80 percent of the land, and now he's really scratching his head. He's going, "It's not a sign of the times, it's not just Spain. This 80/20 wealth distribution seems to be everywhere," well, he was kind of right. It is with wealth distribution but it's not just wealth distribution. In fact, the 80/20 principle was always present, right throughout history, but it's not just wealth. And if you read a book, if you want to go into this in detail it is worth doing this, there's a good book by Richard Koch, who has a book called the 80/20 Principle, and he's kind of ... you might have read it or you might have heard about it. He's kind of brought the 80/20 principle back to the surface again. What he says is average performers are all over the place doing all sorts of things, we're busy, we're doing this, we're doing that. Top performers identify the few things that make a big difference, which he calls the vital few, and then they just do those things. All of a sudden you get extraordinary results without extraordinary effort.

The thing about the 80/20 principle, it's helped shape the modern world and yet has remained one of the most underutilized principles of our time, like, literally, you really should be studying this principle and applying it to your life. So the real message of the 80/20, there are two parts, there's the trivial mini, most of what you do has little impact on your results, and I could switch that to most clients have little impact on your results. There are the vital few, the vital few things you do create nearly all of your results, and the vital few clients that you take onboard create nearly all of your results. If you improve the vital few then you can easily double or even triple your results.

Let me show you how. This is 100 percent true and by the time I finish going through these slides you'll be amazed, because it is true and it's so common sense when you look at it. Let's have a look at the 80/20 principle first because I want to give you a broader perception of this thing called the 80/20, right? So let's look at 80/20 of activity, that's actions, that's things you do in a day. Now, I did an exercise, a productivity exercise with clients I was working with, and I said, "I want you to right on the left hand side. Right down all the activities you take and then I want you to allocate all the results you get. So all the results you get on the right, all the activities you do on the left," and people go, "Yeah, I do all this stuff and it gets me these results," that's what they think happens, which is kind of true.

But then we said, "Okay, I want you to break up all these activities in terms of time and then I want you to allocate the percentage of how much impact that activity had on your overall result. Okay, I want you to carve it up. So if you've got five activities, each activity can only tally up to 100 percent contribution to the result," right? They do this and what they found was that 80 percent of the things they do contributed to not much. So maybe answering emails, maybe talking to people, you know, 15 minutes talking to someone at the water cooler, making phone calls that didn't make any difference, sitting there daydreaming, cleaning their desk, all sorts of little things. 80 percent didn't make any difference at all but there was a few things that produced nearly all of their results.

Now, they've done research on Fortune 500 CEOs to find out how productive they are and how many minutes of the day, if they took their most valuable things that contributed to 80 percent of the results, how many minutes a day do you think was the vital few, the highly, highly impactful? Well, when they researched it they found on average it was about 24 minutes a day for a CEO, those 24 minutes produced nearly all of the results for the day. The rest of the time was driving to meetings, doing emails, doing stuff, busy but not contributing to the results. And this is really important, we call those 20 percent the vital few. So this is what really happens if we look at our day and our activities. Most of our day, that we spend 80 percent of our time on, delivers virtually nothing. A few things, making a few key phone calls, a few key meetings, getting out a key marketing message, produces nearly all of your results, so your day looks like this. Interesting isn't it?

Now here's a young lady who understood the power of the 80/20 principle, and for marketing, right? She was selling Girl Scout cookies and she was only 13 years old but she was smart enough, with her mother, to sell cookies outside of a medical marijuana dispensary. I told you there's great places to fish. Now, if you're selling cookies door to door it might be hard work, but if you're stacking it outside a clinic where people come out with the munchies, it's like fishing from a bucket. She sold 117 boxes in two hours. Now that is working smarter not harder. That is applying the 80/20 principle. So not all locations for selling Girl Scout cookies are equal, some are far more equal than others. This would be a 20 percent location.

So let's just quickly have a look. I just want to ram this theory of the 80/20 because I want you to use it more than just ... we're gonna do it for identifying your target market, but I want you to do it for more than that, I want you to do it for your life. I want you to understand this 80/20 principle so we'll do a few weeks as [inaudible 00:11:42], okay? Right. Have a think about the clothes in your wardrobe. Now, hopefully, well, maybe not, but you wear clothes 100 percent of the time. Well, most of the time, right? So let's say when you're out and about. Okay. You wear clothes all the time. You might think, "I've got my wardrobe and that's what I wear 100 percent of the time," but what you're probably gonna find if you go through your wardrobe, and actually say, "How many times do you wear this shirt and how many times do you wear this sweater?"

And go through all your stuff, what you're gonna find is a lot of clothes in your wardrobe you don't wear very often, yet there will be your favorites, the ones you wear virtually all the time. You don't have to, but you've got your favorites, your favorite shoes, your favorite shirt, and 20 percent of your clothes and shoes get worn 80 percent of the time. This is true, isn't it? This is true. Even for you. Think of your wardrobe. That sweater your mother gave you two years ago, it's almost brand new, you've never worn it. It's too good to throw away but it's a trivial many. So this is what your wardrobe looks like.

Criminals, have a guess what this could be. 20 percent of the criminals create 80 percent of the crime. So often, when police see something happen, that's why they say, "We're pretty sure we know who it is," because it's the same people doing 80 percent of the crime. They don't have to review everybody. It's got Johnny's fingerprint all over it. Johnny is committing a large chunk of the crime, he's doing it everyday. So 20 percent of the criminals create 80 percent of the crime. Authors, 20 percent of the authors sell 80 percent of the books. There's people like John Grisham and [Ludlam 00:13:40] and the key ones, they're the ones that sell everything and there's a whole pile of authors who only sell one or two copies to their mother. Actors and income in Hollywood, some of them earn millions, most of them are waiting tables in Hollywood. Someone like Julia Roberts might earn 20 million for a movie, at the same time the other 20 actors in the movie might earn a couple of thousand. That's what happens. The 80/20 principle.

Sports people, Floyd Mayweather, some of the footballers earn tens of millions. Floyd Mayweather, hundreds of millions. Yet, most of the sports people earn hardly anything. It'd be the same with architects, some architects will earn exponentially more, lots would earn under 100,000. The vital few, the trivial many. So, a quiz for you, the 80/20 principle is about identifying the ... A, B, C, D, or E, identifying the vital few inputs that generate 80 percent of the outputs. Is that what it's about? Is it about understanding the key things that make the big difference? And is it about doing more of the 20 percent? Is it also about doing less of the 80 percent that doesn't have an impact, the trivial many? Is it about working smarter and not harder? Or is it about all of the above?

Well, 80/20 is about all of the above, doing all those things. Now, let's bring it to clients. How most architects rate their clients, they tend to think of their client base as I've got five clients and they produce me this much income. No, we need to be a wee bit smarter than that. We need to break them down. Because what you're gonna find is 80 percent of the clients that you work with probably produce 20 percent of your income. There's a few projects, let's say projects, there's a few projects that give you a large portion of your income. 80/20 principle. And this you're doing exactly the same type of property over and over again, but if you're having a mix you're gonna find there's a certain type of client or project that produces ... is exponentially more profitable. Now, you may look at this from a fulfillment point of view as well. 20 percent of your projects, I'm gonna bid, produce 80 percent of your enjoyment. You know, 1/5 of the projects you work on you love, 4/5 you just get through. Would that be true?

So with 80/20 glasses on, if we put ... remember those X-ray glasses you used to be able to buy 20 or 30 years ago and you could, in theory, you're supposed to see people's bones? They used to sell them on the back of magazines. Well, I don't know if that ever worked, but certainly we're gonna put out 80/20 glasses on and have a look at things and what we're gonna see is 20 percent of the projects produce 80 percent of the income, 20 percent of the projects produce 80 percent of the fulfillment for us. So, question here, what would happen? What would happen if all you did was double your share of the 20 percent? So if you think about your clients that you like working with or the projects you like working with, what would happen if you ... say it's one out of five.