I have read a lot about it and I just still don’t understand it. I feel incredibly stupid whenever I see it come up somewhere and I know it’s name and I know that I’ve read about it, but I still don’t know what it is.
This has gone on for almost a year now.
Help.
In: Other
Rarely is everything going to be equal across the board, say a business’ revenue from customers.
Let’s say you open a burger stand. You’ll have some customers who come once because they are passing through town. Some who come in very rare occasions. Some who stop in from time to time. And you’ll have your hardcore regulars… these people come in weekly, maybe even more. And maybe they are also bigger ticket customers getting 2 burgers at a time and adding a shake on most visits. Because you don’t have to keep marketing to get them through the door, and because marginal profits grows as the ticket grows (it doesn’t take that much more work to make 2 burgers instead of 1 when assembling an order, but you charge the same for the second one) So even though they might only represent 20% of all customers you serve in a year, they end up being way more than 20% of revenues, end up representing 80% of your profits.
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