The Pareto Principle, also known as the 80-20 rule, estimates approximately 80% of outcomes are derived from 20% causes. In retail, it means the bulk of sales come from a small sliver of customers. Not only does Dick’s Sporting Goods (DKS) provide evidence the 80-20 rule is alive and well, the company provides new details that may help investors model the future with more accuracy.

In its latest annual report, Dick’s revealed 14% of customers account for more than 70% of sales. What’s truly useful about the disclosure is that Dick’s identifies the customers responsible for most sales as the 20-million active members of its loyalty program. Importantly, Dick’s also revealed it has 140 million members— or athletes as the company calls them— in a database it presumably works to convert into active members of the loyalty program.

Investors cannot yet determine how much the program has grown— this is only the second year Dick’s has disclosed the number. In each of the last two annual reports, the company says only that it has “over” 20 million active members. Though member growth is important, it doesn’t entirely capture the aim of Dick’s strategy.

The company re-tooled the program in 2019, focusing narrowly only on its top customers. The change was made after program sales stagnated. In 2019, deferred revenue from Dick’s loyalty program was $32.9 million, up from $32.3 million in 2018, or just 1.85%.

But since launching the new program— which seemingly targets fewer but higher value customers— program sales have improved significantly:

-In 2020 loyalty program deferred revenue rose 26.4% to $41.6 million
-In 2021 loyalty program deferred revenue rose 10.6% to $46 million

Though overall sales grew 28.3% in 2021, outpacing deferred revenue growth from the loyalty program, Dick’s double down on its highest value customers isn’t finished. In FY22, Dick’s will expand its digital and in-store personalization efforts to better help customers discover the right product at the right time.

Dick’s has two ways to win. First, it has acquired, on average, 8-million new loyalty program members a year for the past two years. With 120 presumably inactive program members, Dick’s can lift sales if it converts new active program members. Second, Dick’s sales can also rise if the new personalization efforts are successful in lifting customer lifetime value (LTV) for its best customers.

As loyalty members go, so goes Dick’s Sporting Goods.