The 80/20 Rule and Why It’s Actually Important

Posted by Kayla Reaves

April 27, 2016 | 10:29 AM

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80_20.pngThe 80/20 rule started off as the “Pareto Principle,” named after economist Vilfredo Federico Damaso Pareto. Legend has it that Pareto observed that only 20% of the pea plants in his garden generated 80% of the healthy pods. Inspired, he looked for other equally uneven distributions. He learned that 80% of the land in Italy at that time was owned by 20% of the population and that 80% of production came from 20% of companies. He came to the conclusion that “80% of results will come from just 20% of the action/inputs.”

So, exactly how applicable is this rule?

This rule has been applied in many areas ranging from matchmaking to sales to healthcare to stocks, and there is good reason for it. Much like the idea behind using personas in marketing and sales to focus your attention, the 80/20 rule allows you to narrow your focus on the most profitable 20% of your customer base. Rather than stretching yourself thin to cater to the whole, you can cater to that smaller fifth and receive similar, if not better, results.

How do I apply 80/20 to my sales and marketing?

From a sales and marketing context, we want to determine how to spend that 20% - what should be the critical focus? Whether you’re applying it to your social media, content, customer base, or brand management, finding your 80/20 balance is crucial for maximizing performance.

Applying the Pareto Principle, you could hypothesize that 80% of the customers you engage, are a result of 20% of the “interesting content” you promote. Your 20% should be focused on easily shareable content that intrigues customers and motivates them to learn more about your products and services.

One way you can find and create this content is by following influencers and maintaining active social media accounts. Instead of mindlessly promoting content, you should follow a plan that makes an effort to engage your audience, learn what they like and don’t like, and how you can better serve them.

Spend less time writing just for the sake of writing and more time generating content that actually works. EBooks, podcasts, and webinars are often times consuming and hard to pull off, but they are the most worthwhile in terms of engagement. “By increasing the time on your 20% activities, you will naturally cut into the 80% of less effective, less happiness-bearing activities”

This next example is where businesses can get into trouble. Focus 80% of your content to cater to your most profitable 20%. This concept is quite tricky as businesses don’t want to alienate 80% of their customers simply because they are less profitable. Businesses need to dig deeper and figure out why this 80% is less profitable. Simply neglecting that 80% is not only a bad idea, but dangerous. This increases reliance on a very small percentage of your customer base to carry sales and when that small percentage, who likely have much in common, falls into financial hardship, you are left scrambling to cater to the withering 80%.

When it comes to your customer base, use 80/20 to identify your most and least profitable customers, figure out why that 80% is less profitable, and then use that knowledge to fix the disparity and create content that attracts both crowds.

Using 80/20 can help you increase efficiency in your work. By swapping your productive 20% with your scrambled 80%, you can reach a whole new level of efficiency.

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Topics: eCommerce, Interactive Marketing, Content Marketing

About Kayla Reaves

Kayla currently works as a marketing intern for Briteskies, LLC. She is majoring in Management:Marketing and Accounting at Case Western Reserve University and will graduate in the class of 2018. In her free time, Kayla stays busy by working on the homecoming committee as Co director, orientation executive board as a staff member, and webmasters for her all female a capella group @CWRUSolstice.

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