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1. Pareto principle marketing

   isaivani on December 6th, 2008

   Tags: 20% action, 80% results, 80/20 rule, economic problems, italian economist, pareto principle, Vilfredo Pareto

   Vilfredo Pareto, an Italian economist who is best known in economics for the concept of the Pareto optimal position. Pareto was one of the first people to analyze economic problems using mathematics. He states that doing 20% of work can generate 80% of the results. In Pareto’s case 20 percent of the people owned 80 percent of the wealth.

   The Pareto Principle, also known as the 80/20 rule, describes the common pattern of sales concentration. The concept is fairly simple, 20% of the input creates 80% of the output. For instance, 20 percent of your advertisement creates 80 percent of traffic and 20 percent of traffic is converted into 80% of sales. 20 percent of your staff will provide 80 percent of your production. If you can reliably distinguish the 20% of actions, it will surely produce the disproportionate amount of benefits.

   After Pareto developed his formula, many other researchers observed similar phenomena in their own areas of expertise. Quality management expert, Dr. Joseph Juran, recognized a universal phenomenon and he termed as the principle of the “vital few and trivial many” which was similar to the Pareto’s principle. According to him 20 percent of the activities are always responsible for 80 percent of the results.

   The 80/20 Rule can be applied in some real life. For example:
   • In general, 80% of football teams’ goals will come from 20% of the players
   • 80% of the revenue comes from 20 % of the customers
   • 80% of the usage comes 20% of the features
   • 80% of the problems come from 20% of the defects
   • 80% of your product comes from 20% of your inventory
   • And so on.

   Well. The Pareto principle reminds you to focus on the 20 percent. As, this 20 percent will always produce 80 percent of your results. So focus and work smart on those 20percent and get top most benefits in the marketing field.

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