The Pareto Principle

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Understanding the Pareto Principle

The Pareto Principle (called also “the Law of the Vital Few” and “the Principle of Factor Sparsity”) is named after Italian economist Vilfredo Pareto (1848-1923), who found, in 1906, that 80% of the land in Italy was owned by a few powerful people (20% of the population).

The idea is simple: the 80/20 rule shows an unequal connection between inputs and outputs: 80% of the effects come from 20% of the causes.

The 80/20 Rule Examples

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The Pareto Principle was proved to be operating in many arenas:

20% of your time can produce 80% of your results.

20% of your customers represent 80% of your sales.

80% of customer complaints come from 20% of clients.

20% of the salespeople make 80% of the sales.

80% of your Web traffic come from 20% of your keywords.

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20% of the people in any given company earn 80% of the profits.

20% of the healthcare patients use 80% of the healthcare resources.

80% of your social sharing comes from 20% of your social updates.

Software engineers spend 80% of their time on 20% of the software’s features.

80% of crimes are committed by 20% of the criminals.

How to use the Pareto Principle to Grow Your Business

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The 80/20 Rule is an interesting tool for growing your business by providing powerful applications in marketing and strategy.

If 80 percent of your profits comes from around 20% of your buyers, you need to identify those clients (psychographic and demographic study) to better target them and find more customers like them.

Author Bio

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Editor in Chief Mehdi Chourou