Pareto’s Principle (good old fashioned 80/20 rule)

Most people in business today either know or have heard of the 80/20 rule which describes the theory of the vital few and the trivial many. For pretty much anything, 20% (the vital few) account for 80% of the total. The remaining 80% (the trivial many) account for 20% of the total.

The initial concept was first introduced by economist Vilfredo Pareto to describe the distribution of wealth and later adapted and made popular by Dr. Joseph M. Juran for business management practices. It commonly became known at the Pareto Principle.

Today, the rule is universally applied to almost any topic or category. Quite often the Pareto Principle is used in business to refer to sales efficiency (ie. “80% of company sales is generated by 20% of the sales staff”) or revenue sources (ie. “80% of company revenue is generated by 20% of customers”).

When times are tight it may be worthwhile to apply this time tested principle to uncover potential for your company. Apply it to your customer base to expose your top performers, those 20% of your customers that are responsible for the majority of your business, and then focus on them to make sure they remain loyal and satisfied.
Read more »