The 80/20 Rule of Marketing and How to Take Advantage of It
More than a hundred years ago, Italian economist Vilfredo Pareto pointed out that about 80% of Italy’s land belongs to about 20% of the country’s total population.
He goes on to infer that most of the wealth in a free-market economy is concentrated in the hands of a small number of people—about 20 percent of the population.
This eventually gave rise to the 80/20 rule, also known as the Pareto principle. Essentially, the Pareto Principle infers that there is an 80 to 20 relationship between an effect and its cause.
The Pareto Principle transcends disciplines. In sports, for example, you’ll find that at least 20% of athletes win 80% of the time, or about 20% of training, and exercise affects 80% of an athlete’s performance. Likewise, in economic terms, about 20% of the population creates more than 80% of the nation’s total wealth.
What is the impact on your business? The 80/20 rule states that 80% of your company’s revenue comes from 20% of your sales efforts. Or you can say that 20% of the work you do is responsible for 80% of your profits.
Is the 80/20 rule true? Or is it useful for business?
The 80/20 principle is based on empirical and anecdotal evidence, not scientific facts. It may not be entirely accurate or precise, but statistics across industries support the rule’s effectiveness.
Salespeople, leaders, consultants, and others have proven time and time again that the 80/20 rule holds when it comes to team or individual performance, best practices and management strategies, day-to-day tasks, operational processes, or advanced business insights.
At the heart of the 80/20 rule is identifying your best business assets and using them effectively to maximize value creation.
To create the most value in your business, you must apply the 80/20 rule in the context of cause and effect in each area. This way, you can attribute 80% of your revenue or 80% of the root cause of your problems to USP.
Applying the 80/20 Principle in Marketing and Sales
In the sales and marketing ecosystem, you can use the 80/20 rule as a guide to come up with efficient marketing campaigns and sales best practices by asking the following questions:
What is our best-selling product or service?
Once you’ve formulated and answered these tough questions for self-discovery, here are some strategies to help you focus your attention and resources on the top 20% of your strategies, customers, and channels.
Top 20% of customers
Your customer and prospect list may have hundreds or thousands of contacts from your website, as well as email and social media marketing efforts.
Pay close attention to which customers have made recent purchases, frequent purchases, or which customers are generous with their purchases.
Once you’ve identified them, mark them as a top priority for your sales and marketing efforts, and use their customer data to help you find and reach new audiences.
Certain customers will always be your high-volume buyers, but it’s important not to take them for granted. Don’t lose touch with your core customers when acquiring new customers or dealing with problem customers.
Make sure you consistently deliver a great customer experience to your best customers. Make them happy with your service, continue to engage with them on a more personal level, and continue to explore more business opportunities with them.
Top 20% Geographic Regions
Once you’ve identified your most profitable customers, the easiest common denominator to look for is where they live. If you’re in retail or service, such as food delivery, wedding planning, or taxi booking, you’re likely to find more valuable customers in wealthier neighborhoods.
Look for trends in your POS platform, paying particular attention to where these customers are. You’ll notice that certain regions, cities, or regions are more profitable than others, obviously due to the presence of a high-income customer base. You can then use this information to enhance your sales and marketing strategies in these locations.
Top 20% Marketing Channels
The recent explosion of content marketing in all its forms means marketers are spoiled. Given the myriad of platforms, websites, media formats, and channels out there, how do you decide where to focus your limited resources?
The 80/20 rule says that only one out of five channels will give you great results. So while spraying and praying are the default methods, it is more common to do
- Identify channels where there are a lot of potential customers.
- Narrow down what your team is good at targeting.
- Develop an effective strategy to drive more engagement and conversions on these channels.
Top 20% of Niche Markets
During the sales cycle, you may encounter customers who exhibit specific behaviors that indicate buyer intent. Use this information to identify commonalities between prospects who are actively looking to buy and drive them down your sales funnel based on their experience.
The concept of a “niche” doesn’t just apply to customers — it applies equally to industries, customer groups, or product portfolios. Any of these niches could bring in a lot of sales, temporarily or for a long time.
Top 20% Content
Today, every competent company is using content marketing to build brand awareness. This comes in many forms, the most popular (and most valuable) are blog and website content (promoted with SEO on Google) and social media on platforms like Facebook, Twitter, and Instagram.
Organic traffic is one of the highest ROI outcomes of building an informative and engaging website. Visitors who click through to your site through Google from search results that match their intent are most likely to convert into paying customers. Likewise, maybe the top quintile of your page gets you most of your high-converting traffic.
Social media is another area where you can try a lot of strategies, there are a hundred possible outcomes, but only a few things work for you. This may be one or more of the following:
- Industry news
- Image from quotes from industry leaders
- the scenes video
- short how-to video
- Screenshots of digital products
- Handle for customer service
Likewise, when your content is published matters – a Friday night post could trigger 80% of your online visibility and engagement!
Top 20% “Problem” Customers
Like it or not, you’ll be dealing with hard-to-please or demanding customers (if you’re a well-known brand, or even an industry influencer or activist) who will test your patience and reduce your productivity by Digital recurring issues, unmet demands, or highly visible squabbles on social media.
If you’re not taking their feedback seriously, or even if you’re bending over backward to please them, it means you’re not setting and meeting expectations properly. Gain insight into these customers and their buying habits.
Are they in your top 20%? Are you wasting precious time interacting with and responding to customers that may not be worth the effort at all in the long run? Can you turn their anger into victory?
Top 20% of employees or salespeople
Every sales team has a famous top performer. These people keep your customers from eating. Pay attention to their approach, behavior, attitude, and way of treating customers.
All of this information should be packaged and turned into a training manual for your other salespeople to use. Oh, and add it to your employee advocacy program too!
Top 20% capital investment
“Half of my advertising spend is wasted; the problem is, I don’t know which half,” retail magnate John Wanamaker is believed to have told Lord Liverhum.
You have a bigger job – you need to know the 80-20 distribution!
Do you let your money work for you? Which part of your operating costs consistently yields better returns? What money is known to lose often?
Managing costs works on multiple levels: it helps you save costs by avoiding counterproductive measures and enables you to make good budget decisions.
For example, you might decide to let an ineffective salesperson go while increasing the remaining team’s daily cookie allowance (a direct factor that affects productivity and productivity).
Find your marketing magic
At some point, we’ve all wondered why certain team members, products, events, and customer calls seem to produce better results than others. You now know the mechanics behind this, if not the reason.
One caveat: The Pareto Principle just shows how things work. This does not mean that the other 80% of your efforts or people are inherently faulty.
This is a logical fallacy committed by many experienced leaders. Sometimes the best way forward is to pick the 20% and use it without judging the remaining 80%.
The 80/20 rule can provide a solid framework for your sales and marketing goals. Whether it involves customers, salespeople, marketing campaigns, or company resources, it’s definitely worth using the Pareto Principle as a guiding light for your decision-making.