What do these five things have in common?
- 20% of your customers generate 80% of the revenue
- 80% of revenue is produced by 20% of your products
- 20% of your sales force generates 80% of the sales
- 80% of your sales are generated by 20% of your advertising
- You wear 20% of your clothes 80% of the time
Except for the last one, you might have guessed these all relate to sales in some way and in that you’d be right. The logic behind all these stats is called the Pareto Principle or, as most of us know it, the 80/20 Rule.
Vifredo Pareto made a ground breaking observation around 1906 that 20% of the Italian population owned 80% of the property. It wasn’t the percentage that mattered to him, but the fact distribution of wealth was unbalanced, always had been and always will be. His work in economics would change that field from one of moral philosophy to one that is data driven.
The 80/20 rule today is most often used to measure productivity. In other words, 20% of what we do determines 80% of the results. Think about yourself for a moment, particularly if you’re in sales or own your own business. If 20% of your customers generate 80% of your sales/revenue/commissions, you need to focus 80% of your time on that group. However, if you’re anything like me, much of your day is spent reading and responding to emails, handling customer fire drills (oftentimes customers that aren’t your top 20%) or going down rabbit holes on the Internet like, “can cow saliva cure baldness?”
What is it that separates us from those uber successful people we read about on the Internet? It’s how they use their time and, whether they realize it or not, how they apply the 80/20 rule to their lives. So what areas in our life can the 80/20 Rule make us more effective?
Sales: If 20% of your customers are responsible for 80% of your sales, why are you spending 80% of your time pandering to the unprofitable 20%? Analyze your customer base to determine who makes up that top 20%, be it in annual sales, frequency of orders or whatever means of measurement works best for your business. Now, find ways to connect with them regularly on the phone, via email, content marketing or personal visits. Spend 80% of your time courting these customers while still cultivating those smaller customers who may one day be at the top of your list.
Management: As a manager, spend the most time working with those on your team who shoulder most of the responsibility. Challenge these people to go beyond the limits they’ve set for themselves and spend your time giving them the tools they need. 20% of your team is responsible for 80% of the problems you face so as a manager, you need to focus the majority of your time helping those most responsible for the success of your department.
Products & Services: 20% of the products or services you offer usually generate 80% of your revenue. This means you need to know why your customers love your super-duper whatchamacallit. And if 80% of your customers are only interested in 20% of your offerings, you need to keep those 20% in the forefront through marketing and sales. Make sure your employees know what these offerings are so they focus on them in their customer interactions.
Finding Your Niche: Some companies try to be all things to all people; an impossible task. Survey your customers to determine why they buy from you. Is it the number of colors you offer, that you guarantee it for life or maybe the fact it doesn’t melt in 120 degree heat? Whatever those features are, promote the heck out of them and find or develop similar products to keep your customers engaged and buying. Focus 80% of your time on your top offerings to make the biggest impact on your bottom line.
Your Personal Life: In relationships, we often discount 80% of the things we treasure to focus on the 20% of things that bother us. If your partner gives you 80% of what you require, you’re golden because you’ll never get 100% of what you need from one person. In thinking of your wardrobe, you most likely wear 20% of your clothes 80% of the time so narrowing down your choices will save you time dressing. And to build stronger friendships, spend 80% of your time with the 20% of people you cherish most.
Woody Allen famously said, “80% of success is just showing up” and Dale Carnegie also had it right with his comment, “Do the hard jobs first. The easy jobs will take care of themselves.” You can apply the 80/20 Rule to almost any area of your life, from goal setting to better eating to doing things that produce the best results. The 80/20 rule can help you lead a more productive and happier life. Except when it comes to playing golf, where a recent survey showed 80% of players cheated while the other 20% admit they lie about cheating. Sigh!
After a several decades on-the-radio as a DJ and traffic reporter, Steve Woodburn MAS, stumbled, as most do, into the world of promotional products. He spent 27 years on the distributor side and the last three as a supplier, which gives him a unique perspective on this crazy business and life in general.