The Power of 80/20
The number theme continues from our last blog (the 3/50 Project) to this one, the Power of 80/20. The 80/20 ratio appears in several business-related disciplines, including management, sales and marketing. In terms of management, Pareto's Law is an efficient way to maximize one of your most precious resources -- time. According to the law, you can reach 80% of your outcome with only 20% input. How exactly does this work? Start with a traditional "To Do" list -- your e-mail is a perfect starting point. Prioritize using the 4'D method -- Dump the junk (easier to set up a junk filter to begin with), Delegate to others what they can take care of (you hand off the responsibility, yet still retain the accountability), Defer (put off what you can handle later), and what's left, you DO it! Essentially, what you have accomplished is a true to do list, separate from the not-to-do list, which is a big time waster.Another way in which you can use the 80/20 principle is in understanding consumer behavior. For most products, 80% of sales are generated by 20% of customers in a business' largest market segment. This ratio holds true even on a grander scale: the richest 20% of people globally consumes 80% of the world's resources. Business owners can apply these statistics by developing a budget and marketing strategy that hit the target with little wasting of time and money. Consumption numbers drive investment numbers, so put 80% of your advertising budget and effort in tried and true promotions, and 20% in innovative channels. This action yields a high ROI in a competitive market.
Finally, the 80/20 principle also relates to customer relationship management. You know President Lincoln's famous saying: "You can fool some of the people all of the time...." Well, you may quote me on this, the same is true of customer satisfaction: "You can satisfy some of the people all of the time...but you cannot satisfy all of the people all of the time." 20% of your customers will account for 80% of the problems. But do not become discouraged by not being able to satisfy all of your customers all of the time -- 80% customer retention is a realistic target for customer satisfaction and retention. Interestingly, even here, the 80/20 principle offers some positivity. In word-of-mouth marketing, of your already satisfied 80%, 20% will be highly influential in spreading the good word about your business!
Look our for our next blog on the Rule of 150.
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