The Pareto Principle is not a new concept. Also known as the 80/ 20 rule can help you better understand your business and benefit your marketing strategy, enabling your company to succeed in a crowded market.
The principal is named after Vilfredo Pareto, an Italian economist. He noticed that in Italy, 80% of the land belonged to 20% of the people. And although this may not seem relevant to marketing, this rule applies to just about everything. Pareto even examined the peas in his garden and found that 20% of his pea plants contained 80% of the yield!
So, using the Pareto Principle, or the 80/ 20 rule, is extremely helpful in business because it helps you predict your future success.
So, let’s check out seven ways that intelligent companies use the Pareto Principle in marketing.
Smarter Faster Better
by Charles Duhigg
⏱ 15 minutes reading time
🎧 Audio version available
80% of your sales will come from only 20% of your product line.
This means that if you identify your most popular products, you can focus on them and ensure that these are what you advertise and promote most heavily. Maintaining an adequate supply of these famous lines is crucial for business success; however, do not be tempted to drop all your less popular lines.
If you do, the Pareto principle suggests that it will adversely affect the popularity of your best items.
Expect that your social media engagement, such as likes and retweets, will come from 20% of your posts.
Check out your most popular posts and see what they are about those particular ones that customers seem to like. Once you understand which of your tweets or promotions are popular and why, focus your attention on creating new social media content that is similar because if you do it right, your new content will be equally powerful.
80% of your profits will come from 20% of your customer base.
This means that finding out more about how they found your site will help you increase sales. Find out where they came from regarding traffic channels and see the converted ads and the content that engaged them. Once you understand this, make sure that your pages are optimized and promote this content.
20% of your customers buy the most products, so learn more about these people and target them.
Learning about your best customers’ demographics is essential. 20% of your customers are your most profitable buyers, so understanding who and where will help you target them better.
Don’t bother wasting too much time understanding the customers who do not spend much; you need reliable, paying customers who like what you do. So, when you know who makes up your loyal customer base and what makes them tick, you can target them accordingly and increase your conversion rate. In addition, you may find unexpected areas of advertising that you hadn’t previously considered that might be the perfect fit for attracting new customers.
80% of your online visitors are likely to respond to only 20% of your keywords.
Many companies spend a lot of time and effort developing a keyword strategy, but in most cases, 80% of your online visitors will come via only 20% of your keywords.
To find out how your keywords are performing, check out Google Analytics or whatever online tools you use, and identify these traffic drivers. Once you know which keywords are the most successful, you can target content around these high performing keywords and maximize on this trend with new content and information to help attract customer conversions
80% of your sales will likely come from just 20% of your advertising channels.
This means it is crucial to know which ones are working and which ones aren’t.
Finding out where your customer leads are coming from will enable you to focus on the channels that produce the most. Results can be surprising; often, a humble and inexpensive banner ad will outperform a more sophisticated online ad.
Once you know which advertising channels are effective, you can create similar advertising and save money on paying for expensive marketing that may look good but doesn’t convert.
80% of your customer complaints are likely to originate from just 20% of your customer base.
Customer complaints are never welcome, but the Pareto principle suggests that 80% of your customer complaints will come from just 20% of your customers.
So, when you are considering new help desks or expanding your customer services operation, remember that these complainers are only a tiny fraction of your customer base and, like death and taxes, are inevitable parts of the life of any company.
In conclusion
The Pareto Principle is a powerful tool for strategic marketing, but it is essential to remember that it is not a natural law determined by science and physics. This means that you should use it as a guide to your marketing strategy rather than consider it an unmoveable principle.
However, the Pareto Principle is a handy tool that works most of the time, so if you use it wisely, you can gain real insight into your business performance and marketing strategy. Why it works is not important here, but the fact that it does work so consistently means that for insightful results, you cannot afford to ignore the Pareto Principle.
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