The 80/20 Rule: How the Pareto Principle in Business Leads to Better Results

Understanding and successfully applying the Pareto Principle to your business goals can really take your strategy for success to the next level. Here’s what you need to know.

The 80/20 Rule: How the Pareto Principle in Business Leads to Better Results

Even if you can’t place the name Vilfredo Pareto, you’re likely at least somewhat familiar with the Pareto Principle. 

Sometimes referred to as the 80/20 rule, the Pareto Principle states that around 80 percent of a given result is the direct outcome of only 20 percent of the effort that went into it.

The 80/20 rule can be applied to absolutely anything in life from economics, to gardening, to relationship building. 

But it can be an especially beneficial concept for business owners and digital marketing professionals to embrace. 

Here’s what you need to know to apply it to your running list of business goals.

    What is the Pareto Principle?

    Many people think the Pareto Principle is just a fancier way to describe the concept of cause and effect. 

    However, while that’s part of it, the 80/20 rule goes deeper than that, especially in business or marketing.

    The Pareto Principle in business refers to the way 80 percent of a given business’s profit typically comes from a mere 20 percent of its clientele.

    Business owners who subscribe to the 80/20 rule know the best way to maximize results is to focus the most marketing effort on that top 20 percent.

    In marketing, the same principle can be applied to show that roughly 20 percent of your marketing approaches yield 80 percent of your overall results.

    Understand that this isn’t to say that the other 80 percent isn’t important in either case.

    The math may not always work out to exactly 80 percent versus 20 percent in every situation, but the Pareto Principle can still be taken as inevitable. 

    Once you understand this, you can start using that understanding to maximize profits, boost productivity, and see a higher return on your overall time investment in your business.

    What are Some Examples of the Pareto Principle in Action?

    Vilfredo Pareto was an Italian sociologist and economist during the early 1900s. 

    His 80/20 rule first came about when he realized that 80 percent of Italy’s lands rested firmly in the hands of only 20 percent of the Italian population. 

    Pareto later realized that this same rule really could be applied to just about anything. For instance, he realized that a mere 20 percent of the pea pods growing in his personal garden were responsible for producing 80 percent of the peas.

    Others have had excellent results applying the 80/20 rule to multiple examples of their own, as well. 

    For example, Dr. Joseph Juran successfully applied it to the concept of quality control during the 1940s, demonstrating that 20 percent of production issues were responsible for 80 percent of the overall defects in a product.

    Here are some more proven examples of the Pareto Principle in action.

    • 20 percent of factories cause 80 percent of the associated pollution.
    • 20 percent of the students in a given school tend to score grades of 80 percent or greater.
    • 20 percent of the drivers on the road are responsible for 80 percent of auto accidents.
    • 20 percent of a nation’s criminals commit an astonishing 80 percent of crimes.
    • 20 percent of your company’s social media posts yield 80 percent of your web traffic.
    • 20 percent of a business’s employees almost always produce 80 percent of the profit.

    It’s important to notice that the Pareto Principle is an observation, not a law. Therefore, it doesn’t for every single scenario.

    How Does Understanding the 80/20 Rule Benefit Businesses?

    So now you know what the Pareto Principle is and how it can lend a deeper understanding of nearly any set of efforts versus their results. 

    But what does that mean for your business? 

    How can factoring the 80/20 rule into your business plan and ongoing marketing strategy help you take your results to the next level?

    You can significantly boost your profits

    Once you understand that 20 percent of your sales reps generate 80 percent of your profits, you’re in a position to refocus your management efforts to the benefit of your business. 

    Use what you know to help the top 20 percent hone their exceptional skills even further and train the remaining 80 percent to operate more like your highest achievers.

    You can do the same thing with your marketing efforts. 

    Channel more of your efforts into the top 20 percent of your products and services, as you’ll see the greatest payoff. 

    Consider discontinuing stragglers that don’t produce. Refocus more of your customer care efforts on the top 20 percent of your existing clients and new leads, as well.

    You can cut back significantly on waste

    Waste is a killer when it comes to any business’s bottom line, so the sooner you can identify where you’re wasting time and resources, the better. 

    You’ll see your team’s overall productivity level skyrocket, taking your profits right along with it.

    The 80/20 rule can be used to help team members of every level stop squandering their efforts on trivial tasks that don’t help them or the company meet larger goals.

    You’ll also gain insights into the top causes of unproductivity in your workplace. 

    Common culprits include lack of proper training, social media distractions, and working environments in need of improvement.

    You can improve your customer care strategy

    Your business is ultimately only as good as your customer service, so cultivating a customer support strategy that really works is critical. 

    The Pareto Principle in business dictates that 20 percent of your product catalog is responsible for 80 percent of your clientele’s complaints.

    The sooner you identify these, the sooner you can work on resolving the issues.

    You can also use the 80/20 rule to build a better, stronger customer care team. 

    Figure out which 20 percent of your staff members are causing the 80 percent majority of your customers’ service complaints. 

    Bolster your training and management methods accordingly, and watch your customer satisfaction rates rise exponentially.

    You can build a more effective company website

    Take a closer look at your website analytics

    You’ll no doubt see that 20 percent of your pages are attracting 80 percent of your overall traffic. 

    Those are the key pages to focus on when assessing concepts like site navigability and traffic flow.

    In fact, it’s been proven that optimizing the way web traffic naturally flows through your site so that it’s easier for visitors to access your most critical pages improves your results. 

    You’ll not only close more sales, but you’ll facilitate better engagement and accelerate business growth.

    How Can You Use the 80/20 Rule to Help Your Company Grow?

    Although all businesses of every size are prone to problems like wasted time and misdirected resources, this is especially the case with small to mid-sized businesses. 

    Almost by definition, such businesses face daily challenges presented by shoestring budgets and a smaller workforce.

    Individual people — especially those at the top of the chain — may wear many hats and likely aren’t making the most of available resources, especially their time.

    For instance, you might want to ask yourself how much time you waste personally running errands like stocking the office pantry or making repeated runs to the post office. 

    As a result, you’re likely overlooking critical priorities like overseeing important communications or setting up meetings with key clients and collaborators.

    No one’s saying it isn’t important to make sure packages hit the mail on time, but it’s just as important to realize anyone on your staff can take care of that. 

    Delegate the “busy work” to an office assistant. And consider outsourcing tasks like content production, graphic design, or SEO so you can take advantage of a professional’s expertise without creating expensive in-house positions.

    Make sure you use the Pareto Principle to seek out and identify even more ways your company, in particular, may be directing too many resources toward the wrong things.

    Are there ways your budget could be better spent?

    Look for ways you can reroute funding from products or strategies that are underperforming to alternatives that are proven essentials for your bottom line.

    Are your sales reps and customer service experts actually realizing their potential? 

    Study your top performers. Identify what they’re doing differently, and use that to help stragglers, underperformers, and newbies improve.

    Are your top clients, products, and services receiving enough of your attention? 

    Apply what you know about the Pareto Principle in business to maximize the results you’re already getting from your top revenue generators.

    Plan your marketing budget

    Wrap Up: Get Better Results by Restructuring Your Efforts

    If you’ve ever wondered why some products, marketing efforts, and client relationships seem to produce dramatically greater results than others, know that it’s not your imagination. 

    It doesn’t mean there’s anything inherently wrong with your lower producers, either. 

    The Pareto Principle shows you it’s simply how things work, not only in business but in many other areas of life.

    The 80/20 rule also helps you better identify aspects of your business, sales strategy, or marketing campaign that aren’t performing at their full potential.

    Doing this, in turn, takes a lot of the guesswork out of redirecting funds, time, and manpower where they’ll do the most good.

    Ready for more helpful tips on how to amplify your future business success? Check out our list of top tools for making your team as productive as possible!

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    Shannon Hilson Rock author vector
    Rock Content Writer

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