The Pareto Principle in Sales and Marketing

The Pareto Principle, also know as the 80/20 Rule, is named after Italian economist Vilfredo Pareto and simply states that for many phenomena, 80% of consequences come from 20% of causes. As a rule of thumb, this principle can be applied in your business in a multitude of ways, particularly in Sales and Marketing.

Some examples of the Pareto Principle at work, see if any of these ring true for you...

Personnel Productivity - 80% of the work is from by 20% of the personnel

Sales - 80% of your sales come from 20% of your customer base

Inventory - 80% of your sales will result from 20% of your inventory

How can we adopt the 80/20 Rule in Internet Marketing?

We can see in many aspects of Sales and Marketing where the 80/20 Rule can help you construct an effective Internet Marketing and Sales program. You need to constantly be aware of where your results are coming from. Keep a close eye on your SEO and analytics, keeping track of what search engines your traffic is coming from, what keywords are used the most and which affiliates are sending the most traffic your way. Im willing to bet all the ratios will support the 80/20 rule. Identify the 20 and strengthen and nurture them.

When analyzing traffic flow on your Business to Business or Business to Consumer website, you will find that 80% of the traffic on your site hits 20% of the pages. Ideally, you should focus our energy on the 20% of pages that are being hit and can maximize conversions. You want those pages to be optimized in such a way that the consumer can find them easily and your website needs to be optimized to lead the consumer to them.

If you’re selling products and services, identify the 20% of your customer base that is bringing in 80% of your profits and strengthen your relationships with them and enhance the products and services they are investing the most. Conversely, this is not an argument to ignore the low volume customers. Seeing the 80/20 rule in effect, it might make more sense to use a blended profit margin to help gain continued growth and competitiveness while not being priced out of your high volume deals. These high volume deals might have decreasing returns proportionate to their scale, are important for your business to achieve the necessary economies of scale to be competitive and lower overall costs of production and distribution.

In my business, Core Web Presence, we see the 80/20 rule in effect quite often. One way we try to use this to our benefit and to the benefit of the customer, is to have our sales team spend 80% of their time during personal communication with our customers and potential customers LISTENING and 20% SELLING. By Listening to our customers we allow the customers to educate us. We learn about their Business, their model, their goals and their needs. This way, we can maximize the 20% of the time spent selling by offering highly targeted and useful products and services based on these needs and goals.

Take some time to learn and understand Paretos 80/20 Rule and see how you can both recognize it’s effect on your business and personal life, and institute it in your thinking to maximize not only your business and profitability, but your lifestyle and passions.