This is a rule that is prevalent in a lot of businesses. it states that 80% of the outcomes can be attributed to 20% of all causes for the given event. In business terms, it states that 80% of the companies revenue is generated by the 20% of the companies customers. it is also known as the Pareto principle. the rule is most commonly used in analyzing sales and marketing. if a company is able to identify it’s 20% of the customers who buy the maximum share then it would be easy to market the product to similar kind of customers. for e.g. Consider a country X, The 80% of the total wealth of the country is in the custody of 20% of the rich population. here is an interesting story how this rule helped in doubling the income of a business in 2 months:
When you first time read the 80/20 rule, you are skeptical about how 80% of work would lead to only 20% of results. first, learn to assess if the 80/20 is applicable to your business. it was the time when his website business which was working for more hours was earning less when compared to the writing business, that’s when 80/20 came to his mind. After, finding this fact he thought of shutting down his website support business in favor of writing business. So, slowly I started turning down website development order, taking new recs. practically, it was shut down but it still had it’s long term customers.
He started focussing on gaining new clients for his writing business. he uses to attend a lot of conferences, where he had a chance to reach to a wide range of people who were his clients. he started focusing on them and the results were very swift and were keenly seen in the monthly reports. from $6900 dollars in august to $16,000 in November he has seen his company growing linearly. today he works less, enjoy and earns more. all due to his insight in the 80/20 rule.
Can your business make most out of 80/20? there are a lot of odds, you may not see that drastic results very soon.but it helps you to realize on whom you can focus more.The reason that the 80/20 Principle is so valuable is that it is counterintuitive. We tend to expect that all causes will have roughly the same significance. That all customers are equally valuable. That every bit of business, every product and every rupee of sales revenue is as good as another. That all employees in a particular category have roughly equivalent value. That each day or week or year we spend has the same significance. That all our friends have roughly equal value to us. That all inquiries or phone calls should be treated in the same way. That one university is as good as another. That all problems have a large number of causes so that it is not worth isolating a few key causes. That all opportunities are of roughly equal value so that we treat them all equally.