Ep.36 – Pareto’s Principle, or the 80/20 Rule for Business and Marketing

There are some things in life that are simply unavoidable. They happen, patterns, behaviours, whatever it might be. But in 1906, Pareto started to obsess over the 80/20 rule when he realised that around 80% of all the land in Italy was owned by 20% of the population.

After that, he started to look for the 80/20 rule in everything, and sure enough, he found examples, in nature and socio-economic practices around him.

Fast forward to today, and the 80/20 rule is prominent in business, and in our marketing efforts. The thing is, if you don’t know what to look for, then you might be missing the signs that are so important.

So how does the 80/20 rule apply to your business and your marketing? Chances are 80% of profits come from 20% of your customers. Invariably, 80% of issues and problems, also come from 20% of your customers.

In this episode, we’ll jump into how this works in marketing, and most importantly, what to look out for so as you can replicate the successes as they happen.

Enjoy!

A huge thank you to Campaign Refinery for sponsoring this episode. Check out the amazing email marketing automation tool they’ve created.

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Do you know about #ParetosPrinciple? Also known as the 80/20 Rule? Join @justchrisbruno, host of the @allaboutdigmar podcast to find out more about how it applies to your business and marketing.

Stuff We Mentioned

Want to find out more about Pareto’s Principle (the 80/20 rule), check out the links below:

Transcript

Chris Bruno 0:00
This week’s episode is brought to you by campaign refinery, an amazing new email marketing automation tool. Look, in the world of digital marketing, there’s a lot to keep track of. We all know this. As much as we’re in love with social media and the power of social conversation here at social link and on the all about digital marketing podcast, we are well aware of just how powerful email marketing can be. Email Marketing is not dead. In fact, it’s never been more important to help you leverage your presence everywhere else into the one channel that you’ll own regardless of what changes Facebook, Twitter, or any other platform makes in the future. I’ve known the founder Travis Ketchum for years, and he’s been a past guest on the podcast, Episode 15. If you want to listen to it, I’ve personally used his other products before and they’ve been fantastic. The amount of thought that he’s put into each and every one of what he’s created has been incredible. I’d highly encourage you to try that free form. day trial at Campaign refinery.com to see what world class email marketing automation can do for you and your business. massive thank you to Travis and campaign refinery for their support of the all about Digital Marketing Show.

Welcome to the all about digital marketing podcast, the show all about digital marketing, digital marketing, digital marketing, digital marketing, brought to you by social ink digital marketing agency specialising in social media and content marketing for brave brands and forward thinking SMEs. I’m your host, Chris Bruno. And as always, we’re here to bring you the most actionable tips, tricks, tools and insights to help you achieve more when it comes to your digital marketing. Subscribe to the show. And be sure to share with a friend if you found something useful or interesting. You can find all the show notes and more information on www dot all about digital marketing.co.uk

Hi, everybody, and welcome to a brand new episode of The all about digital marketing podcast. I’m your host, Chris Bruno. And today I want to spend a little bit of time talking about the 8020 rule, also known as Pareto principle.

Now, if you already know the basics of the 8020 rule, that’s going to help but if you don’t, don’t worry about it, we’re going to go through a little bit of it now. discovered many years ago, over 100 years ago by Alfredo Pareto, he started to study the 8020 rule, which became known as his principle, the Pareto principle, because he noticed that 80% of all land in Italy at the time was owned by only 20% of the people. He became a little bit obsessed by this ratio that 8020 and as he started to study it, he’d find it in more and more and more places. In many, many different walks of life as well, it wasn’t just about the land. In nature, it’s been shown that actually 20% of crops will actually end up producing 80% of the final product.

In business, we see that 20% of clients usually equate to about 80% of the revenue. The general principle behind it is very, very simple. The 8020 rule can be broken down like this 80% of effects come from 20% of the causes. Now, why am I talking about the 8020 rule on a marketing podcast? Well, funnily enough, it’s not just in nature. It’s not just in land back in 1906 in Italy, but it’s actually applicable to pretty much everything we do when we start to actually look at it. And please, if you’re thinking right now, at 20 spot on, that doesn’t really make any sense. And that’s not how my business works or whatever else. Please try and take it with a little bit of a pinch of salt be at 20 But the point of the principle is that the majority of your results will be coming from very small amount of your efforts. And this is true for most of us. And it happens in various different parts of the business.

Now, if you take your marketing, for example, you might think back and say over the last couple of years, I’ve done X number of campaigns, some were really successful, others take too long or others didn’t really achieve anything or whatever it was that might have happened. When we look at those results, and if we look at it with the view of the 8020 rule, the chances are, we can actually find what that 20% was that created 80% of those results.

The power of finding that information and understanding what those 20% were and what those efforts were that brought in those results, and allows us to have the knowledge and understanding of what it would take to recreate those results. A mentor of mine many years ago said to me, success leaves clues. And it’s very, very true. Today, we’re really lucky digital marketing gives us access to a historical record of everything that we’ve done, how we’ve done it, how it performed, what money we spent, what sort of results we had. And that’s a huge asset to us, especially when we’re considering the 8020 rule. And we’re trying to use that, to decipher what it is exactly, that’s going to help our business.

So in your business, and I know this is true for mine, and I know that I’ve seen this in other people’s businesses. If you apply the 8020 rule, you’ll probably find that 80% of revenue comes from 20% of customers. Again, this is a general rule. But if you look at it and your numbers and you say it’s not at 20, it’s actually 76. That comes from 25%. You’re getting the principle, the vast majority of the money you earn is coming from a smaller group of your total clients. The chances All that your problems are also broken down in the same way 80% of your problems and your issues probably also come from 20% of your clients.

The 80/20 rule can be applied to so many different things to give you an understanding of how you’re actually performing, and most importantly, to understand the most important parts of your business, ie that 20% of your client base, which is a real cash generator and a real revenue generator for your business. That 20% has to be more important than the other 80% right.

So what sort of things can you do for your marketing? To try and understand and to try and review? Well, let’s take social media marketing, for example, for myself and for the whole team at social Inc. We believe in the power of social media.

We don’t believe it’s the be all and end all of what you do as your marketing but we feel that it gives small to midsize businesses a huge opportunity to really get out there, to engage in conversations to build a community, and to actually create conversions and build your client base. But let’s say you’ve been posting on social media, and you feel like nothing’s working. Or you feel like you’ve had a little bit of success and a little bit of things have worked out. But you can’t really understand why or what it is that you need to be doing to make this work.

Well, let’s take a look at the data. Let’s break down everything that you’ve done and look at those numbers to decipher whether imagery or text or links or video has been more proficient in helping you to start conversations and engage with your audience. This is a really simple starting point. But the analysis that you’re going to get from this even at a very high level, let’s say just in total number of engagements compared to the title Suppose, but the chances are that’s going to start giving you an indication. If you look at your stats, and if you look at the data, and you realise that 80% of all the engagement happens when you’re creating a video, then you know what the answer is, you know what you need to do going forward, right?

If you’re looking at that, and you realise that actually the questions that you ask on social media, the ones that really get people engaged in your community starts to answer, then you now also know what it is that you need to be doing. And the same applies if you’ve been running adverts. I’m willing to take a bet that if you looked at all the adverts you’ve run, and you took the total spend compared to the total number of leads or clients signed, you’re going to find that there’s only a very small percentage of those adverts that are really performing.

So the idea of the 8020 rule is to use this to help us identify where we should focus and this is the beauty of it. I’m not saying that you only talk to 20% of your customers because they produce 80% of the revenue. Let’s make this clear. But it means that if you know that 20% of your customer base are the ones that are creating 80% of the revenue, then you know that that’s the profile. That’s the demographic of the target audience you want to keep growing. The people that buy once and that never buy again, are they as valuable in terms of a lifetime value to you and to your business? As somebody who actually ends up buying on a weekly or a monthly or a quarterly basis? Of course not.

So what can we do about the 8020 rule? And how can we actually get this to help us to implement it, Bob Exactly. Like I’ve said, You start by looking at what is and what isn’t working. You look at where the revenue comes from, and more precisely, does most of your revenue honestly come from a split of all your clients? Or does it actually come from a very, very concentrated small percentage, when it comes to the problems you have, in your business, do the same thing. How many support tickets are coming from the same people over and over again? And how could you use that to try and establish a better way for those people to get through your system to use your platform to shop online with some tutorials or help or information buttons, whatever it might be, but you can help yourself and your business by using the 8020 rule to identify the really important things.

The 8020 rule was used in helping to create Eisenhower’s matrix. This has allowed us to identify the things that are important, but not urgent. In other words, not fighting fires all the time in our business, but working on the core tasks that help us to grow our businesses. The same is true for your marketing. The same is true for your sales. The same is true for your customer support. And this is why the 8020 rule is so important. There’s a great book that if you fancy reading, you be more than happy to, to have a look at a neighbour happy to recommend, which is by Richard Koch. And it’s the 8020 principle.

It’s a pretty simple title. But I will link to the show notes. It’ll help you to understand the basis of this. But if not just simply google the Pareto principle. And you’re going to find dozens of examples and dozens of ways that this applies in your business in life in general, and it’s going to help you to identify those key tasks, those key things, activities that you can do that have the biggest impact on your business. There was a woody allen quote, and I just want to finish up with this because I thought it was super relevant to this 80% of success is showing up. That means that the other 20% is that special something?

I think that’s a really good way to end this and to tell you all remember to show up, but look for the reasons that things work and that things don’t Identify the key tasks that are going to have the biggest impact. And once you’ve identified those, you can continue to repeat and optimise and make it better and get more results as are as at the end of the day. That’s what we’re all here for. Right? I just want to say thanks again, to campaign refinery for sponsoring the podcast. And I wish you all the very, very best. Please feel free to drop us a line you can find us on all the social media channels as all about digital and we’d be happy to answer any questions or to even have a conversation and engage with you about what you think the 8020 rule means for your business. Thank you very much for your time.

The all about digital marketing podcast is brought to you by social Inc. A distributed digital marketing agency specialised in delivering results through online campaigns, whether it’s content marketing, social media marketing, online advertising or web design, we’ve got you covered from strategy Through to delivery. If you’re struggling with your digital marketing, get in touch today by simply visiting www dot social ink.com

Transcribed by https://otter.ai

Music by Hani Koi from Fugue