The Pareto principle, colloquially known as the 80/20 rule, is a principle that businessmen and women should live by. Why, then, do so few of them know what it is? Here we define what the 80/20 rule really is, why it’s so important, and why you should make it a part of every aspect of your life, not just your marketing strategy.
What is the 80/20 Rule?
The 80/20 Rule is a principle that was proposed by an Italian economist in 186 by the name of Vilfredo Pareto, and was later named after him. He mentioned in his article, the “Cours d’economie politique” that 80% of the land in Italy at that time was owned by 20% of the population. This observation was extended to today’s 80/20 rule: 80% of the effects of any situation come from 20% of the causes.
In business, it’s often applied like this: 80% of your company’s profits will come from 20% of your customers. 80% of the result you expect will come from 20% of what you put into your project.
Why is it so important?
Using the 80/20 rule allows you to approach your planning in a way that will allow you to maximize profits, production, or any other aspect of your business, with a minimum of effort. Let’s focus on the earnings example above.
- 80% of profits come from 20% of customers.
- It would make sense to focus on making sure 20% of your customer base is happy before spending resources on the rest, right?
- The same can be applied to any situation.
- While it doesn’t always come out at 80/20, the basic concept still applies: there is no 1-to-1 balance from input to output.
How can I use this in my daily life?
This same rule that can be applied to marketing, earnings predictions, and many other aspects of business can also be applied to time management and other things you use every day, whether you realize it or not. 80% of your results should come from 20% of your effort.
It is easy to get carried away with projects around the house that in the end are not going to be very productive. Sure, you might be able to fix that leak under the sink, but is it really worth the time you’re going to spend? If it takes you 6 hours to fix a problem that would have taken a professional plumber 20 minutes, then you are wasting those 6 hours. Instead of using 20% of your effort to get 80% of your results, you have managed to flip the rule, spending 90% of your effort for only about 10% in terms of results.
one final note
It should be noted here that while the 80/20 rule is a great rule of thumb, it is not set in stone. It’s a great guide, but should only be useful as such. Don’t try to box everything you do into that 80/20 ratio or you’ll find yourself striving for something that’s impossible to achieve.
With that said, take a look at the various aspects of your life and see how they might benefit from applying such a guideline. You’ll be amazed at how much extra time and productivity you can gain with a little change in perspective.