Innovation in marketing strategy: the 80/20 rule

In 1906, an Italian economist, Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country. Developed in the context of income and wealth distribution in the population, this formula was adapted to the business world by business management thinker Joseph Juran. It became known as the Pareto principle or 80/20 rule. The Pareto principle, which states that the results of actions in many cases come from 20% of the causes, is leading the innovation of modern marketing strategies today.?

At the beginning of the 20th century, the landlords ruled in Italy, and the difference between the bourgeoisie and the people was clearly felt. The Italian economist Vilfredo Pareto has signed a formula that will be used as one of the most consistent explanations for many issues even a century later and will be called the Pareto efficiency. Pareto, who wanted to reveal the relationship between wealth and the population in Italy, determined that 80% of the land in the country belonged to 20% of the population. Carrying out similar research in different countries, Pareto discovered that similar situations were seen in other countries as well. The Pareto principle provides an observation and explanation of the unequal distribution of things in life, which was popularized in the min-1900s and applied to the business world. This principle is called the 80/20 rule, and the Pareto principle also opens the door to innovation in marketing today.?

As Unusual Enterprise, in this article, we will talk about what the Pareto principle is, how the 80/20 rule is understood in the business world, and how marketing teams can learn from this principle.?

What is the Pareto principle or 80/20 rule?

The Pareto principle, developed by Vilfredo Pareto to reveal the relationship between wealth and population in Italy, and later popularized in the business world by the leadership of names such as Robert Kock and Joseph Juran, is a formula that explains the relationship between outputs and causes. The Pareto principle, named after its developer, claims that 80% of the results are due to 20% of the causes and suggests an unequal relationship between inputs and outputs. The Pareto principle, also known as the Pareto rule or the 80/20 rule, can be adapted to many disciplines, from production to management to Human resources and marketing.?

How is the Pareto principle used in business?

The 80/20 rule aims to identify the potentially most productive inputs in business and prioritize them. The main purpose of the rule in the business world is to identify the best assets of the business, business processes, or departments and to achieve maximum value by focusing on these assets. The practical equivalents of the 80/20 rule can be exemplified as follows:?

• 80% of your sales volume is generated by 20% of your customers.?
• 80% of your revenues come from the top-performing 20% of your products.?
• 80% of the complaints you receive come from 20% of your customers.?
• 80% of your quality control problems are caused by 20% of your products.?
• 80% of your marketing success depends on 20% of the strategies you implement.?

The Pareto principle, which can be connected to almost every business process and related concept and facilitates the understanding of the cause-effect relationship, is positioned as a guiding mathematical rule for purposes such as narrowing the focus of managers, identifying the problem in their organizations, and encouraging innovation.?

Is the Pareto principle correct?

Before discussing the Pareto principle, it is necessary to understand that the 80/20 rule is not a rigid and mathematically proven law but only a rule and relationship explanation tool. The 80/20 principle is based on empirical evidence rather than scientific fact. While there is no proof that it is entirely correct or conclusive, many examples prove that this rule works. Salespeople, leaders, consultants, and other business players; it is argued that the 80/20 rule applies when it comes to best practices, management strategies, routine tasks, operational flows, and high-level business approaches.?

As a wrong interpretation of the Pareto principle, it is stated as thinking that the parts outside the specified ratios are irrelevant and meaningless. The 80/20 rule, which draws attention to the importance of 20% of the inputs, does not ignore the remaining 80% input. Keeping up to date with the possibility that they may also be important, the Pareto principle argues that 20% is required for maximum efficiency in general terms. Although 20% of the subject studied to determine the results of a student’s exam, what is explained in 80% of the textbook does not lose its importance.?

The way to innovation in marketing: the 80/20 rule?

As we have mentioned the Pareto principle can be applied in almost all business lines and departments. Many marketing professionals today are discovering that the 80/20 rule is a reality that opens the door to innovation in their marketing strategy. Teams who want to take the 80/20 principle as a guide in marketing and sales should first ask themselves the following questions:?

• Who are most of our valuable customers?
• Which marketing channels bring us the most conversions and sales?
• What are our top selling products or services?

Based on data businesses that can answer these questions find the reason behind 80% of their earnings and access. After this point, the teams:

• Develop better strategies for target audiences,?
• Give more weight to channels in campaign planning,
• Require more effort to perfect products and services
• Perfect the customer experience.?

Now let’s focus on how to do this through different concepts…

Better experiences for 20% more customers

By answering the above questions with insights from the data, businesses also identify the customer base that adds value to their business and which they should prioritize. Only 20% of thousands of connections in customer relationship management systems or other channels have the potential actually to turn into sales and establish a long-term business relationship. While determining this 20%, it is necessary to observe which customers shop more often and what actions are taken by frequent or larger budget shoppers. Improving the customer experience for this identified audience becomes a must for companies aiming for success in their marketing and sales strategies. This 20% target audience, whose satisfaction with the services is ensured and brand loyalty is increased by communicating on a personal level, contributes to the stable growth of the business.?

Stronger targeting for 20% of the markets

If there are markets, countries, and regions where products and services perform better, these areas should be prioritized in the strategy. It is considered one of the best practices of the 80/20 rule that a retail chain with a national network should have more branches in the region where it can sell more than the product segment. On the other hand, providing a stronger inventory of more unique products in the warehouses responsible for neighborhoods with high purchasing power for a package delivery service is considered one of the right steps to be taken to increase performance.?

More focus on 20% of marketing channels

The 80/20 rule also affects how marketing channels are used to interact with customers. In light of this rule, which says that only 20% of all marketing channels perform better, digital channels where content performs better or open-air communication channels that are accessible to more people with high purchasing potential should be evaluated better.?

More effort for 20% of content strategy

Almost every company today uses content marketing to build brand awareness, contribute to search engine visibility, and improve its reputation among customers. Blog content, social media posts, email newsletters, podcasts, YouTube videos, and more provide an effective way for brands to engage with their consumers in a descriptive and informative way. According to the Pareto rule, 20% of the content that achieves the best reach and interaction in the best performing 20% of these channels should be determined, and more attention should be paid to these areas in the content strategy. For example, if a quality blog post written in a way that is SEO friendly contributes positively to the search engine visibility of the business, then a large part of the content strategy should include such blog posts.?

Final words…

When Steve Jobs returned to Apple in 1997, Apple was going through some hard times. In the last quarter of 1996, Apple’s sales decreased by 30% and Microsoft was the leading computer company in the market. Jobs needed to do something, and his first action was to review the company’s product line. Discovering that Apple produces multiple versions of the same product to meet the demands of retailers, Jobs took action to reduce the number of products by 70%. While Jobs’ cuts resulted in more than 3,000 layoffs, Apple has grown into one of the most valuable companies in the world today, with powerful products, each with the highest value in its segment. What Steve Jobs did was apply the rough 80/20 and focus on the 20% with the potential to maximize value.?