Pareto principle in practice

The 80/20 principle, also known as the Pareto principle, is a concept that states that 80% of the outcomes come from 20% of the inputs. In the context of marketing activities, this means that 80% of the results you achieve are likely to come from just 20% of your marketing efforts.

In short-term marketing objectives, the 80/20 principle can be applied to identify which marketing tactics or channels are driving the majority of your sales or leads. By focusing on these tactics and channels, you can optimise your marketing budget and resources to achieve the highest return on investment (ROI). For example, if you find that social media marketing is generating the majority of your leads, you might allocate more of your budget to this channel to increase your ROI.

In long-term marketing objectives, the 80/20 principle can help you identify your most profitable customers or market segments. By focusing on these customers or segments, you can create targeted marketing campaigns that are more likely to resonate with them and generate higher sales. For example, if you find that your most profitable customers are in a particular age range or geographic location, you might tailor your marketing messaging and campaigns to appeal specifically to this demographic.

The 80/20 principle can further be applied to how one looks at short term vs long term marketing. Many performance markers tend to focus on the short term objectives, eg: sales that are directly attributed to a specific channel. While brand marketers are looking at long term brand building that typically don't measure success based on sales. In truth neither are better than the other. Short term objectives are great for driving revenue while long term is great for retention and recognition which will eventually lead to revenue. If you were to switch all your focus to either one of these you'd see a negative impact in both short and long term.

If for instance you turned off short term marketing you'd see an obvious decline with respect to the revenue being generated. While if you switched off long term, you wouldn't see the immediate impact on your revenue until the lift from those activities dwindled away. Turning off short term doesn't have a large effect on long term, but long term certainly has an effect of your short term.

Overall, the 80/20 principle can be a powerful tool in marketing strategy, helping you optimise your marketing efforts and resources for both short-term and long-term objectives. By focusing on the inputs that are generating the most significant results, you can maximise your ROI and achieve your marketing goals more efficiently.