Pareto Principle

I have recently been introduced to a new rule which can be adapted to any situation. The Pareto Principle also known as the 80:20 rule. This is a common rule in business and can be used to show statistics. Think of any situation and this can be used… eg

80% of the time I use 20% of my clothes.

As much as I want to deny this, its true. I always try to filter down my clothing, the old “If I haven’t worn it in the past 6 months then I should consider throwing it out”. This however causes me to think of scenarios where I find I will in fact NEED this item. There still there, resting on their hangers.

80% of the time I will eat the 20% of food that I know I like.

Nothing wrong with sticking to something you like? There are loads of selections for a lunchtime menu, soups, salads, the loyal sandwich but I cant seem to tear myself away from my beloved fish fingers.

80% of the time I contact 20% of the contacts on my phone.

Why is it that there is always at least one person in our phonebook that we have no reason to keep in contact with yet we keep their phone number? I still ave my driving instructors number, ive been driving for three years now? The list accumulates over time and yet I rarely contact these people.

This rule applies in business

80%of the time you will make profit for 20% of your customers

80% of the time complaints come from 20% of your customers

80% of your sales come from 20% of your products

If 20% of your customers are most of your profit then it would be wise to keep them happy, keep them coming back, you its good to focus on this percentage of people.

Most companies create a loyalty card. This usually includes discount offers, money off or in Nando’s case a free chicken. Keeping these customers happy is a wise move in marketing and business.

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