I know from experience that prioritising tasks and business functions can be a nightmare. When you have a busy working environment it can be difficult to know what to do first and where to place your efforts. Ultimately, this indecision and uncertainty can hamper your productivity and mean you waste time, money, and effort on fruitless ventures.
I want to help you get away from that and introduce you to the concept of the 80:20 rule. Also known as the Pareto Principle, the 80:20 rule is a technique you can use in your business and daily life to be more productive and get better results.
It’s incredibly simple but can transform the way you work. If this sounds like something you need, read on as I explain the premise, and how you can implement it into your home and working life.
What is the 80/20 Rule?
The 80/20 rule was theorised by Jospeh M. Juran in 1941 after he studied the research of Vilfredo Pareto. Pareto had found that approximately 80% of the land in Italy was owned by just 20% of the population. Juran expanded upon this observation and created the Pareto Principle or 80/20 rule:
“The Pareto Principle states that 80% of an outcome results from 20% of all inputs for any given event.”
Let’s look at the common example of fundraising. Often although there might be hundreds of donators at a charity event, you will find that a large portion of the funds are donated by a small minority.
For example, 50 people might donate £10 each totalling £500, while two people alone might donate £400 each totalling £800.
But why does this matter? It matters because in a business sense, this fundamental can be used to assign priorities and gauge where you should place most of your effort and money. The aim is to direct your efforts to the 20% of business tasks that are expected to yield 80% of the results.
Important Snippets to Remember
Although the fundamentals of the 80/20 rule are clear, we have to be cautious in its usage and remember these key snippets:
- The aim is to prioritise the 20% of inputs that produce the best results.
- This starts by identifying the 20%.
- After that, concentrate your efforts on that 20% and consider how to optimise it.
- This is only a rule – not an undeniable truth.
- This also doesn’t mean that the other 80% of inputs should be ignored.
- The figures don’t have to be rigidly 80/20.
The most vital point is that although your aim is to concentrate your efforts on the 20%, the 80% cannot be ignored. If you simply started ignoring 80% of your business, it would ultimately fail – regardless of how effective the 20% was.
The charity event is a great example of this point. All donations including the smaller £10 donations are important. Indeed, without the smaller donations, the overall total would be much less.
Therefore, the best approach here would be to put the most effort into courting the higher-value donators, without overlooking the smaller-value donators and making their contributions seem insignificant.
How Can You Apply the 80/20 Rule in Your Business and Working Day?
You should have a clearer idea of what the 80/20 rule is but may not realise how it can be used in business.
This starts with understanding the different scenarios where it applies, and then a simple two-step implementation process. If you want to learn more about this, you can contact us too to benefit from our years of digital marketing expertise.
Step 1 – Understand Where You Can Use the 80/20 Rule
The first step is to decide which areas of your business or specific businesses processes where the 80/20 rule can work. Examples include:
- To manage employee workloads.
- For digital marketing efforts.
- To prioritise business tasks.
- To optimise a specific business task.
- For new product development.
Choose a task, process, or area of your business to start with. From there, you can analyse the inputs and create a strategy for implementation.
To demonstrate, I’m going to use the example of allocating your digital marketing budget. I find this is often a tricky one as there are multiple marketing channels you can use, and it can be difficult knowing which ones to concentrate your efforts and budgets on.
Step 2 – Define Which Input Results in the Biggest Output
To implement the 80/20 principle, you have to know which 20% of inputs will result in 80% of the outputs. Or more precisely, which inputs will provide the biggest outputs – it doesn’t have to be an 80/20 split, it could even be 90/10 for example.
To identify the 80/20 involves research, analysis, and looking at current and historical business data. In our digital marketing example, great metrics to use would either be revenue generated or CPA (cost per acquisition).
Revenue generated would allow you to see which marketing method brings the most money in, but CPA takes this one step further and shows you which is the most cost-effective method – you could combine the two. Your data might show:
| Marketing Method | Budget | CPA | Revenue Generated in Period | % of Outputs / Of Total Revenue Generated |
|---|---|---|---|---|
| PPC | £500 | £5.12 | £1,741 | 26% |
| Social Media | £500 | £12.10 | £578 | 9% |
| Organic SEO | £500 | £3.10 | £3,986 | 59% |
| £500 | £7.80 | £421 | 6% | |
| Total | £2000 | £7.03 | £6,726 | 100% |
From this, it’s clear that PPC and organic SEO represent the 80% of the outputs; in fact, in this instance, they represent 85% of the outputs for 50% of the inputs. The key is that PPC and SEO have the lowest CPA and are generating most of your revenue so most of your effort, time and budget would be best spent on these marketing methods. That’s not to say we would stop Social Media Marketing or Email Marketing as they do provide important methods of keeping in touch with customers and prospects, but the focus of most of our efforts would not be on these channels. More on this next.
Step 3 – Assign Resources, Budget, and Manpower Accordingly
Once you have a clear idea of which components of the process are responsible for the best end results, you can then re-shape your outlook to concentrate your efforts on them.
In our digital marketing example, this could be done by budget allocation. Currently, the marketing budget is split evenly between the four different channels at £500 each. However, you can see that although the budget is even, the results are not.
You could utilise the 80/20 rule and up your budget for PPC and organic SEO to £750 each, while reducing the budget for social media and email marketing to £250 each for example.
With this approach, you still gain revenue from social media and email marketing, and they continue to be profitable. However, your main area of concentration shifts to PPC and organic SEO marketing because they are proven to be responsible for most of your revenue. This should ultimately mean that your marketing budget is much more effective as your return on investment will improve.
This demonstrates perfectly how the 80/20 principle works, and the great thing is that it can be applied to a heap of business processes. For example, you could use it to allocate time and resources for new product research. Alternatively, you could use it to see which social media platform to concentrate your marketing efforts on based on which platform provides the best results, of course.
The 80/20 Rule Can be Used Throughout Your Life to Get Better End Results
I hope you now have a clear understanding of the 80:20 rule and how it works. If you want to see how it could be used for your business, please feel free to contact us to arrange an initial chat where we can discuss your marketing plans and more.
I also want to make it clear that you can apply the 80:20 rule in your life outside of work too. It isn’t only useful for facts, figures, and profit margins. You can use the principle to manage your spare time more effectively, or to do more of what you enjoy.
For business though, the 80:20 rule can be especially effective and help you optimise your processes and strategies. A great starting point is your marketing and digital marketing as you should have plenty of data to work with – as long as you are tracking results by channel. You can also look at implementing the principle in other areas of your business and strive for continual optimisation.
If you want to find out more about how to use the 80/20 Rule in driving your sales and marketing effort, I’d certainly recommend you buy Perry Marshall’s book 80/20 Sales and Marketing: The Definitive Guide to Working Less and Making More.
