What Does the Pareto Principle Mean for Marketing?
Italian economist Vilfredo Pareto, in his research, discovered that approximately 80 percent of the land in his nation was owned by only a few—about 20 percent. In further pursuit of this discovery, he determined that land ownership followed this same pattern in other countries and regions. This became what is known as the Pareto principle, also known as the 80/20 rule.
The Pareto principle was originally applied to measurements of wealth but soon extended to unexpected areas like biology and crime rates. It was discovered, for example, that 20 percent of pea plants in a garden produce about 80 percent of the garden’s peas and that 80 percent of crimes are committed by 20 percent of criminals.
When it comes to marketing and the Pareto principle, you can assess your sales to see if it rings true. The principle suggests that 80 percent of your sales will come from 20 percent of your customers. Make a concerted effort to find which customers spent the most and which are the most recent and frequent customers. Research what marketing channels the customer went through, be it ads or social media content—find out how you’re reaching them. By focusing on the 20 percent’s habits, you might pick up more customers just like them.
Apply the Pareto principle to your online sales and you might notice a trend that points to 20 percent of your products producing 80 percent of your sales. Armed with this information, you can focus on pushing the big products to your customers.
That’s right. Pareto might even apply to the keywords you use for all of your Internet marketing. Use an analytics tool to see which keywords are producing the most traffic—you’ll find it might be close to 20 percent of your keywords that produce the bulk of your traffic, which helps point you in what direction to focus your marketing.
Analyze your social media data. What generates the most responses and where do they come from? Compare your highest performing social updates and see what they have in common so you can apply those characteristics to future posts.
In a lot of cases, the Pareto principle can be applied to your paid advertising strategies. The bulk of your sales might be coming from only 20 percent of your advertising channels, which means you should focus more on your highest performing outlets.
That’s not to say that the Pareto principle is infallible—it’s a trend, not a law, and there will be natural deviations. However, it’s a useful point of analysis for any San Diego business’s Internet marketing plan. By narrowing down data, you can create a tailored marketing agenda that has the potential to increase traffic, sales, followers, and more.