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The Pareto Principle applies to a variety of trade and industry situations and shows us that almost 80% of the results are a function of only 20% of the activities.  This idea is also regularly referred to as the “80/20 Rule” or the “Law of the Vital Few”.

This principle is named for Italian economist, Vilfredo Federico Damaso Pareto who, in 1906, discovered that 80% of the land in Italy was held by only 20% of the people.  Soon after he realized that same unequal relationship worked for other areas as well (e.g., gardening).

Notice that the 80% and 20% stats are not definite relationships; to be more precise, it is merely the unequal distribution that is important.

1. Personal Implications:

The Pareto Principle serves to remind you to stay consistently attentive to the 20% of the total daily actions that really make a difference.  Given the complexity of present society, and especially the information glut introduced by the WWW, it is very easy to become distracted and start focusing on things that (although they may be “pressing”) are not actually important in impacting your business success or your profitability.  

Simplify Your “Action List”

• Of all the entries on your “To-Do List,” only 20% will actually affect your business success.
• Eliminate things that simply waste time and trivial.

Focus on Your Positives, Not Your Weaknesses

• 20% of your work will generate 80% of your outcomes.
• Use technology for those tasks that can readily be automated.

Remain Focused on the 20%

• Finding the critical 20% helps you spread your time efficiently.
• If problems do interfere, and something has to fall through the cracks, make sure it isn’t one of the significant 20%.

The “80/20 Individual” takes the Pareto Principle seriously and applies its findings to everyday life and everyday tasks.  S/he concentrates on – and builds on – individual strengths.

2. Customer/Product/Service Implications:

Define the term “Product” to include both tangible (i.e., physical) products as well as services and understand how the following commonly accepted statistics might impact your business.

Recognize Vital Customers & Best Selling Products/Services

• 20% of customers account for 80% of profits.
• 20% of products account for 80% of sales.

Handle Product and Service Issues or Discontinue Them

• 80% of customer complaints center around the same 20% of products or services.

Weed out “customers” that are really just kicking tires and don’t dilute your time and resources on products and services that have a negative effect on your bottom line - draining time, energy, and money that could be better utilized elsewhere.

3. Website Implications:

Distribution is about getting the products to the customer, and in an internet environment, much of that delivery happens via one or more of your websites. 

Determine Your Essential 20% Websites

• 20% of websites account for 80% of the hits.

Determine Crucial Traffic Patterns

• Approximately 80% of your viewers see only 20% of your website pages. (This figure holds true for both business to business and business to consumer, but may not hold true for pure content sites.)

Examine Your Web Traffic Logs

• You’ll notice that a small number of keywords, search engines & websites give you the lion’s share of your hits.

The Pareto Principle can help you as you optmize your pages and improve traffic patterns.

4. Management Implications:

Small companies, such as the bulk of internet businesses, drive the nation’s economy.   Your internet business will benefit if you understand how Pareto’s Principle affects your bottom line.

Evaluate Your Sales Force (Including Affiliates)

• 20% of a sales force produces 80% of the annual results.
• The best 20% of any group is generally at least 16 times as useful as the remaining 80 percent.

Just as major corporations need to manage their employees, you’ll need to identify key performers, develop them, and encourage them if you want your business to be profitable.

5. Advertising/Marketing Implications:

Use Pareto’s Principle to help you make good decisions about your marketing and advertising campaigns. 

Determine Your Best Performing Ads and Marketing Campaigns

• 20% of your promotion will yield 80% of your campaign’s outcomes.
• 20% of a marketing promotion will generate 80% of the results, etc.

Recognize your winning ads, and the placements that produce the top results, then test – test – test, constantly tweaking them to make them even better.

If you’re operating a small, online business, you’ve probably already learned that there are many things demanding your attention at any given moment.   One of the most difficult challenges you’ll face each and every day is determining how to spend your limited resources.

Consistent application of Pareto’s Principle will help you raise your business’ productivity and overall efficiency, thus growing your profitability.

Click the following link if you’d like to learn how to apply Pareto’s Principle by taking advantage of the MaxPro System and proven processes from one of the leading internet millionaires.

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