Eighty-Twenty Rule

Posted in Marketing and Strategy Terms, Total Reads: 291
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Definition: Eighty-Twenty Rule

80-20 Rule is a principle where 80% or majority of the outcomes or results are due to the 20% (minor) factors. It is also known as Pareto’s law.

Pareto devised original observation about the world’s population and wealth as follows:


Explanation:

- Top 20% population holds 80% of the world’s wealth.

- Next 30% hold 15% of wealth.

- Last 50% population hold only 5% of the wealth.


Understanding in management:

• 80% of the companies’ revenue comes from the top 20% products marketed

• Best 20% efforts get converted to almost 80% of the results

• 80% of companies’ profit from 20% of their customers

 


Advantages as manager/company:

• Top preforming can be identified.

• Resources can be allocated more efficiently.

• Saves time

• Increase productivity per unit time

 

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