An Impression of Pareto Principle

Also known as 80/20 rule, the Pareto Principle basically explains that from 20% of efforts, you gain 80% of results. It is simply a way of looking at how your life is organized. This rule is applicable to almost all spheres of life such as: software, health , problems, sport, clients, economy and much more.

An Impression of Pareto Principle

The Principle becomes a bit more exciting when it’s applied in business. Since, it enables business people and managers to cut out the wastage and focusing on what they are doing to achieve best results. No doubt, An Impression of Pareto Principle depends a lot on how you use it and if you use it wisely, certainly it can get you the finest outcome.

An Impression of Pareto Principle

This is a method of isolating your priorities, money and time in such a way that will allow you to achieve your goals within a stipulated time. Now, when it comes to talk about the consequences of Pareto Principle, take a look at some of the significant points:

Marketing

There are many companies putting a lot of efforts to get new customers and this is the thing which makes this principle quite popular. The organizations have found that 20% customers are reported for 80% of revenue. Thus, this clearly shows that this method can help you discover the huge positive difference.

Application

Previously, the major reasons why organizations were not able to handle important issues, because of the well defined methodology. However, nowadays the basic rule that applies to each and every business activity is that from 20% of one’s activities results in 80% of results. Therefore, one can say that this principle fits in an enterprise in different ways.

Retaining Customers

The Pareto principle explains you that when you serve 20% of the territory, do 80% of customers actually come from that region. Not just this, when you apply this principle and categorize the customers differently, you need to be aware of how the status of customers changes and how to add value and services to topmost clients.

You can read more articles on What is Voice of Customer VOC.

Here are other examples from Wikipedia:

  • 80% of your profits come from 20% of your customers
  • 80% of your complaints come from 20% of your customers
  • 80% of your profits come from 20% of the time you spend
  • 80% of your sales come from 20% of your products
  • 80% of your sales are made by 20% of your sales staff

Aside of these examples, you can also associate the Pareto Principle when talking about Long Tail. Check our Pareto distribution and long tail to learn more about how this can be applied.

When companies apply this Pareto Principle, it’s totally up to them to resolve difficulties, make a detailed study of areas that induces problems and come out with the decisive actions that make a positive difference in your best possible outcomes. By concentrating on few important issues, certainly you will be able to move towards company’s goals and objectives effectively.

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