How have you applied Pareto 80/20 Principle?

[philipjterry]

This one concept changed my life quite frankly. Although, I believe it needs to be tempered in order to stay sane.

How have you applied it? Examples...

[nomis5]

I haven't any examples. But thanks for posting this simple principle, it has a huge amount going for it.

[philipjterry]

I'll give you an example, I worked out that 80% of my most valuable content was coming from the top 20% contributors who I then ascertained were 'altruism type' personalities. I then expanded on that and asked myself what the top 20% of my activity was that influences 80% of their response, and funnily enough it happened to be emailing them. I then did an 80/20 on my emails to them to see what generated 80% of the value. It was problem questions that no other web owner in my space was answering.

Result? Number 1 on Google for a hot keyword in 6 months, remain there 1 1/2 years on.

[nomis5]

Brilliant!

More ideas please, because this is an excellent post.

I've no examples, as I said earlier, but I do know this, that 20% of my content generates 80% of my income.

But then again, without that 80% of largely unproductive content I believe that it would all fail. Thoughts?

[directwheels]

Call me crazy, but the way I apply the 80/20 rule to my online business is to provide no customer service. No contact phone or email on the site.

The product is simple, priced fairly low, and is self explanatory. If you have questions, you probably shouldn't be buying it. With this, I eliminate a lot of high maintenance customers (yeah, the ones that email you 15 times before they buy and send you 10 emails to ask you why their items having arrived although they have the tracking numbers.)

Those few high maintenance customers created a lot of work for me and make up for a small portion of the revenue. It was probably the 5% of the high maintenance customers that created 70-80% of the work for us. So by eliminating that, I get to spend that time on better things that generate revenue for this business or my other projects.

My volume is high and each sale is relatively small. Having a staff spend 15 minutes on the phone with somebody is simply not worth it. By doing this, I also hope that I am hurting my competitors a bit because those customers who want to call someone and ask a million questions will end up with them. Those are also the customers that are much more likely to have complaints and want to return stuff.

Be warned that this approach may not work for your business.

[dailypress]

I earn over 80% of my income from less than 20% of my websites.

I get over 80% of my traffic from less than 20% of my websites.

Both apply.

Actual estimates are 90% & 10%.

[philipjterry]

nomis5 - you are focusing on the wrong thing, and directwheels is getting warmer. TIME and PEOPLE are your most precious resources, therefore focus on optimizing the 20% of your time with top 20% people that generates 80% results. Being very efficient in the time slots where you are on a roll (or "in flow") or see 80% value being generated. Efficiency + Effectiveness. Multiply that 20%.

It's actually quite shocking what starts happening to the surrounding world if you 80/20 literally everything. People/ pages/ words/ ideas.

And like directwheels says there is 20% who will sap 80% of your most precious resource - time. Eliminate those immediately! I fell victim to this one but learned to adapt quickly and to never ever let it happen again.

[cmendla]

Thanks for reminding me about the 80/20 rule. I had a lot of experience with it when I worked for the gov't. We went through the whole deming/ total quality control thing and it actually worked. I'm going to dust off my knowledge of things like brainstorming and fishbone charts as well.

I need to get a bit better organized and a little more focused.

[incrediBILL]

Went thru the whole ISO 9000 stuff back in the day and it does work as long as everyone in the team adheres to the process. One broken link in the chain and the whole thing literally unravels.

Call me crazy, but the way I apply the 80/20 rule to my online business is to provide no customer service. No contact phone or email on the site.

Crazy :)


Customer feedback is actually part of the process. To eliminate noise calls, I only supply a non-800 # for serious inquiries. Toll free phone #s encourage any old crank to call for any old reason, not interested. I also have no problem telling someone I can't accommodate their needs if it;s too far off target and I'll refund so fast it'll make your head spin to get rid of a problem customer.

However, if you never listen to what your customers are saying, you risk missing out on new trends and suddenly your product could become irrelevant.

[lgn1]

The 80/20 rule works for most things that are a direct or indirect result of human behavior; or in other words, human behavior does not follow a Gaussian distribution, but is instead skewed.

I always wondered why human behavior is non-gaussian.

[philipjterry]

Humans by nature always want to evaluate all the options or make lots of comparisons before they act with purpose(take a risk). I think this is part of the dilemma we face when making 80/20 effective.

Of course everyone's personal philosophy and strategy is different so one can't generalize about things like customer service. But whatever we do must be cohesive. And one must always act on purpose with purpose - that is why I mentioned in the other thread passion for me personally is paramount, as it is something which I can always fall back on if everything goes tits up.

[Edwin]

Call me crazy, but the way I apply the 80/20 rule to my online business is to provide no customer service. No contact phone or email on the site.

Interesting. We took our phone number off our domain sales site for a similar reason: our product is self-explanatory, automatically "sold" to prospects (they type in a domain name and see a message that it's for sale, with the price) and is a take-it-or-leave-it decision at that point.

Used to be that tyre kickers would call us up and berate us for selling our domains at prices they thought were "unfair", or try and sell us registrar services or their own "great" domain names, or get us to talk through how "this domain thing" works.

We can handle purchase requests within a few hours by email, and I've never had to pick up the phone to support actual clients. As far as I can tell, our sales rate went UP when we simplified to a short one-page lander with a simple message and an email address contact.

[vik_c]

I've noticed a lot of people go a step ahead and say it's 90-10 or 95-5 for them. Between the lines, it seems they think it must add up to 100. It doesn't have to. The 80 applies to one area (revenue) while the 20 applies to another (work). It can be 77% and 17% for all you know. 77% of revenue coming from 17% of clients or 92% of revenue coming from 14% of clients.

[philipjterry]

Vik_C, I'm just wondering why that matters?

It's a principle that is dynamic - not static like 77/17, it's probably fluctuating all the time but the principle that a small amount of input produces a disproportionate amount of output stays the same. I always like to think in terms of input to output ratio's or imbalances between what goes in and what comes out. How can we turn on that mental filter so we can see these imbalances and leverage them to the absolute hilt? You could easily get bogged down in being too analytical....

[vik_c]

@philipjterry

You're right. The specific figures don't matter. It's the broad implementation of the effort-result law that counts. I was just pointing out a little misinterpretation that happens often.

[CainIV]

In my opinion 80/20 describes building systems thinking. 90+/10 describes systems perfection. Both are two different entities in the lifestyle of a business.

In order to grow from an adolescent business to a mature business, a business must usually undergo a period of 80/20 thinking. This allows elements to be build out at a rapid enough pace to allow the business to leverage systems thinking and move up revenue levels.

[anand84]

Another way to look at the Pareto principle with respect to websites - 80% traffic comes from 20% of pages. That's a scary situation where the risks are too high (Imagine one high traffic page losing traffic). Consider diversifying.

[philipjterry]

I think the key is held in honing our own mental filter to 'screen out' with more precision that 80% that is taking up valuable space 'in our minds' and anything which is simply staring straight back at us.... Even a simple touch like having a top notch seo white paper (highlited with top 20% sentences!) or favorite relevant book (top 20% pages bookmarked with top 20% actions 24hours/ weekly/ monthly) perched by the side of the computer in peripheral view could act as an affirmation to what we are doing effectively or draw attention to any wandering or any waste that is being created. We often forget waste creates all kinds of downstream knock on effect problems later on which hinder us from consistent application of that critical 20%.

[dataguy]

I think the Internet introduces a polarizing factor, making the Pareto principle more like 90 / 10 or even 95 / 5.

I know for me, less than 5% of my users, pages, and websites generate more than 95% of my revenue, and it's been like that from day 1.

[bwnbwn]

I apply this rule in real time real life. Your food is provided by less than 1% of the population, so 99% are consumers. Think about it. I understrand he uses it for his websites wonderful. I use it as a way of living.

[philipjterry]

bwnbwn, good nugget of info - do you have any fav examples how you apply it?

On another note...
I don't have any stats on this, but I also imagine by being number 1 on Google you would get 80+% of search traffic... In other words get to number 1 or don't bother.

[bwnbwn]

philipjterry yes [webmasterworld.com...] Since this post I have a couple more steers ready for the freezer, planted my land in rye grass, built a bulk feed holder, gave away 500lbs of pears, and planted a winter garden.

In other words get to number 1 or don't bother.

Number 1 is and will always be PPC ads for any term that brings in traffic. I know what you mean but the position isn't 1 but 4-6 depending on the terms.

[philipjterry]

On the other hand if you go to Nuoro province in Sardinia - 99% of the population live by agropastoral activities and likely pick pears from the fat of the land....

[Sierra_Dad]

Let's see. . .

80% of the work I do, someone else could be doing it at 20% of the cost of me doing it.

When it comes to work that I am not doing, but should be, the same ratio probably applies.

[philipjterry]

But Sierra, how long to train them? To get the same quality? To achieve the cohesiveness of tying all lose ends together to create the desired output? Avoiding downstream problems which later cost you 80% of your precious time?

I'd say 80% of my day is spent walking outside, shopping, pratting about in the kitchen, eating, doing chores, thinking, reading and then 20% of my day on this computer. Therefore that 20% needs to be very accurate, precise, rewarding, results focused...

That narrow window needs to be scrutinized and maxed out big time.

Anyone got any interesting opinions why 20%- of content generates 80%+ revenue? Why not 50/50...? Is it lack of research? Throwing too much against the wall to see what sticks?

@dataguy - not sure what you mean by "polarizing factor" - where's the polarity in that? By the way I love that word - it's one of the laws of the universe :)

[dataguy]

@dataguy - not sure what you mean by "polarizing factor" - where's the polarity in that? By the way I love that word - it's one of the laws of the universe :)

For the past 100 years, Pareto's Law could only possibly apply to those around you. With the Internet, 'those around you' is much more inclusive. People on the other side of the Globe have just as much access to your website as people physically next door to you.

I think by it's very nature, this makes Pareto's Law more like 90/10 or 95/5 when you're dealing with the Internet.

The proverbial 15 minutes of fame is more like 90 seconds now. Make the most of it!

[Sierra_Dad]

But Sierra, how long to train them? To get the same quality?

Valid consideration, but there are also people who would require less training than I would to do certain tasks at higher quality than I would.

To achieve the cohesiveness of tying all lose ends together to create the desired output? Avoiding downstream problems which later cost you 80% of your precious time?

Yes, those things would qualify as part of the 20% I should do myself. Those are the things I should get good at. But if I do, that means I can accomplish five times as much.

Business folks much smarter than me say "work on your business, not in your business."

[cabbie]

My wife swears by this principle. She does 20% of the work and gets 80% of the money.

[philipjterry]

80% of my best ideas seem to come from 20% of the day; first thing in the morning, just as I rise n' shine funnily enough. How have I leveraged this...? I bought a dictaphone and start capturing all these thought processes while in the peaceful lull of a soft bed. My hypothesis is that 100% of my concentration is on thought. Nothing else, no distractions.

80% of my pleasure seems to come from 20% of activities... I realized that eating a well cooked dish has the potential to bring a huge amount of pleasure. I've underestimated this for years. So to leverage it even further I've been pushing myself to learn the top 20% flavor principles and inspiration from top 20% sources of information.