The 80/20 rule in business is a concept that suggests that a small number of inputs lead to a major output. In other words, the majority of your time and energy goes toward processing a small number of things in order to achieve results. The rule can be useful for identifying where your business spends a majority of its time, money and resources to help you determine where changes should be made to streamline processes and better focus your efforts on the things that really generate results. Let’s take a more in-depth look at this phenomenon so you can understand why it’s relevant for businesses, how you can use it and some examples of when it might not work as well as others.
What is the 80/20 rule in business?
If you’re a person who wants to make a business work, it can be helpful to understand how the 80/20 rule works in order to better prioritize your efforts. According to Harvard Business Review, the 80/20 rule states that for most outcomes, roughly 20% of inputs lead to 80% of outputs. Most people might not realize that something like an advertising campaign has an 80/20 rule. That is, if you spend 20% of your budget on advertising and get 80% of the results, then it is worth it. If you spent more than 20%, though, you would get less results. Here are some examples:
How to use the 80/20 rule in business
1. Identify the 20% that generates 80% of your revenue 2. Focus on those 20% efforts 3. Ignore the other 80% 4. Celebrate your success and move on to the next 20%
Can the 80/20 Rule Be Used in B2B Marketing?
In a business-to-business marketing situation, the 80/20 rule would suggest that 80 percent of your efforts or resources go toward 20 percent of your prospects. For example, if a company has two lead generating marketing tools, they might allocate 80% of their budget to one and 20% to another. This is because some leads are easier to get than others and require more effort and resources. It’s important to remember that not all leads are worth the same level of investment. A lead worth investing in might be someone who is going to spend a larger sum on products or services from the company. In this case, the 80/20 rule can help a company prioritize its time and resources on getting these leads rather than low-quality ones.
How Does the 80/20 Rule Work in Business?
The 80/20 rule in business is a great way to identify where your time, money and resources are spent. It’s based on the idea that most of your effort leads to a small number of outputs. The rule is not set in stone—it’s meant to help you uncover different ways in which you can achieve your goals. You may be able to use this rule as an opportunity to better streamline processes and focus on the things that lead to success. Let’s take a look at how this works with some examples: If you have a store, you might use the 80/20 rule by focusing on the 20 percent of customers who tend to spend more money or spend more often than other customers. You could then adjust your overall strategy to target these high-value customers instead of trying to serve all customers equally well. If you run a company and want to reduce costs, you could also use this principle by focusing on reducing costs for the minority of your employees who are responsible for generating most of your expenses. This would allow for greater savings than if everyone were equally affected since less people means less total cost impact. If you own a retail store, applying the 80/20 rule would mean focusing more effort on those items that sell best since they generate the most profit for your company overall. For example, if ice cream generates 60 percent of food sales in your shop and it sells out every day, then it makes sense
Can the 80/20 Rule Be Used In B2C Marketing?
The 80/20 rule can be used in a variety of different ways, including in B2C marketing. You can focus on the top 20 percent of your market or concentrate on your top 20 percent of customers by showing them customized messages and not giving the same message to anyone else. So, where should you place your focus? For example, if you sell children’s clothes online, you could spend 80 percent of your time checking out who has bought what items and then only spend 20 percent of your time responding to customer service emails. Or if you sell home improvement products, you could invest 80 percent of your time researching how to improve your sales efforts and only spend 20 percent on unimportant tasks like updating social media posts.
Bottom Line
: The 80/20 rule is a useful way to focus your time, money and resources. The 80/20 rule is a useful way for businesses to focus their resources toward the things that generate the most results. It helps them identify where they spend most of their time, money and effort in order to maximize returns on their investments. For example, it can help a business figure out which customers are worth spending more energy on or which processes should be streamlined the most. In practice, the 80/20 rule means that you should focus your efforts on 20% of the tasks that add value to your business or deliver results (i.e., generating revenue). You should spend 80% of your time focusing on only 20% of the tasks that actually generate revenue for your business.
