Pareto's Principle: The 80/20 Rule

Pareto’s principle is a universal tool which shows that 20% of causes contribute to 80% of the effects. By identifying these causes, an organization can easily control the most important effects.

Limiting time loss. By knowing which activities are the most productive, a manager can focus on them to improve their performance.

Knowing its customers better. A company can set its communication strategy and target the most important consumers. It’s important to know the characteristics of 20% of the largest customers, including their source, their type of industry (in the case of professionals) or their age and gender (in the case of individuals). By doing this, it can create new prospects that match the characteristics. The target consumers are similar to the best customers; the company has a better chance of bringing them from the prospective stage to the consumer stage;

Better managing its risks. By knowing the most important risks and those that are easy to correct, a company can concentrate on its core business;

Pareto ratio for each department can improve its effectiveness, including:

20% of machine set-up time can solve 80% of problems;
20% of the production line is responsible for 80% of the final product.

Many studies show that 20% of customers are responsible for 80% of sales.

For example, 20% of employees produce 80% of the work. But it is also used in business strategies, knowing that 20% of products generate 80% of profits