The 80/20 Rule:

One Little Statistic That Can Change Your Life

Anyone who has been through a business, marketing, or economics class has apparently heard of the 80/20 rule. I somehow managed to miss that one! Recently though I bought a little book called "The Four Hour Work Week" in which great emphasis is placed on this principle, and it makes sense. But what about those who aren’t business majors? Do they even know this rule exists, much less how it applies to our lives, and in my particular case, how I can apply it to my business?

For those who don’t know, the 80/20 rule is a fundamental rule of business that states, “for many events, roughly 80% of the effects come from 20% of the causes.”[1] Broken down into “real world talk,” this simply means that the things we spend doing only 20% of the time bring us 80% of the results we need. While this may seem like a really boring and dry statistic, it’s actually an extremely useful rule to keep in mind when thinking about your business.

To give you an example of the 80/20 rule, think about your email address list. If you’re like most people, you have a large number of contacts, but only communicate regularly with about 20% of them. Going further, the reason you only talk to that 20% so often is that you can find 80% of the information you need from that group. You will only go outside the initial list when you need something on the outside of the 80% they provide. It doesn’t mean the “unlisted” aren’t useful, it just means that the ones who do make the cut are highly valuable and should be treated as such.

Once we understand what this rule means, we can apply it to our businesses rather easily. Below are a few tips to help you do this:

• Look at your marketing methods. As long as you are tracking them properly, you should be able to see which methods are bringing the most traffic. Chances are that roughly 20% of what you do will bring you about 80% of your traffic. Focus on these methods and try to establish why they work better than the rest. Stop wasting your time on the 80% that aren’t working for you, and nurture the ones that are.
• Review your customer list and see who your repeat customers are. Again, likely 20% will be repeat, happy, big-spending, singing-your-praises clients. Once you’ve figured out who these people are, take a little more time to thank them, and remember that these are your truly devoted buyers. Additionally, try to find what it is you’re doing that makes these people so much more dedicated than the others. The goal is to move people from the 80% group into the 20%.
• If you’re like most artisans, you don’t make just one specific product, but rather a line of similar goods. Take a good look at what you make and see which items are bringing you 80% of your sales. Focus on these items and perfect them. Use these items in your ads, sales, blogs, etc. For instance, if you make jewelry, you may make earrings, rings, bracelets, necklaces, and cuff links. If you’re selling earrings to 80% of your buyers that means you’re selling 20% of what you make 80% of the time. Perhaps it’s time to focus on making earrings a bit more than the rest.
• Go through your blog archives and see which posts received the most response. Make a list of these posts, and see if you can find what makes them so popular. Use these posts as guidelines for your future posts, since they are obviously speaking to your readers well.
• Look at where you’re spending money on supplies. Chances are, you’ll find you’re spending about 20% on the things you really need, and the other 80% on things you use but could live without. Work to eliminate that 80%, so you can devote your budget to the 20% that’s really making you money.

These are just a few ways the 80/20 rule can work for you. By gaining a better understanding of this rule, you will soon be seeing all sorts of ways you can apply it daily!