Named after economist Vilfredo Pareto, who observed that 20% of Italians owned 80% of the land in 1896, this pattern appears in many areas like business, wealth, and productivity. It highlights how outcomes are often unevenly distributed.

How the 80/20 rule applies to business

The 80/20 rule helps businesses focus on what matters most. Here are practical examples of how it works:

- Sales and Revenue

Example: A store finds 20% of its products generate 80% of sales.

Action: Focus marketing and stock on these top-selling items.

- Customer Value

Example: A tech company sees 20% of clients account for 80% of revenue.

Action: Offer premium support to these key clients and automate service for others.

- Employee Performance

Example: In a sales team, 20% of reps close 80% of deals.

Action: Learn from top performers and assign them the best leads.

- Quality Control

Example: A factory notes 20% of processes cause 80% of defects.

Action: Fix these problem areas first to improve quality.

- Time Management

Example: A CEO finds 20% of meetings drive 80% of decisions.

Action: Cut or delegate less important meetings to focus on high-impact ones.

In business, the Pareto Principle helps identify where to focus resources for maximum impact.

Below are real-world applications with examples:

1. Sales and Revenue

Example: A retail chain finds 20% of its products drive 80% of sales.

Action: Prioritise marketing and inventory for these top products.

2. Customer Value

Example: A software firm sees 20% of clients generate 80% of subscription revenue.

Action: Offer premium service to high-value clients and streamline support for others.

3. Employee Productivity

Example: In a sales team, 20% of reps secure 80% of deals.

Action: Replicate top performers’ strategies and give them priority leads.

4. Quality Control

Example: A factory finds 20% of processes cause 80% of defects.

Action: Target those processes for improvements first.

5. Executive Time Management

Example: A CEO notices 20% of meetings lead to 80% of key decisions.

Action: Focus on high-impact meetings and delegate or reduce others.

6. Marketing Campaigns

Example: An e-commerce company finds that 20% of ad campaigns produce 80% of leads.

Action: Boost budget for effective campaigns and cut weaker ones.

7. Cost Reduction

Example: A logistics firm discovers that 20% of suppliers cause 80% of cost overruns.

Action: Renegotiate or replace those suppliers.

The 80/20 rule helps businesses zero in on the most impactful areas. By targeting the 20% that drives 80% of results, or problems, companies can use time, money, and energy more effectively.