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The Pareto Principle: A Guide to Developing an Effective Sales and Marketing Plan



In 1906, Italian economist Vincent Pareto noted that 20 percent of the Italian population owned 80 percent of the real estate. He proposed that this ratio -- 80 to 20 -- could be found many places in the physical world and theorized it might actually be a natural law.


Fast forward to the 1940s, when Dr. Joseph Juran, an American electrical engineer, advanced this theory and called it 'The Pareto Principle.' Juran, who is widely credited with being the father of quality control, said that applying the principle to business metrics helps to separate the 'vital few' -- the 20 percent that has the most impact -- from the 'useful many' -- the other 80 percent.


Here are a few examples of the Pareto Principle:

  • 20 percent of employees produce 80 percent of a company’s results.

  • 20 percent of a given employee’s time yields 80 percent of their output.

  • 20 percent of a company’s investments produce 80 percent of its investment profits.

  • 20 percent of people create 80 percent of the nation's wealth.

Or looking at the Principle from another view point:

  • 80 percent of social media shares are produced from 20 percent of posts.

  • 80 percent of your knowledge is used 20 percent of the time.

  • 80 percent of stress is caused by 20 percent of stressors.

  • 80 percent of new customers are generated by 20 percent of new product offerings.

  • 80 percent of your weekly tasks affect 20 percent of your future.



Applying the 80-20 Rule to Your Sales and Marketing Efforts


In the sales and marketing ecosystem, you can use the 80/20 rule as a guide to come up with highly effective marketing plans and strategies, as well as sales best practices by asking questions such as:

  • Who are our most valuable and loyal customers?

  • Which marketing channels produce the most conversions and sales?

  • What are the company's best-selling products or services?

Once you formulate and answer these questions, there are tried and true strategies to help you focus your attention and resources on your top 20% channels, clients and tactics.


Focus on Your Top 20% of Customers


You probably have hundreds or perhaps even thousands of contacts in your client and prospect lists. Monitor and evaluate which customers recently purchased or renewed contracts, which are frequent buyers, or which clients purchase more than your 'average' customer. Once you’ve identified them, tag them as a top priority for your sales and marketing efforts and use their customer data to help you find and attract similar new audiences.


Certain clients are always going to be your high-volume buyers, however, it's important not to take them for granted. Don’t lose touch with your core clients while acquiring new customers or dealing with problem clients. Make sure that you’re always providing a superior customer experience to your best clients. Keep them delighted with your service, keep engaging with them on a more personal level, and continue exploring further business opportunities with them.


Top 20 Percent Marketing Channels


The Pareto Principle says that only 20 percent of all your employed marketing channels will produce the best results. So, while many companies employ numerous marketing tactics and hope that something 'sticks' and produces results, the more strategic approach is to:

  • Identify the marketing channels where a significant number of your potential customers are present.

  • Narrow down the ones that your team is good at targeting.

  • Formulate effective strategies to engage and convert more on those channels.


Content Marketing

Most companies are using content marketing to build brand awareness. Content marketing includes blogging, website content and social media platforms such as LinkedIn, Facebook, Twitter and Instagram.


Organic traffic is one of the most ROI-intensive outcomes of building an informative and engaging website. Visitors who click-through to your site from a Google search have the highest chance of converting to a client or customer. So marketing resources and efforts focused in this area are worth the time and expense.


Make 2023 the Year of the Pareto Principle for Your Business

The 80/20 rule can provide a solid framework for your sales and marketing objectives. Whether it concerns customers, salespeople, marketing campaigns or company resources, it’s definitely worth your time to employ the Pareto Principle as a guide in formulating your sales and marketing strategy for the upcoming new year.


Want to learn more about how to develop an effective marketing strategy that employs the benefits of the Pareto Principle? Contact me at susanelder@ignitepropel.com.




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