The subject of the 80/20 rule came up with one of the figure skating kids, and while I was writing her an explanation of that phenomenon this morning, it occurred to me that it’s an important subject that I’ve never really written about, that I can recall.
To start, what is the 80/20 rule. I’ll just copy and paste the definition I gave her:
It’s a fairly universal law that says that 80% of the effects come from 20% of the causes. It was first indicated in 1906 by Vilfredo Pareto of Italy. He noticed that 80% of the land was owned by 20% of the people, and that 20% of the pea pods in his garden contained 80% of the peas.
That’s the general idea. The examples I gave her were as follows:
- Only 10% of Americans pay 68% of all the Federal income taxes collected by the government
- Every year, approximately 20% of the jockeys win 80% of the races, usually to within a few percentage points
- Of the 94 named cloud types I could find, 15 are capable of producing rain. That’s 16%.
This rule applies equally well in job hunting. About 80% of people find a job online, and blast off a resume. Only 20% of people, according to HR managers surveyed, take the time to customize the resume to the job. Guess who gets the job? Those 80% are doing nothing except making the hiring manager’s job easier.
Where else does this rule apply in business? Take a look at your profits on a customer by customer basis. Chances are, you’ll find that 80% of your profits come from only 20% of your customers.
If you do lots of shotgun-style marketing, you’ll see that 80% of your leads probably come from LESS than 20% of your marketing. Maybe even 90/10.
When I was doing extensive list building last year on pages with Adsense ads, so that I could recoup my lead generation costs from ad clicks, I discovered something interesting: Over 90% of my Adsense revenue was generated by just THREE of the 80+ web sites I was running with ads on them. Where do you think I started directing my marketing efforts?
Dan Kennedy has pointed on on multiple occasions that, no matter what group of people you are talking to, they will sort themselves into 80/20 piles. More accurately, they will become 5/15/80 groups. You can take 100 highly successful people, all self-made millionaires, and lock them in a room to talk shop amongst themselves. There is a very high likelihood that five of those people will end up leading five groups, or colluding to organize the whole room into a seminar format and the five of them lead the discussion. Of the 95 remaining as the “audience”, 15 of them will participate, whereas the remaining 80 or there abouts will sit back and watch. This phenomenon has been proven over and over in seminar and workshop settings of highly successful people that all paid thousands of dollars to be at said workshop. It’s an amazing phenomenon to watch, I’ve seen it happen on many occasions myself at leads group meetings, Chamber of Commerce functions, political mixers, and more.
What’s the bottom line for you? Be in the 20%. Even better, be in the 5%. Be the guy that customizes your resume to each of the 10 companies you have researched and identified as companies you want to work for, then approach them creatively — job openings or not. The right company will make an opening if need be.
In business, fire your worst customers. The people that give you the most grief and headache – fire them. Chances are, they’re COSTING you money.
Focus your marketing efforts on getting the 80 for doing the 20.
Same on your operational activities, 20% of what you do accomplishes 80% of what you need to accomplish. Can you delegate or outsource the other 80% of the tasks, or even get rid of them entirely? Streamline. Become efficient. Create systems, track metrics.
Until next time,