ôô

What Is the 80/20 Rule? The Pareto Principle Explained

The 80/20 rule (or Pareto Principle) can help you boost your productivity by doing what really moves your goals forward.

By
Stever Robbins
4-minute read
Episode #512

Activity Is Lumpy

Bernice’s task list is also subject to the 80/20 rule. She reviews her list and, for each item, asks how much eat item contributes to the store’s success. Not surprisingly, she decides that her sales and marketing efforts–20% of her time–is ultimately responsible for the store’s success. If she boosts her sales and marketing time from 20% of her time to 40% of her time, she could double the size of the store.

Combine the lumps

But having done her 80/20 analysis, Bernice can use the results to make her time even more productive. Previously, she concentrated on selling large batches of Audrey IIs to large, corporate call centers. That brought in a lot of revenue.

But what she really wants is profit. Profit comes from breath mints, primarily purchased by retail customers who visit the store. This suggests she test concentrating on in-store consumers by adding more high-profit impulse purchases. Though her revenue will be lower, she’ll actually take home more in profit. 

She could also use her 80/20 analysis to suggest to her big call center customers that they buy breath mints with their Audrey II orders. After all, with all the meat they eat, Audrey IIs can have seriously bad breath, so breath mints make sense as an accessory. A very, very high profit accessory. 

Everything Is Lumpy

An 80/20 analysis helped Bernice understand revenue, profit, product mix, and growth strategy. But you can use it everywhere. Like relationships. Of all the things that bring Bernice and her shmoopie Melvin closer, she realizes that sharing new analytical techniques makes Melvin light up like nothing else. Geek talk is only 20% of their relationship, but it’s 80% of their bonding time.

You don’t need a genie, you just need 80/20.

Knowing this, Bernice realizes that sharing the 80/20 principle with Melvin will make him deliriously happy. So she packs up early, closes the store (putting some sample packages of breath mints outside the door as a gift for any customers inconvenienced by the early closing time), and rushes home for good old-fashioned quality geek time.

Because at the end of the day, there’s an 80/20 rule for life. And for Bernice, 80% of her deep happiness comes from her friends and family, not her business. So profitable though it may be, sometimes shmoopie-time is just more important.

Use the 80/20 rule anywhere you want to get more results. Ask which 20% of the effort, time, or money is producing 80% of the results. Then double down on that 20%. You can find out what brings the most revenue, profit, and products. You can find out what brings the most happiness. The most closeness. The most joy. Because reality is lumpy. And you don’t need a genie to get what you want out of life...you just need to take your lumps and use them to work less and do more.

I’m Stever Robbins. Follow GetItDoneGuy on Twitter and Facebook. Want to make obscene progress on your biggest goals? Check out my “Get-it-Done Groups” at http://SteverRobbins.com. Image © Shutterstock. 

Pages

About the Author

Stever Robbins

Stever Robbins is a graduate of W. Edward Deming’s Total Quality Management training program and a Certified Master Trainer Elite of NLP. He holds an MBA from the Harvard Business School and a BS in Computer Sciences from MIT.