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  • THE 80:20 RULE OF MARKETING

    • July 13, 2018
    • Posted By : admin
    • Comments Off on THE 80:20 RULE OF MARKETING

    The 80/20 rule, also known as the Pareto Principle, is attributed to the Italian economist, Vilfredo Pareto. In one of his papers, Pareto noted that about 80% of the land in Italy belonged to approximately 20% of the country’s total population. In essence, the Pareto Principle infers that there’s an 80-to-20 relationship between effects and their causes.

    The Pareto Principle transcends disciplines. In sports, for example, you’ll find that at least 20% of athletes win 80% of the time, or that roughly 20% of training and exercise impact 80% of an athlete’s performance. Similarly, when it comes to healthcare, about 20% of patients depend on as much as 80% of the nation’s healthcare resources.

    In the marketing world, the 80/20 rule suggests that 80% of your company sales come from 20% of your customers. Alternatively, you could say that 20% of what you do represents 80% of that particular activity’s outcome.

    Things to remember in the 80:20 rule

    1. Marketing investment: The 80/20 rule has a few marketing-related applications. One application relates to how money is spent on advertising and other marketing campaigns. In general, 20% of marketing messages produce 80% of your campaign results. Understanding which of your investments produce the greatest results lets you eliminate some of the costs associated with less productive techniques. This improves your marketing efficiency and returns.
    2. Product mix: From a product perspective, 80% of a typical company’s revenue is derived from 20% of its products or services. These products are sometimes referred to as cash cows since they drive much of the business’ results. You can utilize this awareness in a couple ways. You can emphasize the value of your core products in a better way to target customers. You can also expand your business by targeting new customer groups that have the most impact on products and services.
    3. Profits: One of the most useful applications of the 80/20 rule in marketing relates to profits. A typical business earns approximately 80% of its profits from the top 20% of its customer base. This knowledge enables companies to focus on maintaining relationships with these top customers. Loyalty and frequency programs are intended to offer the best value and experiences to customers who provide the best results.
    4. Customer pyramid: The customer pyramid approach is a way to expand on the Pareto Principle and further break down your customer base for business efficiency. At the top of your pyramid is the platinum level, or the top 20% of customers. Just below are the gold customers. In a highly profitable company, gold customers also contribute to profits and might eventually become part of the core group. Getting them engaged in loyalty programs is helpful. The next tier, the silver group, may or may not include profit-generating customers. These are more cost-conscious customers, so the key to retaining them is to provide basic services at minimal costs. The bottom of your pyramid is the lead weight customers. These customers are typically unprofitable. They demand time, resources and services, but are unwilling to pay for them.

    WAYS TO USE THE 8020 RULE EFFECTIVELY

    1. 80% of your profits come from 20% of your customers.

    This is the most common observation of the Pareto Principle. Thankfully, it’s pretty easy to find out whether or not it holds true for your business. If you find that the bulk of your profits comes from around 20% of your buyers, then make sure you’re working hard to retain those customers and treating them well.

    In addition, you’ll want to find more customers like them. Marshall, the marketing strategist, recommends the following techniques for finding that powerful 20% of your customers:

    Identify customers who have bought recently, frequently and spent the most.

    Find out where that 20 % come from — the traffic channels that they discovered, the ads on which they converted and the content with which they engaged. Optimize, enhance and promote that content.

    Perform a demographic and psychographic study on your 20 percent. The better you get to know them, the better you can target them.

    You should stop spending inordinate amounts of time on the few customers who spend paltry amounts. Focus on your best customers — and that will usually mean only around 20% of them.

    1. 80% of your online product sales come from 20% of your products.

    What products do you sell? If the Pareto Principle holds true for your business, then you’ve got some hot sellers, responsible for around 80% of your sales. These are the products that you should work to enhance, promote, advertise and push. They’re hot sellers for a reason, so make the most of them.

    1. 80% of your visitors come from 20% of your keywords.

    Many companies spend a lot of time developing keywords, forming a keyword strategy and applying those keywords across their website. But here’s the surprising thing about keywords: In most cases, 80% of your traffic and visitors come from a mere 20% of your keywords. I’ve found that the ratio is usually even more weighted than that.

    Take a peek at Google Analytics or SEMRush to find out if this is true for your business. My site, quicksprout.com ranks for a lot of keywords, but there are only a handful of traffic drivers within them. The keyword “online marketing” alone is responsible for more than 13%. And, because this is true, it makes sense for me to:

    Focus content on online marketing.

    Serve the users who want online marketing information.

    Provide even more detailed and helpful information on online marketing.

    1. 80% of your content marketing leads come from 20% of your content.

    You already know that content marketing is powerful. But do you know where your content marketing leads are coming from? If your experience is like mine, you’ll find that most of your leads and traffic come from just 20% of your content assets. When I ask my clients to analyse their content marketing resources, they usually discover one evergreen piece of content that continues to drive tons of traffic.

    I identified my own top-performing content assets and milked them for all they were worth by turning them into long-form guides.

    1. 80% of your social sharing comes from 20% of your social updates.

    Take your social sharing into consideration. Where are all those likes, plusses and re-tweets coming from? They’re probably coming from just 20% of your updates. Using a social analytics tracker, find out the features that your high-performing social updates have in common and apply them to your other updates.

    1. 80% of your traffic comes from 20%of your traffic channels.

    Every website receives traffic from a variety of sources. I keep a close eye on my traffic channels to see where I’m gaining most of my referrals. A quick glance at Google reveals the top referral sites. According to Pareto, you’ll gain most of your referral traffic from just a few of these sites.

    1. 80% of conversions will be generated from 20% of your pages.

    In conversion optimization, you need to focus on the 20%best-converting pages. The better you optimize these pages, the more conversions you’ll be able to gain.

    1. 80%of sales come from 20% of advertising channels.

    When you take into consideration your advertising channels, you probably use AdWords, retargeting and perhaps some site-specific banners, or other outlets. Where are most of your sales and leads coming from? Focus on the channels that produce the most.

    1. 80% of customer complaints come from 20% of customers.

    Just as the most sales come from 20% of your customers, the most intense pain comes from 20% of your customers. These are the customers who have your help desk on speed dial, are people you know by name and are also people you sometimes wish you didn’t even have as customers.

    These few customers are responsible for 80% of the time and attention of your customer service personnel. Keep this in mind when you’re developing strategies for assisting your help desk personnel.