Being customer centered on all of your customers is pretty nigh impossible. Know who the top revenue-producing customers are and make sure you meet their needs.įocusing on 20 percent of your customers is a great deal easier than focusing on 100 percent of them. In most instances, the 80/20 rule still ] applies-80% of the revenue comes from 20% of the customers. Marketing, and the whole firm, should devote extraordinary endeavor toward delighting, keeping forever, and expanding the sales to the 20 percent of customers who provide 80 percent of the firm’s sales and/or profits.ĭirect your attention where the real threat of competition exists. If you make most of your money out of a small part of your activity, you should turn your company upside down and concentrate your efforts on multiplying this small part. The 80/20 Principle suggests that your strategy is wrong. What is that 20 percent in your case? What is stopping you doing more of it? What is preventing you from “making” an even more extreme version of that 20 percent? The return on investment usually follows the 80/20 rule: 80 percent of the benefits will be found in the simplest 20 percent of the system, and the final 20 percent of the benefits will come from the most complex 80 percent of the system.Ĩ0 percent of value perceived by customers relates to 20 percent of what an organization does. Don’t plan to the nth degree on the first day. the 80/20 rule, revisited: You can eliminate 80 percent of the waste by spending only 20 percent of what it would cost you to get rid of 100 percent of the waste. You have to work out your own uses for the principle: they will be there if you look creatively.Ĭalm down, work less and target a limited number of very valuable goals where the 80/20 Principle will work for us, rather than pursuing every available opportunity.įor every step in your business process, ask yourself if it adds value or provides essential support.
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HOW TO THINK 80/20Īuthor says every person I have known who has taken the 80/20 Principle seriously has emerged with useful, and in some cases life-changing, insights.
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Those who developed the personal computer and its software in the next generation, such as Apple, Lotus, and Microsoft, applied the 80/20 Principle with even more gusto to make their machines cheaper and easier to use for a new generation of customers. And if you have an intruder alarm, 80 percent of the false alarms will be set off by 20 percent of the possible causes. Twenty percent of your clothes will be worn 80 percent of the time. In the home, 20 percent of your carpets are likely to get 80 percent of the wear. Taken literally, this means that, for example, 80 percent of what you achieve in your job comes from 20 percent of the time spent.
The 80 / 20 Principle Summary Summary of 80/20 Principle By Richard KochĪuthor says the 80/20 Principle asserts that a minority of causes, inputs, or effort usually lead to a majority of the results, outputs, or rewards. The 80/20 Principle can raise personal effectiveness and happiness. It can help individuals and groups achieve much more, with much less effort. The “80 / 20 Principle” author says the 80/20 Principle can and should be used by every intelligent person in their daily life, by every organization, and by every social grouping and form of society.
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