I mention the 80/20 rule frequently in my writings so I thought it was about time to write a proper introduction to the concept. I believe it’s fundamental to every business person – to every human being – so if you have never heard of this rule, please read on and absorb everything I’m about to tell you, it could potentially change your life. But don’t take my word, here’s a short (2 minute video) about a best selling book on the subject.
The 80/20 rule sounds like a statistic and in some ways it is. Personally I’m not a big fan of maths and beyond basic web statistics like pageviews, impressions, unique visitors – and when I stretch myself – conversion rates and split testing, I try and avoid all complex numbers. I work better with feelings, ideas and concepts.
The good thing about the 80/20 rule is that you don’t have to understand statistics to be a believer. Yes it has foundations in economics and yes, it was “proven” using statistical analysis by a man named Pareto, but it is not meant to be understood only by economics professors.
Here is an example. Say you are promoting two different products. Initially you spend an equal amount of time and invest an equal amount of money on promotion (Facebook or Google or YouTube ads). After 2 months you notice that Product A has attracted 2 times the sales of Product B. The 80:20 principal says that you should redirect your time and money in such a way that you now spend 80% of your time and money on Product A, and 20% of your time and money on Product B or on finding new products.
Every time you bring in a new product, you should start with an AB Test. That means for one week, you give an equal amount of time and money to your best product and the new product, just to see if it compares favorably or not.
Yours truly. Jim