Vilfredo Pareto was an early twentieth century Italian economist who gave us the 80/20 rule. We hear it most commonly used in reference to sales . . . 80 percent of your business comes from 20 percent of your customers. But the mistake we often make is to spend too much time trying to get the marginal 80 percenters to perform like our superstar 20 percenters. Wouldn’t it make more sense to spend most of our time working with our superstars? After all, they “get it.” They understand and appreciate our value proposition, and if we nurture them and are attentive to their needs, they may have the potential to become even better customers.
Where else might we apply the rule? Is it possible 80 percent of our customer service headaches are coming from the bottom 20 percent of our customers? The customers accounting for the least of our sales are often the most demanding and time-consuming. It’s not a bad idea to comb through your customer list periodically looking for customers who demand significantly more service than they are worth, and make them available to your competitors.
How about your employees? Think of the activities that are key to your company’s success. Do you believe that 80 percent of those key activities are being achieved by 20 percent of your workers? Again, doesn’t it make sense to invest time and resources in the 20 percenters . . . the people who are really making a difference . . . rather than spending most of your time trying to improve the 80 percenters?
It’s all about leverage. It’s about identifying the customers, employees, systems and processes that are the keys to your company’s success. It’s about making sure you’re constantly working with those keys to make them stronger and more effective. Where can you get an 80 percent result from a 20 percent effort?