The 80/20 Rule or the Pareto Principle as it’s also known, is a much talked about idea among business people and especially internet entrepreneurs.
If you haven’t heard of it then basically it says that “80% of the results come from 20% of the causes”.
This idea came about after Mr. Pareto (an Italian economist) noticed that 80% of Italy’s land was owned by 20% of the population.
But in terms of running a web business, what does it really mean?
Here are some practical examples:
- 80% of your sales will come from 20% of your clients
- 80% of your traffic comes from 20% of sources
- 80% of the perceived value of your products comes from 20% of the actual content
- 80% of your productivity comes from 20% of your day
But here’s the thing: In my experience the 80/20 Rule should really be the 95/5 rule!
I admit “95/5 Rule” doesn’t perhaps sound as good but I’ve been really amazed by how the results in my own business reflect this split.
For example, in all the niches I’ve been involved with 5% of the customers contribute 95% of the time spent providing customer support.
It’s the same if you have other marketers promoting your products: During a product launch I did last month 95% of the traffic came from 5% of the affiliates.
How To Take Advantage Of This
Maybe you’re sitting there reading this thinking, “But Rob, I don’t have any customers, support queries or affiliates yet!”
In fact this was exactly my position 18 months ago. We ALL start from zero, just at different points in time.
Regardless of the stage you’re at right now, take some time out and isolate the really productive things that work for you.
It doesn’t matter whether this is learning, building websites, driving traffic, creating products, promoting affiliate offers, whatever.
The chances are these will represent 5-10% of your total activities. Next allocate much more time on these tasks and cut back on the rest.
Sounds simple, right?
Well, cutting back can be challenging as it’s often the same little details and “fine tuning” that we think (usually incorrectly) we need to get right before we can move on.
But you need to be brutal as getting better results is often not a case of doing more but simply reallocating your time away from less productive tasks and towards the actions that are really paying off!
My advice is start TODAY!
Have you noticed how it’s just the small things that can make all the difference? Do you think you can reallocate your time to achieve more? Disagree completely?! It’s all good – let me know your thoughts below and I’ll respond to every comment… 🙂
P.S. If you really want to concentrate on the 5% that matters, please click here.
I complete agree with this, a couple of months ago we were working on so many projects now we have cut back and are focusing our time on the projects that work and putting more time in these is helping to push them along quite well.
Thanks very much for your comment.
It’s really great to hear that you’ve got this to work yourself. I think it’s really powerful, especially as it means you just have to reorganise things rather than work harder.
Hope to see you back here soon on the GHG Blog 🙂
I can certainly back-up your comment that “5% of the customers contribute 95% of the time spent providing customer support”
In my payroll business I have a small number of clients who are endlessly requiring support and with whom I spend a huge part of my time.
Then there are the rest of my clients (the majority) who I rarely hear from and who just let me get on with running their payrolls.
In some ways the “challenging” clients are often more valuable to me in terms of keeping me sharp and preventing me from getting into a rut.
They often have questions that I might need to seek outside advice about.
Or they ask a question for which I have already acquired the knowledge – but that I have not used in a while.
So it’s a learning exercise for me as well.
So I would say embrace your more challenging clients as much as you do your easy-going ones.
Excellent advice Kevin, I completely agree that those small number of higher maintenance clients can be so useful in obtaining feedback that you can use to improve your products and services for everyone.
It really surprises as we usually following the golden rule 80/20 in every aspects of business and things we associate with.
Your results might signify that over time everything has evolved, so as the online business. But, I believe 80/20 is obvious proportional result and stays for an extended period of time when you start anything new.
Further, When you enhance your inputs, things are going to filter out and you will find a precise but strong mix who or which stands with you for life long.
Here I don’t know your story of 95/5.
Great to hear from you.
Thanks very much for your thoughts, enhancing the inputs is definitely very important 🙂
Hello Rob …
thanks for the above e-mail … much appreciated. Interesting theories which transpire into actual truths. As soon as I saw 80/20, it reminded me of an newspaper article I read ohhh probably 20 years ago now. And it was saying out of the total working population, that only 20 percent were happy in their jobs and 80 percent were unhappy. I very much doubt those figures have altered much.
The only confirmed split of 95/5 I can think of is that 95 percent of the wealth in the UK is owned by 5 percent of the population. Which in my opinion destroys the myth that foreigners think all inhabitants here are wealthy. I think they get confused with comparable standards of living and are not aware there are many people here in the poverty trap.
TIME MANAGEMENT … Information Overload? Distractions? Be Blinkered!
Getting ”brutal” as you call it, “ruthless” is in my mindset only seems to fall in place for many when you know you have to succeed with whatever goals you seek in life or the future looks bleak.
There are always a certain number of negative tasks to be done to achieve positive results and building an Internet business is no exception, normally things we don’t like doing but they must be done for our own well being.
For example, I’m struggling with my website despite your guidelines with me making some “newbie” errors that I can’t seem to fix. I may have to send out a flare and get the “Rob Cornish” lifeboat to come and rescue me before I drown completely. I’m clinging to technical lifebuoy trying to keep afloat in shark infested waters at the moment. Is this an example of unproductive time management? Maybe, but it is also part of the steep learning curve that GHG encourages each member to take on board, so the implications are positive but the time I’m losing trying to resolve these issues is negative.
Your line “Information Overload” and “Distractions? Be Blinkered!” … I wrote down on a piece of A4 paper in BIG letters. It works! And I am beginning to make steady progress, so this message from you seems like a reminder, a follow-up and you can safely assume this member TAKES NOTE OF YOU AND ACTS!!!
In other words ”We Practice What You Preach” … ha ha … Now where is that Wednesday night webinar message? …
Speak soon Rob … nice to hear from you …
Thank you for taking the time to write such an extensive response to this.
You make some excellent points. I should have used UK wealth example in the post!
Your right than the bigger picture goes beyond the 95/5 type split. The biggest problem people face when starting out in internet marketing is actually what to do!
There’s just so much trash information out there which leads people down the wrong route. This is what happened to me when I started too.
Don’t let the sharks get you Andrew. Please feel free to get in touch via the contact page on this site if you’d like any help.
I agree with “focusing” on the more productive things and in this marketing
business that we are in Time can REALLY slip by REAL FAST if you concentrate
on the little details, that’s when chunking comes into play. Its really more about taking action when buying an info product and watching your expending with them
because 1 thing I’ve learned about is that it soon starts collecting dust on my desktop. Thanks for listening Rob.
Time, sand, fingers….. what was that quote again?!
You’re spot on. Got to plan and update that TODO list. It’s really invigorating when you get this fired up 🙂
Thanks for your great article Rob.
I am just starting out in this IM business but I know for sure that its the little things that usually count and adds up overtime which really makes a difference in the business. It is just a matter of putting in the time to make the little or detailed things work for you. Remember that the 80/20 rule is just a particular standard that is required but it all boils down to how that works for an individual in their business that could change all that.
Glad you enjoyed the article. You’re definitely right Violet, the best way to progress is to take baby steps forward and they certainly do add up over time.
On the details, I am really talking about tiny little tweaks here and there that people (myself included) tend to get bogged down in whilst simultaneously neglecting far more important tasks. “Ready, Fire, Aim!” (not “Ready, Aim, Fire!”) is the best thing to remember to overcome this I think 😉
Some very interesting comments on this post. Have read them all and was particularly interested in what Andrew had to say.
I find ‘distraction’ to be a major unwanted time consumer and at 78 years of age this is SO undesirable.
eg I’d much prefer to be at my computer writing blog posts etc. but I’ve mislaid my mobile phone charger and am still looking.
Later on I’ve got to take her indoors out to lunch so another couple of unproductive hours. Don’t get me wrong, she’s worth a lot to me but she can’t understand what I’m doing in my office all day!
One of the products I give away on http://www.netfount.com is a book called ‘how to live on twenty four hours a day.’ I read it myself often and in conjunction with your 95/5 split it is very useful.
Always great to hear your thoughts!
Enjoy your lunch 🙂
Pareto is a principle that Ive known for years but by my self-admission havent really mastered because my inclination is to put in more effort than others, believing that this creates my marketing “edge”. A slightly pedantic approach at times with things that I am unfamiliar, but its easier to manage time when you are familiar with what you are doing and you can rely more on instincts.
Very interesting that youve found it to be 95/5. The danger though is that some customers wont get enough attention. Doesnt seem to be an issue with you though Rob.
A couple of general points: from a business perspective the principle emphasises the need to MEASURE aspects your business AND your time. Measurement is frequently neglected in large business, never mind by energetic entrepreneurs.
To help me be more productive in allocating time, I tried to learn speed-reading. I never mastered it, BUT it made massive improvements to my time-management. One of the key principles can in fact be related to the 80/20 rule – read the first and last couple of paragraphs first. You probably dont need the 80% thats in the middle of an article. This should be true of good marketing – “tell ’em what you are going to tell ’em. tell them the story, then summarise the story”
Hi there Ian,
You’re right that there is a risk that other customers get neglected. But I’ve found that if you set expectations correctly (i.e., low) and then aim to massively overdeliver support is much easier.
That said I remember I did have a customer once who was VERY troublesome (in the stock trading niche) and I nearly fired them (i.e., refund them and bar them from purchasing any more of my products) because it really got to the point of a major time drain and there wasn’t much more I could help them with anyway.
A couple of other great ideas there Ian on measurement and speed-reading. Thanks for sharing.
We should all apply the split to productivity v research v forums v blog commenting etc. So for every 5% of our time spent on non-productivity, we should spend 95% on productivity.