The Pareto Principle relates to a assortment of trade and industry situations and informs us that nearly 80% of the outputs are a function of only 20% of the causes. This idea is also often labeled as the “80/20 Rule” or the “Law of the Vital Few”.

This principle is named for Italian economist, Vilfredo Federico Damaso Pareto who, in 1906, documented that 80% of the land in Italy was held by only 20% of the population. Later on he understood that a similar lop-sided relationship worked for other areas as well (e.g., gardening).

Note that the 80% and 20% ratios are not definite values; to be more precise, it is simply the unequal allotment that is relevant.

1. Individual Implications:

The Pareto Principle reminds you to remain consistently focused on the 20% of the total daily tasks that really impact your profitability. Given the complexity of prevailing society, and particularly the information overload produced by the Net, it is very easy to lose focus and start focusing on things that (even though they may be “urgent”) are not genuinely important in determining your business success or your ROI.

Simplify Your “To-Do List”

* Of all the entries on your “To-Do List,” only 20% are really critical.
* Delete entries that simply waste time and are unimportant.

Focus on Your Strengths, Not Your Problems

* 20% of your time will produce 80% of your outcomes.
* Use technology for those tasks that can easily be automated.

Remain Attentive to the 20%

*Knowing the critical 20% helps you allocate your time efficiently.
* If problems do come up, and something has to get dropped, make sure it isn’t one of the crucial 20%.

The “80/20 Individual” takes the Pareto Principle to heart and applies its findings to everyday life and everyday decisions. S/he focuses on – and capitalizes on – individual strengths.

2. Customer/Product/Service Implications:

Consider the term “Product” to include both real (i.e., physical) products as well as services and determine how the following rule-of-thumb statistics might impact your business.

Identify Key Customers & Most Popular Products/Services

* 20% of customers account for 80% of profits.
* 20% of products account for 80% of sales.

Answer Product and Service Troubles or Discontinue Them

* 80% of customer complaints cluster around the same 20% of products or services.

Weed out “customers” that are really just kicking tires and don’t dilute your time and resources on products and services that have a negative effect on your bottom line – draining time, energy, and money that could be better spent elsewhere.

3. Website Implications:

Distribution is about getting the products to the customer, and in an online environment, much of that distribution happens via one or more of your websites.

Identify Your Significant 20% Websites

* 20% of sites account for 80% of the traffic.

Determine Vital Traffic Patterns

* Almost 80% of your visitors see just 20% of your website pages. (This figure holds true for both B2B and B2C, but may not remain true for pure content sites.)

Check Your Web Traffic Registers

* You’ll learn that a few keywords, search engines & websites give you the bulk of your hits.

The Pareto Principle can inform your decisions as you apply SEO to your pages and improve traffic patterns.

4. Management Considerations:

Small companies, such as the bulk of online businesses, drive the nation’s economy. Your internet business will benefit if you understand how Pareto’s Principle affects your bottom line.

Evaluate Your Sales Force (Including Affiliates)

* 20% of a sales force produces 80% of the annual results.
* The best 20% of any group is typically at least 16 times as advantageous as the remaining 80 percent.

Just as major corporations need to manage their employees, you’ll need to identify key performers, take care of them, and encourage them if you want your business to be profitable.

5. Advertising/Marketing Considerations:

Use Pareto’s Principle to help you make good decisions about your marketing and advertising strategies.

Determine Your Top Performing Ads and Marketing Campaigns

* 20% of your publicity will deliver 80% of your campaign’s outcomes.
* 20% of a marketing campaign will generate 80% of the responses, etc.

Isolate your winning ads, and the placements that produce the best results, then test – test – test, constantly refining them to make them even better.

If you’re operating a small, online business, you’ve probably already learned that there are many things vying your attention at any given moment. One of the most difficult challenges you’ll face each and every day is deciding how to spend your limited resources.

Reliable application of Pareto’s Principle will help you improve your business’ productivity and overall efficiency, thus increasing your ROI.

Click the following link if you’d like to learn how to apply Pareto’s Principle by taking and proven processes from one of the leading internet gurus.

Technorati Tags: 80/20 Rule, affiliate businesses, internet businesses, Pareto, Pareto's Principle