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What Is the 80/20 Rule? How the Pareto Principle Will Supercharge Your Productivity



What Is the 80/20 Rule? How the Pareto Principle Will Supercharge Your Productivity

If you’re sitting at your desk staring at your to-do list and you have no idea where you should start, you need to apply the Pareto Principle, otherwise known as the 80/20 Rule.

The Pareto Principle, or the 80/20 Rule, is a common principle used across various industries and businesses to help determine the highest priority tasks that yield the most impact.  When you’ve identified the high-impact tasks, you’re guaranteed to increase your productivity and your profits.

In the early 1900s, Vilfredo Pareto recognized this occurrence when studying Italy’s wealth distribution.  Pareto observed that 80% of Italy’s land was owned by only 20% of the population.  Pareto also noticed this same 80/20 occurrence in other things, like the productivity of the pea plants in his garden.

It is important to understand the 80/20 Rule is not a mathematical formula. Instead, it is an observation explaining the correlation between effort and outcome. If only 20% of your task list is deemed a high priority and those high priority tasks yield the highest return, why not spend your time and effort there? 

Examples of the Pareto Principle

In business, for instance, this means 80% of your profits come from 20% of your sales.  So, it would help if you focus your energy on those clients who make up the 20% of your highest sales.

If you’re a marketer, you may have noticed that 20% of your marketing messages account for 80% of your campaign results. Or, if you’re working on a major marketing project, you might see that 20% of your initial efforts are responsible for 80% of the final outcome.

If you’re a financial advisor, you might have noticed that 80% of your business profits derive from 20% of your clients.  It might be best to work on maintaining the relationship with those particular clients.

The Pareto Principle doesn’t just apply to overall outcome observations, though.

Instead, the 80/20 Rule can be applied to nearly every part of your workday to help maximize efforts and productivity.

The 80/20 Rule: 20 percent of your efforts result in 80 percent of your outcome.

How to Use the 80/20 Rule to Your Advantage

According to the 80/20 Rule, 20% of your efforts produce 80% of your results.

If you think about the Pareto Principle in terms of productivity, it doesn’t necessarily mean you should only work 20% of the time or go into the office one day of the week.

It is essential to note the Pareto Principle does not suggest you work less.

Instead, when applying the 80/20 Rule to your workday, the Pareto Principle can help you identify the tasks you need to focus on to maximize your time and results.

In other words: work harder on the tasks that matter the most and don’t sweat the small stuff.

How to Apply the 80/20 Rule to Maximize Productivity

If you are in charge of a team or overseeing a project, using the Pareto Principle can help you identify your team’s high-priority tasks.  The 80/20 Rule assumes that even if your team spends an equal amount of time on each task on the to-do list, only two of those tasks will carry the bulk of the results for the project.

So, to apply the Pareto Principle, you’ll need to make a list of all tasks that need to be done to complete the project. Make sure you include everything on this task list.  After making a list, consider which tasks will have the most significant impact on the project to give the highest results.  Some tasks may seem small, but sometimes the smaller tasks have the most significant effect.

Delegate these high-impact tasks to your team and worry about the other tasks later.

You can apply the same concept to your own to-do list. Identify which tasks will yield maximum results and focus your efforts there.

How to Apply the Pareto Principle to Make Business Decisions

The 80/20 Rule can help you make tough business decisions, too. Maybe you have a list of projects for several different clients, but you’re running short on time. If the 80/20 Rule is true, you’ll want to focus your time and efforts on pleasing and developing solid relationships with the 20% of your clients who yield the most results for you (read: profits).

This isn’t to say you should be unprofessional and disrespect your other clients. But, if you’re feeling overwhelmed or tight on time, it might be helpful to recognize where you’re receiving the most of your results and dedicate your time and effort to those clients.

The Pareto Principle can also help you think about business problems and potential solutions.  To apply the Pareto Principle to help you solve your problem, think of all the possible solutions, and work backward. You’ll want to work on the two best solutions that solve your problem.

Avoiding the Pitfalls of the Pareto Principle

Like all principles, the Pareto Principle has a few drawbacks. 

It’s important to remember that the 80/20 Rule is not about reducing your workload. Instead, the Pareto Principle helps you identify the most critical, high-impact tasks on your to-do list.  Don’t neglect the small tasks, unimportant tasks, though.  Eventually, those small tasks will become important if you let them sit too long.

The 80/20 Rule might help you identify which of your employees are producing the most work if you’re managing a team.  Looking at the 20% of employees that complete 80% of the work doesn’t necessarily mean you should fire everyone else.  Instead, use the findings of the Pareto Rule to delegate tasks to your team fairly. 

Encourage your team to collaborate on high-priority tasks.  Or assign different jobs to different people and check in with everyone to ensure they feel responsible for their part of the equation.   Your employees will be encouraged to work harder if they know they’re contributing to the biggest piece of the rewards—not just the minor details.

Understanding the Pareto Principle

Remember, the numbers 20% and 80% are not exact statistics, just estimations and observations.  The point of the 80/20 Rule isn’t the numbers.  The point is everything in business is not created equal.  There are a few things that are weighted with a far greater reward compared to other things.

Spend your time working on tasks or working with clients that will yield the highest results.  Applying the Pareto Principle to your business makes you more likely to increase your profits while cutting back on wasted time and efforts.

Editor’s note: This post was originally published in [Month Year] and has been updated for comprehensiveness.

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45 Free Content Writing Tools to Love [for Writing, Editing & Content Creation]



45 Free Content Writing Tools to Love [for Writing, Editing & Content Creation]

Creating content isn’t always a walk in the park. (In fact, it can sometimes feel more like trying to swim against the current.)

While other parts of business and marketing are becoming increasingly automated, content creation is still a very manual job. (more…)

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How data clean rooms might help keep the internet open



How data clean rooms might help keep the internet open

Are data clean rooms the solution to what IAB CEO David Cohen has called the “slow-motion train wreck” of addressability? Voices at the IAB will tell you that they have a big role to play.

“The issue with addressability is that once cookies go away, and with the loss of identifiers, about 80% of the addressable market will become unknown audiences which is why there is a need for privacy-centric consent and a better consent-value exchange,” said Jeffrey Bustos, VP, measurement, addressability and data at the IAB.

“Everyone’s talking about first-party data, and it is very valuable,” he explained, “but most publishers who don’t have sign-on, they have about 3 to 10% of their readership’s first-party data.” First-party data, from the perspective of advertisers who want to reach relevant and audiences, and publishers who want to offer valuable inventory, just isn’t enough.

Why we care. Two years ago, who was talking about data clean rooms? The surge of interest is recent and significant, according to the IAB. DCRs have the potential, at least, to keep brands in touch with their audiences on the open internet; to maintain viability for publishers’ inventories; and to provide sophisticated measurement capabilities.

How data clean rooms can help. DCRs are a type of privacy-enhancing technology that allows data owners (including brands and publishers) to share customer first-party data in a privacy-compliant way. Clean rooms are secure spaces where first-party data from a number of sources can be resolved to the same customer’s profile while that profile remains anonymized.

In other words, a DCR is a kind of Switzerland — a space where a truce is called on competition while first-party data is enriched without compromising privacy.

“The value of a data clean room is that a publisher is able to collaborate with a brand across both their data sources and the brand is able to understand audience behavior,” said Bestos. For example, a brand selling eye-glasses might know nothing about their customers except basic transactional data — and that they wear glasses. Matching profiles with a publisher’s behavioral data provides enrichment.

“If you’re able to understand behavioral context, you’re able to understand what your customers are reading, what they’re interested in, what their hobbies are,” said Bustos. Armed with those insights, a brand has a better idea of what kind of content they want to advertise against.

The publisher does need to have a certain level of first-party data for the matching to take place, even if it doesn’t have a universal requirement for sign-ins like The New York Times. A publisher may be able to match only a small percentage of the eye-glass vendor’s customers, but if they like reading the sports and arts sections, at least that gives some directional guidance as to what audience the vendor should target.

Dig deeper: Why we care about data clean rooms

What counts as good matching? In its “State of Data 2023” report, which focuses almost exclusively on data clean rooms, concern is expressed that DCR efficacy might be threatened by poor match rates. Average match rates hover around 50% (less for some types of DCR).

Bustos is keen to put this into context. “When you are matching data from a cookie perspective, match rates are usually about 70-ish percent,” he said, so 50% isn’t terrible, although there’s room for improvement.

One obstacle is a persistent lack of interoperability between identity solutions — although it does exist; LiveRamp’s RampID is interoperable, for example, with The Trade Desk’s UID2.

Nevertheless, said Bustos, “it’s incredibly difficult for publishers. They have a bunch of identity pixels firing for all these different things. You don’t know which identity provider to use. Definitely a long road ahead to make sure there’s interoperability.”

Maintaining an open internet. If DCRs can contribute to solving the addressability problem they will also contribute to the challenge of keeping the internet open. Walled gardens like Facebook do have rich troves of first-party and behavioral data; brands can access those audiences, but with very limited visibility into them.

“The reason CTV is a really valuable proposition for advertisers is that you are able to identify the user 1:1 which is really powerful,” Bustos said. “Your standard news or editorial publisher doesn’t have that. I mean, the New York Times has moved to that and it’s been incredibly successful for them.” In order to compete with the walled gardens and streaming services, publishers need to offer some degree of addressability — and without relying on cookies.

But DCRs are a heavy lift. Data maturity is an important qualification for getting the most out of a DCR. The IAB report shows that, of the brands evaluating or using DCRs, over 70% have other data-related technologies like CDPs and DMPs.

“If you want a data clean room,” Bustos explained, “there are a lot of other technological solutions you have to have in place before. You need to make sure you have strong data assets.” He also recommends starting out by asking what you want to achieve, not what technology would be nice to have. “The first question is, what do you want to accomplish? You may not need a DCR. ‘I want to do this,’ then see what tools would get you to that.”

Understand also that implementation is going to require talent. “It is a demanding project in terms of the set-up,” said Bustos, “and there’s been significant growth in consulting companies and agencies helping set up these data clean rooms. You do need a lot of people, so it’s more efficient to hire outside help for the set up, and then just have a maintenance crew in-house.”

Underuse of measurement capabilities. One key finding in the IAB’s research is that DCR users are exploiting the audience matching capabilities much more than realizing the potential for measurement and attribution. “You need very strong data scientists and engineers to build advanced models,” Bustos said.

“A lot of brands that look into this say, ‘I want to be able to do a predictive analysis of my high lifetime value customers that are going to buy in the next 90 days.’ Or ‘I want to be able to measure which channels are driving the most incremental lift.’ It’s very complex analyses they want to do; but they don’t really have a reason as to why. What is the point? Understand your outcome and develop a sequential data strategy.”

Trying to understand incremental lift from your marketing can take a long time, he warned. “But you can easily do a reach and frequency and overlap analysis.” That will identify wasted investment in channels and as a by-product suggest where incremental lift is occurring. “There’s a need for companies to know what they want, identify what the outcome is, and then there are steps that are going to get you there. That’s also going to help to prove out ROI.”

Dig deeper: Failure to get the most out of data clean rooms is costing marketers money

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Ascend | DigitalMarketer



Ascend | DigitalMarketer

At this stage, your goal is to generate repeat buys and real profits. While your entry-point offer was designed for conversions, your ascension offers should be geared for profits—because if you’re serving your customers well, they’ll want to buy again and again.

Ascension offers may be simple upsells made after that initial purchase… bigger, better solutions… or “done for you” add-ons.

So now we must ask ourselves, what is our core flagship offer and how do we continue to deliver value after the first sale is made? What is the thing that we are selling? 

How we continue to deliver value after the first sale is really important, because having upsells and cross sales gives you the ability to sell to customers you already have. It will give you higher Average Customer values, which is going to give you higher margins. Which means you can spend more to acquire new customers. 

Why does this matter? It matters because of this universal law of marketing and customer acquisition, he or she who is able and willing to spend the most to acquire a customer wins.

Very often the business with the best product messaging very often is the business that can throw the most into customer acquisition. Now there are two ways to do that.

The first way is to just raise a lot of money. The problem is if you have a lot of money, that doesn’t last forever. At some point you need economics. 

The second way, and the most timeless and predictable approach, is to simply have the highest value customers of anyone in your market. If your customers are worth more to you than they are to your competitors, you can spend more to acquire them at the same margin. 

If a customer is worth twice as much to you than it is to your competitor, you can spend twice as much trying to acquire them to make the same margin. You can invest in your customer acquisition, because your customers are investing in your business. You can invest in your customer experiences, and when we invest more into the customer we build brands that have greater value. Meaning, people are more likely to choose you over someone else, which can actually lower acquisition costs. 

Happy customers refer others to us, which is called zero dollar customer acquisition, and generally just ensures you’re making a bigger impact. You can invest more in the customer experience and customer acquisition process if you don’t have high margins. 

If you deliver a preview experience, you can utilize revenue maximizers like up sells, cross sales, and bundles. These are things that would follow up the initial sale or are combined with the initial sale to increase the Average Customer Value.

The best example of an immediate upsell is the classic McDonalds, “would you like fries with that?” You got just a burger, do you also want fries with that? 

What distinguishes an upsell from other types of follow up offers is the upsell promise, the same end result for a bigger and better end result. 

What’s your desired result when you go to McDonalds? It’s not to eat healthy food, and it’s not even to eat a small amount of food. When you go to McDonalds your job is to have a tasty, greasy, predictable inexpensive meal. No one is going there because it’s healthy, you’re going there because you want to eat good. 

It’s predictable. It’s not going to break the bank for a hamburger, neither will adding fries or a Coke. It’s the same experience, but it’s BIGGER and BETTER. 

Amazon does this all of the time with their “Customers Who Bought This Also Bought …” But this one is algorithmic. The point of a cross sell is that it is relevant to the consumer, but it doesn’t necessarily have to be aligned with the original purchase. What you don’t want to do is start someone down one path and confuse them.

You can make this process easy with Bundles and Kits. With a bundle or a kit you’re essentially saying to someone, “you can buy just one piece, or you can get this bundle that does all of these other things for a little bit more. And it’s a higher value.”

The idea behind bundles and kits is that we are adding to the primary offer, not offering them something different. We’re simply promising to get them this desired result in higher definition. 

The Elements of High-Converting Revenue Maximizers (like our bundles and kits) are:

  1. Speed

If you’re an e-Commerce business, selling a physical product, this can look like: offering free shipping for orders $X or more. We’re looking to get your customers the same desired result, but with less work for them.

  1. Automation

If you’re a furniture business, and you want to add a Revenue Maximizer, this can look like: Right now for an extra $X our highly trained employees will come and put this together for you. 

  1. Access 

People will pay for speed, they’ll pay for less work, but they will also pay for a look behind the curtain. Think about the people who pay for Backstage Passes. Your customers will pay for a VIP experience just so they can kind of see how everything works. 

Remember, the ascension stage doesn’t have to stop. Once you have a customer, you should do your best to make them a customer for life. You should continue serving them. Continue asking them, “what needs are we still not meeting” and seek to meet those needs. 

It is your job as a marketer to seek out to discover these needs, to bring these back to the product team, because that’s what’s going to enable you to fully maximize the average customer value. Which is going to enable you to have a whole lot more to spend to acquire those customers and make your job a whole lot easier. 

Now that you understand the importance of the ascend stage, let’s apply it to our examples.

Hazel & Hem could have free priority shipping over $150, a “Boutique Points” reward program with exclusive “double point” days to encourage spending, and an exclusive “Stylist Package” that includes a full outfit custom selected for the customer. 

Cyrus & Clark can retain current clients by offering an annual strategic plan, “Done for You” Marketing services that execute on the strategic plan, and the top tier would allow customers to be the exclusive company that Cyrus & Clark services in specific geographical territories.

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