It’s called the 80/20 rule, or the Pareto Principle. Named after the Italian economist Vilfredo Pareto, this concept maintains that for many phenomena, 80% of the consequences stem from 20% of the causes. In business, this principle has been adapted to many efficiency efforts such as Six Sigma.
The message is simple enough – focus on activities that produce the best outcomes for you. This applies to both your business/working life and your “other” life. 20% of your efforts yield 80% of your results. 20% of your clients bring 80% of the profits, and 20% of your marketing efforts result in 80% of your business.
Don’t take it too literally. For example, I’ve found that about 32% of my marketing accounts for about 68% of my business. The bottom line is this – there is an inherent imbalance between cause and effect.
An article in Law Practice Today speaks to using 80/20 in your marketing efforts. It’s an interesting read, but it doesn’t get to the real shining point in 80/20 thinking. The key is not only to use 80/20, but to cut out the 80% that is bringing you only 20% of your profitability. To do otherwise is to squander the majority of your resources.
Take, for example, direct mail. “They” say that 1% response rate is very good. I, on the other hand, say that means 99% of your prospects toss your mail piece into the trash. So you’ve got two options, both of which are pretty good:
- stop doing direct mail, knowing you can save most of your money and give up only a small number of viable leads; or
- look at ways to make your direct mail more effective.
Easier said than done, right? Wrong. All you need to do is make sure you’re handling your direct marketing campaign properly. Review your results with an eye towards a common bond among the people who take you up on your offer. Do they all live in a certain area? Do they all belong to the same racial or ethnic group? Are their households similarly structured? By answering these questions you can use direct marketing in a more effective manner, thereby boosting your response rate with very little effort.
Of course, you should also concentrate on why you aren’t getting the other 99% of the population when you send out a mail piece. Look to your list, your mail piece design, the copy, and the offer. By split-testing over a period of time, you should be able to create a piece that will appeal to at least 20% of those non-buyers; refining the next 80% will lead to higher response rates still.
Fast? No. Easy? Not really. Inexpensive? Well, it’s certainly cheaper than wasting all those stamps and envelopes.
