Pareto is your Best Friend

Pareto is your Best Friend

What do Pareto, Pythagoras, and Murphy have in common? They all have laws or theorems named after them. Alanis Morrisette even wrote a song about Murphy’s Law (even though she named it Ironic).

Don’t worry, we’re not taking you back to your school days to relive the horror of Pythagoras. We want to focus on Pareto, much beloved by the business community.

His principle can help you improve your email marketing and boost your business. He is your best friend – or he should be.

Keep reading to find out who Pareto is and why you need him.

What Is the Pareto Principle?

Back in 1896, Vilfredo Pareto discovered that 20% of the population owned 80% of Italy’s land. In the 1940s, Dr Joseph M. Juran rediscovered the 80/20 Rule and renamed it, giving the credit back to Pareto.

To cut a long story short, it applies to uneven distribution, not only economics.

20% of the features in a product account for 80% of the product’s usage. 20% of the bugs in software cause 80% of the software’s crashes. It’s a rough guide, and sometimes it may be closer to 15/85, other times 25/75.

It highlights the situation where a unit of input doesn’t yield the same output.

Pareto’s original principle applied to Italian economics. But you can apply it to your business too. Check your figures and you’ll see around 80% of your sales come from 20% of your customer base.

If productivity is more your thing, 80% of your results come from 20% of how you spend your time.

It makes sense. Think about your working day. If you work an eight-hour day, then you’ll produce the most work in 96 minutes. And that’s okay. The other 384 minutes might be meetings, checking emails, and basic admin. They’re all necessary to keep your business running. But it’s more difficult to trace a direct link between them and revenue.

It’s also unrealistic to expect you to spend eight hours working at the same level of focus as in those 96 minutes. Your level of effort decreases over time.

Why Does the Principle Matter?

The Pareto Principle is like the offside rule. Not everyone grasps what it’s about but the people who do reap the rewards.

Applying the principle to your business lets you boost your sales. How?

Say you get 80% of your income from 20% of what you invest your time in. On one hand that looks like you’re wasting 80% of your time. Instead, identify what the money-spinning activities are that make up the 20%. Then spend more time doing them. Or scale back on the other 80% of wasted time.

That also lets you provide a better service to your customers. You’ll spend more time and focus on the things that matter. And those are the things that matter to your customers. That’s why they generate 80% of your sales.

But Wait! There’s More.

If 20% of your customers give you 80% of your sales, that 20% is crucial. Work out who that proportion of your customers is and use what you find to update your target audience. Then figure out how to attract more customers like them.

Using a platform like Websand makes figuring this stuff out easier. Data is baked right into your dashboard.

customer lifetime value matrix

Take it one step further and reward that 20%. They’ve shown you their loyalty, so show some in return to cement that supplier-customer bond.

Using the Pareto Principle in Your Email Marketing.

The basic principle implies 20% of your effort will give you 80% of your results. In email marketing, 80% of your sales come from 20% of your subscribers.

Use your data to identify this 20% (or so) of your subscribers. Set up a segment for them and reward them. You might give loyal subscribers early access to a product for their feedback in return.

Or a Loyalty Program Might Suit Your Business Model.

Verizon offers its VerizonUp program. They give members a credit every time they spend $300 on their Verizon Wireless monthly bill. But that one credit can get them front row tickets at special events. It can earn them discounts or device upgrades.

Hair colouring company Overtone offers a tiered loyalty program. Loyal customers earn points by placing orders or referring the program to others.

Tie these programs into your email marketing through automation. Send an invitation to join your program to your list. And advertise your loyalty program in your welcome email to new customers. Give subscribers points for registering.

Add a note to each purchase email to remind subscribers how many points they’ve earned. Consider adding a note about how many they need to earn to reach their next reward.

Send an email whenever a customer hits a reward threshold. Congratulate them so they feel like they’ve achieved something. Track your data to see how soon customers come back to claim their rewards. It’s another way of identifying your top 20%.

Analyse What You’re Sending to Subscribers.

Focusing on the 20% who buy isn’t to say you should neglect the other 80% of your subscribers. Figure out what you’re doing to appeal to the loyal 20%. Does your brand story appeal to them more? Rewrite your brand story to appeal to the other 80%. Drip feed it through a series of automated emails. Help them reacquaint themselves with you.

You might need to change your lead magnet to attract more subscribers like the loyal 20%. Figure out how you can help this new audience. Produce a lead magnet that does so and promote it wherever the 20% hang out.

The Pareto Principle Also Applies to How You Approach Writing Emails.

You’ve set aside an hour to write a series of emails for your automation sequence. But you’re not sure what to say in them.

Spend 10-12 minutes brainstorming ideas based on your data. So what content worked best, what led to sales, and what provided the most value for your subscribers. Remember your goal is to send the right message to the right person at the time they need that message.

Then spend 45 minutes writing the emails based on those observations.

You’ve spent 20% of your time on a task that will net 80% of your results.

Use automation to set up these emails in advance. It’s the best way to use Pareto’s Principle to use your time more effectively. That gives you more time to spend developing your product. Or providing stellar customer service and expanding your customer base.

How Will You Use Pareto’s Principle?

What will you do first? Identify the 20% of your customer base? Or plan your time so you spend 20% on the right tasks? Whichever you want to do, you need data to draw the best conclusions.

What if your current email marketing provider doesn’t give you the data you need? Switch to Websand. We’ll help you set up a data-driven, subscriber-focused platform. It works with your strategy, not against it. And did we mention you’ll be GDPR-compliant from the get-go?

Go on. Treat yourself. You, your business, and your subscribers deserve it.

Drop us a line. We’re standing by!


Also published on Medium.