What is the Pareto Principle? The 80/20 Law
Posted: Sun Dec 22, 2024 6:02 am
Or put another way: 80% of the consequences come from 20% of the causes.
The inventor of this idea was Vilfredo Federico Pareto, an Italian engineer, sociologist, economist and philosopher who one day discovered that 80% of the country's wealth was in the hands of 20% of the population.
This made him think and he established this rule that reminds us that there is no balance between cause and effect . On the contrary, there are usually very few taiwan cellphone number things that produce better results and it is those, and not the others, that we should focus on.
To understand it:
Imagine a company that offers two types of services: the basic one, which has a low price; and the premium one, which is slightly more expensive. If the company has 100 clients, according to the Pareto Principle, 20 of them generate 80% of the income. These are the ones who have purchased the premium service and therefore pay more money.
According to this Law, companies should devote 80% of their efforts to caring for and retaining these customers. Typically, companies offer equal customer service; however, those that apply the Pareto Principle experience improvements in time management, productivity and customer satisfaction.
Why should you apply it to your company?
What Pareto suggests is that we should pay more attention to what brings us the most benefits. It is about prioritizing and working with results in mind .
This allows us to:
Manage your time better: you do more in less. If you put aside trivial activities, you will have more time and energy for what is really important.
Boost growth: Freed-up time can be reinvested and used to ensure business growth and development.
Reduce stress or anxiety: having clear priorities and knowing that we don't have to attend to everything makes work much more enjoyable and makes stress disappear.
The inventor of this idea was Vilfredo Federico Pareto, an Italian engineer, sociologist, economist and philosopher who one day discovered that 80% of the country's wealth was in the hands of 20% of the population.
This made him think and he established this rule that reminds us that there is no balance between cause and effect . On the contrary, there are usually very few taiwan cellphone number things that produce better results and it is those, and not the others, that we should focus on.
To understand it:
Imagine a company that offers two types of services: the basic one, which has a low price; and the premium one, which is slightly more expensive. If the company has 100 clients, according to the Pareto Principle, 20 of them generate 80% of the income. These are the ones who have purchased the premium service and therefore pay more money.
According to this Law, companies should devote 80% of their efforts to caring for and retaining these customers. Typically, companies offer equal customer service; however, those that apply the Pareto Principle experience improvements in time management, productivity and customer satisfaction.
Why should you apply it to your company?
What Pareto suggests is that we should pay more attention to what brings us the most benefits. It is about prioritizing and working with results in mind .
This allows us to:
Manage your time better: you do more in less. If you put aside trivial activities, you will have more time and energy for what is really important.
Boost growth: Freed-up time can be reinvested and used to ensure business growth and development.
Reduce stress or anxiety: having clear priorities and knowing that we don't have to attend to everything makes work much more enjoyable and makes stress disappear.