The 80-20 Rule

The Twenty Percent

It's practically a cliche, but the oft-repeated adage that 20 percent of your customers will generate 80 percent of your sales is so true it hurts. 

In reality, this adage, which is also known as the Pareto Principle, has been an effective tool in business for everything from diagnosing operations problems, to product/service innovation, to targeting customers. In entrepreneurship, if we can directly target that 20 percent of customers, then we have hit the jackpot: it helps us hone our message, it helps us place our messages in the right marketing channels, it helps us figure out how to get our products/services to customers. Knowing your 20 percent is a really big deal.

In this exercise, you are asked to talk with a local business entrepreneur and discover (1) who their 20 percent is and (2) who the entrepreneur thinks their 20 percent is. Third, if your entrepreneur is right, reflect on why they are right -- what activities have they done to actually discover and understand their 20 percent, how often do they actively solicit feedback from customers, and what kinds of questions do they ask when they do ask for feedback? Conversely, if your entrepreneur doesn't know who their 20 percent is, reflect on why. What aren't they doing? Are they overconfident? Have they made faulty assumptions?

 For this exercise, here's what you need to do:

1) Find a business owner and talk to them about their customers. Who do they think their target customers are? What are their customers' unmet needs?Where do they find their customers? What are their customer's demographics? What kinds of media do their customers consume? Etc.

2) Next, go and talk to 3 'target customers' -- using the demographics/psychographics the entrepreneur described. As these 'target customers' the questions in the paragraph directly above.

3) Reflect. Does the entrepreneur adequately understand their customers' problems? Where are the differences? Why might these differences exist. 

Important. Do not tell the entrepreneur about the second part of the exercise -- it can put them on the defensive and either shut down the interview or prevent them from providing you with the fullest information. Also, please video record your customer interactions and the entrepreneur interview. If the entrepreneur declines to be recorded, that's OK. But if they approve, be sure to include the videos in your post. Do be sure to include video recordings of your customer interactions, however.

For this post, be sure to include the "The Twenty Percent" in the title and label it "Week 8." When you have completed this post, please be sure to Share the URL to the post here and complete the Declaration.

Text for declaration:

PLEASE READ CAREFULLY:

I have published a blog post for the 80-20 rule. 

In my blog post, I interview an entrepreneur about who they think their customers are and what their customers' problems are.

In my blog post, I interview 3 'target customers' and ask them the same questions about their needs that I asked the entrepreneur.

In my blog post, I describe what the differences are between what the entrepreneur believes her or his customer problems to be and what the customers actually say their problems are.

In my blog post, I reflect on why these differences might (or might not) exist.

In my blog post, I include video recordings of these interactions.

In my blog post, I include the phrase "The Twenty Percent" and the label "Week 8." 

I proofread my blog post before publishing it.