01.14.2015 - By David Hehenberger and Doug Yuen
In this episode, we discuss the business applications of The 80/20 Principle. Many of these ideas come from the book The 80/20 of Sales and Marketing.
The Changelog
* Thanks for the latest 5-star reviews! UberNinjaReviewer and Donnacha in Edinburgh
The Core
* The 80/20 of Sales and Marketing by Perry Marshall
* The 80/20 Principle by Richard Koch
* Vilfredo Pareto: 20% of the pea pods in his garden contained 80% of the peas
* The 4-Hour Workweek by Tim Ferriss
* Applies to many things: wealth distribution, support tickets, WordPress plugin downloads, sales/customers, traffic sources, programmers
* Not always an 80:20 ratio, but there’s a disproportionate distribution
Our Takeaways
* 20% of sales reps drive 80% of sales (best sales rep is 16x better than an average one)
* Also applies to programmers – “10x programmers”
* 20% of clients make up 80% of your revenue
* 20% of clients take up 80% of your time
* These aren’t always the same 20%
* Productivity:
* 80% of your productivity comes from 20% of your tasks
* Divide everything into $10,000/hr, $1,000/hr, $100/hr, $10/hr tasks
* Focus on strengths, not weaknesses
* Outsource / hire
* “There is nothing quite so useless, as doing with great efficiency, something that should not be done at all.” ― Peter F. Drucker
Starbucks Espresso Machine Principle
* 80/20 scales
* Offer a “super deluxe experience” like Starbucks
* 20% of customers will spend 4x
* 4% of customers will spend 16X
* 1% of customers will spend 50x
* Pippin Williamson’s 2014 Review
“The Secret To Improving Everything” = Continuous Split Testing
* Improving a WordPress.org ad by 2x, sales page by 2x, checkout page by 2x = 8x sales
* A 10% improvement every month will double sales in 7.2 months
* Volume + testing/measurement