Maximizer and the Pareto Rule
Vilfredo Pareto (1848-1923) was a well-respected and competent Italian economist with an interesting story about his background. Apparently, while he was working in his vegetable garden at home he noticed that approximately 80% of all his garden’s pea production came from only about 20% of all the pea plants in the garden. He investigated his other vegetable plants and discovered that the same applied to them too. With his interest piqued on the matter, he then looked further afield and discovered that of all the land in Italy, most of it was owned by a small percentage of the population – only 20%. And in fact, the same concept applied to most of Italy’s neighboring countries: 80% owned by 20%. Being an economist, Pareto wondered how this applied in business and after much research concluded that his observations applied accurately in business too. He determined that 80% of all business comes from only 20% of an organisation’s customer base. This concept is now known as follows: “The 80/20 Rule (also known as the Pareto principle or the law of the vital few & trivial many) states that, for many events, roughly 80% of the effects come from 20% of the causes.”
How does this apply to Maximizer CRM? Well, if you run a win/loss analysis in Maximizer’s Sales Opportunity module for your top sales staff (i.e. 20% of your total sales staff!), you will most likely discover that the top 20% of their wins over the years will account for pretty much 80% of your organisation’s turnover. Furthermore, if you run an Activity Report on your Maximizer Address Book, the most active customers will most likely be about 20% of your customer base. The same will typically apply in your Customer Service entries. Essentially, your most active customers are usually also your most profitable customers, which typically amounts to 20% of your customer base. Such valuable customers are the ones you will be the closest to and spend most of your time with. Thank you Vilfredo for making us aware of this fascinating and useful concept and we trust that you are resting in peace!
By Mark Annett