Pareto Law
Also called the 2:8 law. Used in many companies and occasions, this law has diverse interpretations: 20% of all products account for 80% of the total amount of sales; 20% of all customers account for 80% of the total amount of sales; if there are 100 ants, only 20% of them work hard; 20% of large taxpayers pay 80% of the total amount of taxes; and so on.
Six Sigma considers the Pareto Law an important keyword. For example, you name in order of importance ten items that need to be improved in the field of quality control, and you try to improve only two of the most important ones. Then you can expect an equal result to what you would gain by improving 80% of all items. In short, this can be interpreted as, "There are only few things that are really important." The following is a Pareto chart that is very often used.
How can the Pareto Law be used in implementing an Internet strategy?
Let's take a look at some examples.
- Japanese are said to be perfectionists. This is a very good thing. On the other hand, we tend to try to do everything when we put a strategy into practice. After everything is done, you may be asking yourself, "What was the most important purpose of this strategy?" The more you narrow your strategy, the more likely you are to succeed. When you put a strategy into practice, you should keep in mind that only a few things are really important. In this way you will never deviate from what is most important.
- Say, for example, you are conducting a customer satisfaction survey. Who do you think are least satisfied? Most of the customers who complain about your products or services are the people your strategies neglected to target. In other words, your main customers equal your main users because they are satisfied with your products and services. If you understand the tastes of these main customers, you will successfully obtain potential customers with similar tastes and generate large profits. Define who accounts for 20% of your main customers. This makes it easier for you to work out action plans. For example, you may give your main customers some privileges or services that are not available to other customers. Or you may introduce another plan to differentiate your main customers from others.
- Pareto Law sets a standard for continuous improvements with Web operation. If you successfully improve 20% of the most important problems, you will gain the same effect as you would by improving the remaining 80%. This represents a big advantage with respect to cost versus effect.
If you keep the Pareto Law in mind, you will be able to find the right methodology with relative ease. This will be very useful in narrowing the problems and creating ideas.
* Pareto Law is a rule of thumb of income distribution discovered by the Italian economist Vilfredo Pareto. It claims that the top 20% of income earners account for about 80% of the total income earned by a given society. The law is considered applicable to a variety of other phenomena.
