80/20 Rule of Marketing: Use It to Your Advantage

Marketing 12 minute read 9th October 2023

Using the 80/20 rule of marketing can increase your profitability, sales, customer loyalty, and market share. It’s a simple yet powerful insight that can shape the future of your marketing campaigns.

In this article, we’ll share how the 80/20 rule can be used by marketers. There are many considerations and nuances to the rule that should be explored. This includes creating the most profitable customer segments and justifying where to spend marketing dollars.

Finally, read to the end to learn more about how the services at Beambox can help grow your business.

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What Is the 80/20 Rule in Marketing?

Are you wondering what is the 80/20 rule in marketing? It’s also known as the Pareto Principle, and it’s the notion that 80% of your results come from 20% of your inputs. The idea was developed by the Italian economist Vilfredo Pareto. In the context of marketing, the 80/20 rule is used to determine the most productive marketing channels. Therefore, you can divert more funds toward the highest ROI marketing activities.

Misinterpretations of the 80/20 Rule in Marketing

It’s important to avoid misinterpretations when it comes to the 80/20 rule in marketing. For example, you may conclude that 80% of the activity that’s not the most productive is pointless. However, it might be that in order to achieve the top 20% of productivity, the other 80% is required too.

Coming up with the right marketing strategy requires many small details coming together. So, be careful about removing key parts of the sales funnel. It might be unclear how they are contributing to the end goal from looking at macro-level data.

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80/20 Rule of Marketing–Best Practices

Now, let’s turn our attention to how you can use the 80/20 rule to improve the effectiveness of marketing strategies. In a nutshell, the rule helps you focus your marketing team’s attention on generating more money. H3: Find the Top Traffic Generating Sources

You can figure out the best traffic sources with the 80/20 rule. Of course, any marketing channel can give you an endless stream of customers when throwing enough money at the problem. However, we want to know what channels provide the most traffic for a specified amount of money.

For example, let’s say you have a marketing budget of $1,000 per month. You can allocate the budget between five marketing channels at the start. However, your results might show that 80% of the traffic comes from a single marketing channel. The smart thing to do would be to allocate more of your funds to the winning traffic source.

However, don’t stop experimenting with new marketing channels. Developing additional traffic sources will help you uncover new customers. After all, some of your customers only lurk in specific areas of the internet. It’s your job to find them.

Uncover the Best Customers

Did you know that 20% of your customers could be bringing in 80% of your revenue? This is true for many businesses; you can use this to your advantage. You’ll need to identify the best customers using CRM (Customer Relationship Management) software.

However, after finding those high-quality customers, you need to figure out more data to repeat the success. Here are some of the things to consider when uncovering your best customers:

  • Track traffic sources: It’s a good idea to determine what traffic sources were used to find your best customers. This can bring more nuance and direction to your marketing strategy. For example, after digging into the data, you may discover that influencer marketing generates the most loyal customers. However, it’s one of the more expensive traffic sources on your list. You’ll need to decide if the cost is worth the payoff to find the best customers.
  • Find regular customers: Using the rule, you can figure out the customers who buy from you regularly. Therefore, you can send them offers with higher frequency. This provides a better customer experience since they are genuinely interested in the promotional material. This is also a great way to reduce customer churn.
  • Buying patterns: Determine small details about when and how customers buy your products. Do they visit your physical stores or buy online? Are they buying at specific times of the day, week, or year? Answers to these questions allow you to hone your marketing strategy. Also, when trying to get more reviews, you can ask after customers have had time to use the products.

Manage Your Costs

Any marketing strategy is limited by the amount of money there’s available to spend. Otherwise, you could solve any problem by throwing more money at the issue. The sales team should consider the 80/20 rule by considering the biggest expenses required to find customers.

Therefore, you can eliminate the most expensive aspects of customer acquisition costs to improve profitability. This is an important aspect of optimizing a business to improve the bottom line. However, there’s a fine line between cutting costs and growing the business.

Time Investment

Another big resource your marketing team will spend is time. Ideally, you should focus most of your time on the marketing efforts that lead to the biggest results. However, it’s difficult to figure out where time is wasted without data.

Dig into your data and look at the activities that take the most time and bring the least results. Keep doing this to optimize the resources available, and that will improve the efficiencies of your processes.

Use the 80/20 Rule for Marketing Presentations

Do you want to justify spending more money on marketing? Then, you can use the 80/20 rule to highlight the parts of your marketing strategy that deliver reliable results. Hence, you can make a case for why more money should be spent on a particular marketing aspect.

Here are a few ideas for what type of marketing factors you can focus on:

  • Geographical location: You can use your data to showcase the best areas to target. This might be a specific state, city, or neighborhood.
  • Age group: Figuring out what age group is the most profitable can justify more spending towards this demographic. Also, you can explore high-cost marketing strategies.
  • Marketing channel: Use the 80/20 rule to show your top-performing marketing channels. You can share why the channel deserves additional marketing spend to harness its full potential.
  • Device: Did you discover that users on mobile devices buy more than on personal computers? Then, show the data to justify why a bigger marketing spend for mobile customers makes sense.
  • Behavior: You may discover behavioral details about the top 20% of customers. During marketing presentations, you can show why this customer segment is worth targeting. It may help you generate more funds for the idea.

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How To Discover the 80/20 Marketing Rule in Action

To uncover the 80/20 marketing rule in action, you’ll need to use data analytics. Nowadays, you can get sophisticated software solutions that can help you spot the top 20% of most datasets. However, the more data you record and analyze, the better your chances of finding new opportunities.

Ideally, you should record data from the start of the sales funnel and at every step. This will give you more data to identify the weak aspects of your sales funnel. Improving the weakest 20% of marketing campaigns can be as important as optimizing the top 20%. Therefore, you can improve the customer’s lifetime value.

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How Important Is the 80/20 Marketing Rule?

To summarize, the 80/20 marketing rule is a crucial element of any campaign. It will help you target the right audience to make the most of a limited budget. It’s especially important for small businesses that need to maximize growth while spending the least amount of money.

However, don’t forget to look at the analytics data for insights into the 80/20 rule of marketing at play. Ideally, team members with strong analytical skills can look for patterns in the data to spot new opportunities.

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