August 8: Understanding the Pareto Principle (The 80/20 Rule)
Most things in life are not evenly distributed; 20% of your customers create 80% of your revenue.
Source: Better Explained
Published: January 2022
Understanding the Pareto Principle (The 80/20 Rule)
Originally, the Pareto Principle referred to the observation that 80% of Italy’s wealth belonged to only 20% of the population.
More generally, the Pareto Principle is the observation (not law) that most things in life (effort, reward, output) are not distributed evenly.
So why is this useful?
20% of customers contribute 80% of revenue: Reward these loyal customers.
20% of bugs contribute 80% of crashes: Fix these bugs first.
20% of features contribute 80% of usage: Prioritize these features on your roadmap.
Editor’s Note: The numbers don’t have to be “20%” and “80%” exactly. The 80/20 rule is a rough guide about typical distributions.
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