The Pareto principle, commonly referred to as the 80 – 20 rule is widely used in a variety of contexts and industries. At SpringTab, we are a huge advocates of the rule and we believe that it can be translated to content personalization. The rule refers to our way of making advertising campaigns more effective: with a bit of fine tuning, a successful campaign becomes superb.
The Pareto principle
The root of the principle lies in Italy. Pareto, an Italian economist observed that twenty percent of the population owned eighty percent of the land. Although this finding about unequal distribution of wealth has never been clearly attributed to Pareto himself, later use by management consultant Joseph M. Juran popularized it as the Pareto principle.
The principle is widely used in other areas, because a lot of experts observed very similar phenomena in their area of expertise. For instance, the Human Development Report of 1992 found that the richest 20 percent of the world’s population controls more than 82 percent of the world’s income. In business, statements such as “80 percent of profits come from 20 percent of customers” are not uncommon and widely regarded as rules of thumb. Surprisingly, it is present in areas like Software Engineering, where it is translated like “20 percent of the code has 80 percent of the errors”.
Does the Pareto principle work?
As with many other rules of thumb, it depends a lot on the context. That said, it should not be applied automatically, but needs careful observation. For example, the rule might work for specific set of clients and not for others. A significant problem with the rule, especially in business, can be that it does not take into account specific resources, such as time. Thus, we believe that it should be applied with care.
SpringTab and the Pareto principle
Having this in mind, we think when it comes to great advertising campaigns, the Pareto principle is a good rule of thumb. As we presented in earlier case studies, even a great strategy can be improved by personalization and mass automation. SpringTab is capable of providing brands with complete social profile of their users and campaign participants. Using their psychographic data, we are able to target even the smallest niche segment and increase advertising ROI dramatically.
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