Pareto Principle

The 80:20 rule describes a trend or trend that is still surprising in many industries, according to which about 20 percent of customer connections contribute to 80% of company success.The rule of Vilfredo Federico Pareto was already formed more than 150 years ago, although the economies of that time were still dominated by smaller companies and multinational companies have not yet been active worldwide.

The 80:20 rule, also known as the Pareto rule , is not the exact percentage, but a basic statement that also characterizes the organizational structure of most companies in the 21st century. A large number of business relationships contribute only a fraction of the company's success , A small percentage of top customers or top business relationships is crucial.

Impact of the 80:20 rule: graded service levels depending on coverage or turnover

In most companies the implementation of the 80:20 rule has a multi-stage sales structure: this is divided into customer consulting or sales for standard customers and another organizational unit for the most important customers, which usually also reports directly to the Management Board. The names in the different industries are different, but the principle is the same: in normal sectors, normal customer relationships are maintained by a service team, a branch team or a service center. After reaching a certain level of sales, personal contact persons or teams will be commissioned to deal more intensively with the handling of this crucial business of the future of the company.

In the banking sector, for example, a "standardized mass customer transaction" or "retail banking" is used for the accounts with low coverage. This includes asset management or services for "selected clients" right up to "private banking" or wealth management. When it comes to distributing goods or machinery, it is often the case that there is a regional organization for the average customer and a further organizational unit for the special customers.

In many industries, the entire customer experience is aligned with the 80:20 rule

In industries where customers are not first-class customers of the 80/20 rule, companies have established a system for approximately fifteen to twenty years to make the customer experience of the top customers more comfortable. Customers are handed out differently colored customer cards so that the preferential treatment can be delivered not only on the actual purchase of the day, but also on the value of the total customer connection. The fact that this strategy is successful is demonstrated by various shitstorms, which break out whenever a group of customer groups are shortened or when the access requirements for a high customer color are changed. The most active in this area are airlines, hotel chains and credit card issuers.

From the 80: 20 rule to portfolio analysis

As soon as the link between company success and the respective "Top 20" is clarified, this basic consideration can be extended to many different areas of the company. If you are generating sales statistics, you will quickly notice that there are some top sellers or blockbuster who generate a large part of the sales and are therefore of paramount importance for the company's survival and value development. Therefore, in almost every area, companies are guided by a value-added approach and the right entrepreneurial activities are focused on the activities that best serve the company's objectives. Over time, the view has been further developed into a portfolio view, and a distinction is made between A / B / C customers or products.

The 80:20 rule has the following importance for companies:

• It describes a link between company success and the sources


• It provides indirect information on how the company organization should be set up


• It is a long-term relationship and is relatively independent of the sector and the company