Forget SWOT, The Pareto Rule Holds The Secret To Your Online Success
One of the most important principles I've learned is the so-called Pareto Rule. This principle holds particular importance for aspiring online entrepreneurs. If you are a Blogger, Digital Marketer, Amazon Seller, AdSense expert, then Pareto’s Rule applies to your business. Understanding it is vital to your success.
What is the Pareto rule?
The Pareto rule was named after Vilfredo Pareto, an Italian economist who invented this business principle in the early 1900s. During his research, Pareto discovered that 80% of all the land in Italy was in possession of a mere 20% of the population.
Pretty soon, he realized that the 80/20 distribution was extremely common in many other aspects of life.
Modern economists have found a broader use of this rule in business:
80% of success is a result of 20% of activities
I realized this rule applies to many online ventures too. Among others, it works in eCommerce, blogging, AdWords and affiliate marketing!
Here are some examples of Pareto’s rule in online ventures.
eCommerce:
80% of your sales will be made by 20% of your products.
AdSense:
80% of your AdSense earnings come from 20% of your content.
Affiliate Marketing:
80% of your commissions are generated by 20% of your affiliate programs.
Amazon FBA:
80% of your income on Amazon is produced by 20% of your product listings.
What does this mean to you?
This principle is most commonly recognized as the 80/20 rule, and it can be a valuable tool when it comes to developing your online business.
How?
In order to be as efficient a webmaster as possible, you need to find out which 20% of your actions, products or campaigns will yield 80% of the desired outcome.
In my own example, it was organic SEO that took just 20% of my time and produced 80% of my entire income!
Needless to say, this was an enormously useful discovery.
So, how do you use the 80/20 rule as a marketer?
You have a couple of options:
The best way to gain advantage from this principle is to look at the traffic characteristics of the top 20% of your web pages that provide the 80% of your revenue. Then, after you've done that, try optimizing these web pages to maximize your sales and profits in an organic way.
But don’t stop there…
Take Pareto Rule to the max!
Another thing to note here is that the Pareto rule is exponential. Personally, I was already aware of the fact that 80% of my income come from just 20% of my web pages.
What I didn't know is that the 80/20 rule still applies within those 20% pages!
(And if you are a blogger I am certain it happens to you too).
Therefore, I made some quick calculations and discovered that the top 20% of the 20% of my most profitable web pages (in other words, the top 4% overall) amounted to 64% of my sales (or if you'd prefer, 80% x 80%).
I was gobsmacked! Just 4% of my pages were producing over 60% of my earnings. And… for those pages I had the potential to get even better.
The myth of SWOT analysis
You will hear in traditional working environments that you need to do a SWOT analysis of your operation (Strength, Weakness, Opportunities and Threats). In other words, find the 80% of areas that produce 20% of your results and allocate time and energy to get better in them.
To me, this makes no sense.
No decathlon or heptathlon athletes ever broke any Olympic records. Success comes from finding your one thing (your 20% of the 20%) and focusing on it.
The secret to success is not SWOT it is Pareto's Rule. It is to identify the 80% of the areas that produce just 20% of the results (your weakness) and… instead of trying to get better, just quit doing them.
Just don’t bother with your weaknesses
In your online business, since you get 80% of your income from 20% of your activities that means the other 80% of your activities produce just 20% of your income.
If that's the case, why even bother with them?
Back, when I was starting Webhostingology.com, I decided to completely ignore certain marketing activities as they didn't have the potential to provide more than 20% of my income. In doing so, I focused on the activities that had the biggest impact – and I got to enjoy some more free time in the process!