The Pareto Principle in Business

In life and in business, it’s fair to assert that most things are not distributed evenly. Wealth, workloads, well-being; it’s clear that there isn’t always balance between inputs and outputs. This observation by economist Vilfredo Pareto holds that about 80% of effects come from 20% of causes. Although the ratio may not always be the exact same, the model is consistent.

For example, a cafe or restaurant with a wide selection of food and drink may find that only 20% of their menu is driving 80% of orders. If that were the case for your business, it would be worthwhile to reconsider such an assorted offering, and instead focus on the best-selling items to maximise production.

With a simplified menu, it may be easier to offer online ordering and delivery via popular apps like Uber Eats, GrubHub and Just Eat. However, if the Pareto rule applies, we may see that 80% of unsatisfied customers are a result of 20% of online orders from third party apps.

While we may not always have the quantifiable metrics to support this theory, with LoyLap’s data-driven Loyalty, we can eliminate the guesswork. If 80% of revenue is driven by 20% of patrons, it’s important to acknowledge that group of “Pareto” customers. Our Campaigns feature enables merchants to target the customers that spend the most at their business in a given period of time, to offer discounts and promotions to further incentivise spend, while building brand loyalty amongst your most valued consumers.

Watch the short video below on how to create a Value Spent Campaign for your business.

Campaigns Series: Value Spend Reward from LoyLap on Vimeo.