It's a data-driven fact: 80% of results come from 20% of the effort you put in.
At least, that's what the Pareto Principle says.
In short, the Pareto Principle — which is also known as “the 80-20 Rule,” “the Law of the Vital Few” and “the Principle of Factor Sparsity”— states that 80 % of your effects come from 20% of your causes. It’s a powerful formula that has profound implications — especially when it comes to your performance marketing efforts. In this blog, we cover how the Pareto Principle can be used to optimize your marketing campaigns.
What is the Pareto Principle?
The Pareto Principle was first introduced by Italian economist, Vilfredo Pareto, in the late 19th century. He found that 80% of Italy’s land was owned by just 20% of the population. Beyond land and wealth distribution, the Pareto Principle has proven to apply to a multitude of arenas; from crime rates and gardening to healthcare resources and business. Here are a few examples of the the 80-20 Rule:
- 80% of crimes are committed by 20% of the criminals.
- 20% of the pea plants in a garden produce 80% of the peas.
- 20% of healthcare patients in the U.S. use 80% of healthcare resources.
- 80% of your sales are generated by 20% of your sales staff.
- 20% of your working hours drive 80% of results.
The Pareto Principle Applied to App Growth
With this 80-20 rule, seemingly, everywhere we look, then it must apply to app growth as well, right?
Yes, that’s right.
As many of us know in growth, 80% of ROI is generated by just 20% of an app’s users. It’s one of the most compelling reasons brands should shift their focus on investing to keep loyal users engaged rather than solely on new user adoption.
Just in case you missed it: 80% of your profits come from 20% of your customers. This holds true not just for app marketing, but all business categories as well. In fact, it’s one of the most common observations of the Pareto Principle.
If the bulk of your bottom line comes from a small set of best customers, then it makes good business sense to work harder to retain those customers and treat them well. From there, you can find more customers like them. Simplified, this is what that 80/20 rule process looks like:
- Identify your top 20% of users who have bought recently, frequently and spent the most.
- Map out how these 20% of users came to engage with your brand. This includes the traffic channels they used, the ads they converted on and the content and products they engaged with in your app.
- Use data to study these customers. The better you get to know them, the better you can retarget them and target other customers like them.
Beyond outlining a principle for generating results, the Pareto Principle is also a basic foundation of efficiency. If 20% of your actions generate 80% of the value, then you can stop doing a lot of things that aren’t producing value. From a marketing perspective, this includes optimizing down from testing a wide array of initiatives and channels to just the 20% that drive the most value.
The 80/20 rule can also be applied to your analytics. Rather than analyzing every available metric — focusing on 20% of your most valuable metrics to understand what’s driving the bulk of the value in your campaigns. So, if you’re reviewing 10 metrics, only focus on 2 to make your campaign decisions. Even further — rather than engaging in every campaign activity available — from paid social to influencer marketing and in-app ads; focusing resources on the 20% of campaign activities that drive 80% of your performance.
When applied to creatives, the Pareto Principle shows the value of drilling down on the 20% of ad creatives that are driving the most engagement. Like the note about metrics above, that means running fewer creatives, from the standpoint of quality over quantity.
Beyond volume, the Pareto Principle can also be used to optimize the content of your creatives. ‘KISS,’ which stands for ‘Keep It Simple Stupid’ is a valuable copywriting rule that can help produce more meaningful messaging. Rather than including 25 words of copy on your ad, cut it down to 5 words. Rather than using an overwhelming array of colors and elements, streamlining your creative design process to be simpler, more efficient — and scalable! — by result.
A note about overdoing the Pareto Principle
As pervasive as the 80/20 rule may seem, it’s not an inviolable law of the universe. Remember, it’s a useful trend to consider when making decisions in business and life. The best information to base your marketing decisions on should come from your own analytics and testing. While the Pareto principle can be an additional tool to guide your strategy, it should not dictate your every move.
Takeaways on the 80-20 Rule
According to the Pareto Principle, 80% of results come from 20% of the effort you put in. This has powerful implications for topics spanning from life to business. When it comes to your marketing campaigns, it’s one of the most compelling reasons you should shift more resources to retaining your best customers.
- Retargeting: Identify the top 20% of your users who have bought recently, frequently and spent the most. Map out the channels, ads, content and products they converted on to better understand them, engage them and target other customers like them.
- Campaign optimization: refine your campaigns to focus more on the top 20% of channels that drive the most value in your marketing mix. Keep in mind quality over quantity when it comes to reviewing your analytics. Challenge yourself to make campaign decisions based on 2 metrics rather than 10.
- Creatives: streamline and scale your creative design and testing process. Run fewer creatives and design ads that are simpler and more impactful as a result.
Need help applying the Pareto Principle?
When you're in the app growth trenches of your campaigns, sometimes all you need is an extra set of eyes to help you drill down on what’s important. We’re here to help you optimize your campaigns using tools like the 80-20 Rule. Reach out to our team to get started.