How You Can Use the 80/20 Rule?
Let’s understand the rule in a better way by exploring a hypothetical problem;
Jayden owns a clothing brand that produces clothes for all genders and ages, which shows that he still needs to segment his business and discover his category. After a year of sales, he marked out the following observations:
- Clothes from the women’s section readily get stocked out. It happened thrice a year; he wasn’t prepared for so many sales and did not have enough resources to fulfill the demand. Hence, he incurred a loss of the profit he may have earned if he had speculated it right.
- Clothes from the men’s section didn’t get much attention, for the first quarter the sales were moderate, and then they dropped significantly for the rest resulting in extra production and loss.
- Clothes from the kids’ sections were not demanded much.
- Clothes from the old age section were not demanded at all.
With so much loss incurred in the last year, Jayden decided to introspect and find a way to escape this situation. Luckily, he already knew the 80/20 Rule and applied that to come up with an effective solution.
Solution:
By applying the 80/20 Rule, he came up with the following solution:
- He found out that out of all five sections, which were Young Male/Female, Old Male/Female, and small kids, he could derive the maximum result from Young Female clothing, which was just 20% of all the production.
- He decided to pay the maximum attention to it. He poured 80% effort into 20% of the production and raised it significantly. He also focused on the Young Male’s section as he was able to derive some results from it also. This time he stopped producing for old age and kids because he thought that for the time being, until the brand grows, he needs to work on these two key areas.
Result
In the next year, by applying the 80/20 Rule as a tool to create strategies to maximize sales and control production, Jayden was able to raise revenue significantly. He also focused on the marketing part, which helped uplift the sales of men’s clothing substantially. Further, he was able to save resources to spend on creating his reach on different social media platforms.
The 80-20 Rule (Pareto Principle) Explained
Do you consider enhancing your organization’s management system to derive the best result? Do you want to create a network of people who can serve as potential customers? Do you have a top-notch quality product but suffer from low sales? Want to know what can solve your problem? This blog will give you a pathway to success in the shape of a simple and flexible rule which is famously known as the Pareto Principle, and in management, we call it the 80/20 Rule.