Does 20 percent of your effort yield 80 percent of the results?

The Pareto Principle, named after an Italian economist-sociologist, Alfredo Pareto, states that the significant items in a given group normally constitute a relatively small portion of the total items in the group. The ratio that holds true in most cases is 80:20. For example, 20 percent of the promotion techniques you use achieve 80 percent of the results. 20 percent of the items in inventory account for 80 percent of the total inventory cost. 20 percent of the customers account for 80 percent of the sales. 20 percent of the sales force generates 80 percent of the sales volume. 20 percent of your telephone callers consume 80 percent of your telephone time. And so on.

Knowing these statistics does nothing to increase business. But taking action will. See where this principle applies in your company and then see what you can do to take advantage of these facts. If you are in the retail business, for instance, you may find that 80 percent of the profit is generated by 20 percent of the floor space. If so, you might identify these high traffic aisles and maximize profit through product positioning. If 80 percent of the sales are generated by 20 percent of the products, you will want maximum exposure for these high-ticket items.

If 80 percent of the traffic takes place during 20 percent of the day, identify this time period and declare it sales time. Have additional staff during this time if necessary. Make sure everyone devotes as much time as possible to customer service and selling. Tell staff not to work on paperwork, stocking etc. during that time period. They can do the maintenance and administration tasks during off-peak times.

If 80 percent of the sales seem to be generated by 20 percent of the staff, Train all employees on the basics of up selling and customer service as well as product knowledge. Make sure the staff members who interact well with customers are not hidden away in the back room. Set sales goals. How many sales do they need to make each day or each hour? Stephen Stressor, author of the book, Working It Out, claims that goal-setting programs can increase performance by 16 percent.

About 80 percent of the shoplifting occurs in 20 percent of the available hours. If your store is open 24hours, that's between 2 pm and 7 pm with Saturday being the most popular day. Security should be concentrated during these peak hours. And you should be well staffed. There is a correlation between shoplifting and customer service so interaction with customers should be greatest during this time period as well.

If 80 percent of the sales come from 20 percent of the store's traffic, figure out how to get even more sales out of existing customers. According to eMarketer, it costs five to ten times as much to find a new customer as it does to retain an existing one. And since regular customers buy more, make more referrals and are less price-sensitive, it would pay to get to know your customers. It would also be wise to see how you can get more traffic into the store and keep them there longer, since sales varies with the length of time spent in the store. You could also attempt to convert some of those 80 percent browsers into customers.

If 80 percent of your sales take place during 20 percent of the year, you must maximize the use of this prime selling time to generate as many sales as possible. But you should also try to convert lower sales months to higher sales periods.

The Pareto Principle could apply to the names on your mailing list, the source of shrinkage, customer complaints, returns, and staff lateness as well as other areas. It's important to analyze reports and collect data and take action where warranted. And if 90 percent of your results are achieved in activities that only consume 20 percent of your time, you have just identified your priorities.