The 80-20 rule was invented by Italian economist Valledo in the late 19th and early 20th centuries. He believes that in any group of things, the most important only accounts for a small part, about 20%, and the remaining 80%, although they are the majority, are secondary, so it is also called the 28-20 rule.
Introduction
In 1897, Italian economist Pareto accidentally noticed the wealth and income patterns of the British in the 19th century. During the survey and sampling, he found that most of the wealth flows to a few people. At the same time, he also discovered a very important thing, that is, there is a relationship between the percentage of a certain ethnic group in the total population and the total income they enjoy. There is a subtle relationship. He has seen this phenomenon at different times and in different countries. Whether it was early Britain or other countries, and even from early data, he found that this subtle relationship appeared again and again, and it showed a mathematically stable relationship.
Thus, Pareto discovered from a large number of specific facts: 20% of the people in society occupy 80% of the social wealth, that is, the distribution of wealth among the population is unbalanced. At the same time, people also find that there are many imbalances in life. Therefore, the 80/20 rule becomes shorthand for this unequal relationship, regardless of whether the results are exactly 80% and 20% (statistically speaking, the exact 80% and 20% are unlikely to occur). Traditionally, the 80/20 rule discusses the top 20% rather than the bottom 20%.
Later generations have given different names to Pareto's discovery, such as Pareto's law, Pareto's law, 80/20 law, the law of least effort, the principle of imbalance, etc. The above names are collectively referred to as the 80-20 rule in this book. The 80/20 rule used by people today is a quantitative empirical method used to measure the possible relationship between input and output.
Management Category
The characteristics of laws are verifiable and have been continuously proven.
There is a famous 80/20 law in the field of management. It says that usually 80% of a company's profits come from 20% of its projects; this 80/20 law has been extended again and again - Economics Experts say that 20% of people hold 80% of the wealth. There are two types of people, the first type accounts for 80% and owns 20% of the wealth; the second type only accounts for 20% but controls 80% of the wealth. Why? It turns out that the first kind of people only stare at the boss's pocket every day, always hoping that the boss can give them more money, and rent their lives to the second 20% of people; the second kind of people are different. In addition to doing the job at hand well, they also use another eye to pay attention to the changing world. They know what to do at what time, so 80% of the first type of people are working for them.
Psychologists say that 80% of human wisdom is concentrated in 20% of people, and they stand out from the crowd as soon as they are born.
There is no absolute fairness in this world
About 80% of society’s wealth is concentrated in the hands of 20% of people, while 80% of people only own 20% of society’s wealth. This statistical imbalance is ubiquitous in society, economy and life. This is the 80/20 rule.
20% of people enjoy 80% of the love in the world, and even handle 80% of the divorce procedures in the world. These 20% of people are always loving and being loved, while the remaining 80% do not know how to enjoy the bitterness and sweetness of love.
The 80/20 rule tells us not to analyze, handle and look at problems equally, but to seize the key few in business operations and management; to find out those who can bring 80% of the total profit to the company. However, they only account for 20% of key customers. Strengthen services to achieve twice the result with half the effort; business leaders must carefully classify and analyze work and spend their main energy on solving major problems and grasping major projects.
Basic content
There is an internationally recognized corporate law called the "Pareto principle", also known as the "28-20 law". Its basic contents are as follows:
The first is the "Twenty-Eight Management Law". Enterprises mainly focus on the management of 20% of the backbone, and then use the 20% minority to drive the 80% majority of employees to improve enterprise efficiency.
The second is the "28 decision-making law". Seize the most critical issues among the common problems of enterprises to make decisions in order to achieve the ostentatious effect.
The third is the "28 Financing Law".
Managers should invest limited funds into key projects of operations, in order to continuously optimize the direction of capital investment and improve the efficiency of capital use.
The fourth is the "28th Law of Marketing". Operators must seize 20% of key products and key users, penetrate marketing, and influence the whole body.
In short, the "28/20 Law" requires managers not to "grasp their beard and eyebrows" at work, but to grasp key personnel, key links, key users, key projects, and key positions.
Law classification
Through investigation and analysis, we found that both the internationally developed media industry and the Chinese media industry in the rising stage have shown "28" trends in many aspects. "Law", specifically as follows:
Technical Law
80% of the output value of the media industry comes from the technical equipment industry, and only 20% comes from the content industry. Internationally, the information technology industry, journalism and entertainment industries are collectively referred to as the big media industry. What we usually call software is actually the hardware of the big media industry. This is a revelation to those who invest in the media industry, those who operate the media industry, and those who study the media industry. That is, in the era of big media, we should broaden our horizons and pay attention to big media. Only by attaching great importance to information technology and strengthening research and development can we lead the era of big media and occupy the commanding heights.
Market Laws
The principles of communication tell us: in a situation of product homogeneity, convenience is the decisive factor in product selection. The TV industry generally believes that interactive TV uses set-top boxes to complete the interaction between viewers and programs, but the success of interactive TV and SMS has once again repeated this story. In the Internet field, convenient and low-priced products such as text messages and games have surpassed e-commerce business.
Entertainment Rules
20% of the output value of the media content industry is in news, and 80% of the output value is in entertainment. The American news broadcast and television networks ABC, NBC, CBS, and CNN have all been acquired by entertainment giants. Even pure journalism has become seriously entertainment-oriented. News Corporation's revenue structure is as follows: 40% comes from the news industry and 60% comes from the entertainment industry, of which the news part mainly comes from its popular newspapers. More than 80% of the businesses of giants such as Viacom, Time Warner, Disney, Bertelsmann, Vivendi Universal, and Sony are concentrated in the entertainment field.
Side business rule
20% of the income of the media industry comes from the main business, and 80% of the income comes from the development of related products. Related product development refers to the design, manufacture, and sale of related products based on content themes, characters, images, shapes, names, events, and ideas. Related products enable film and television programs to leave the screen and newspapers and periodicals to break out of the industry and become daily consumer goods for the public, thereby gaining long-term vitality.
VIP Rule
It is 20% of customers who bring 80% of profits to a company. According to this principle, if we can identify these 20% of customers and provide better services, it will undoubtedly be the greatest help to the company's development and performance growth. Although the main consumers of mass media entertainment are the majority of ordinary consumers. But this does not prevent the fulfillment of the "eighty-eighth law". First of all, it is common sense in the media industry that 80% of the revenue of products for the public comes from 20% of customers. Secondly, 80% of the income comes from 20% of the market. For example, the purchasing power of Beijing, Shanghai and Guangzhou exceeds 50% of the country's total. Thirdly, the media value for 20% of large customers is very high. For example, the Discovery brand ranks among the top ten brands in the world.
Brand Law
20% of strong brands occupy 80% of the market share. Generally speaking, the market share of the first brand is more than double that of the second brand, and it is the most valuable brand in the industry. In the Internet world, the three major portals account for the vast majority of the Internet industry in terms of both attractiveness and revenue.
The reason why the "28/20 Law" is highly praised by the industry is that it advocates the business strategy of "doing something and not doing something", which determines the vision of the media industry. To make good use of the "80/20 rule", the media industry must first figure out who the 20% of the enterprise is, and then focus its management attention on these 20% of key business tasks, and take effective tilting measures to ensure that Make key breakthroughs in key aspects, which will then drive the overall progress and achieve overall progress in media management.
Financing Laws
80% of investors in the stock market only think about how to make money, and only 20% of investors consider contingency strategies when losing money.
But the result is that only 20% of investors can make long-term profits, while 80% of investors often lose money. The 20% of people who make money have 80% of the correct and valuable information in the market, while the 80% of people who lose money do not collect information carefully for various reasons and only get 20% of the information through stock reviews or TV.
When 80% of people are optimistic about the market outlook, the stock market is close to the short-term top; when 80% of people are bearish about the market outlook, the stock market is close to the short-term bottom. Only 20% of people can shovel the bottom and escape from the top, and 80% of people buy and sell when the stock price is halfway up the mountain.
80% of brokerage commissions come from 20% of short-term customers' transactions, but 80% of investors' profits come from 20% of the number of transactions. Therefore, unless you have skilled short-term investment skills, do not rashly participate in short-term trading. Large-cap index stocks, which account for only 20% of the market, play an 80% role in the rise and fall of the index. When studying and judging the trend of the market, we must pay close attention to the performance of these index stocks. Only 20% of stocks can become dark horses in a market trend, and 80% of stocks will fluctuate with the market. 80% of investors will miss the dark horse, but only 20% of investors have a chance to be with the dark horse, and even fewer can truly ride the dark horse.
80% of investment profits come from 20% of investment stocks, and the remaining 20% ??of investment profits come from 80% of investment stocks. 80% of investment income comes from 20% of transactions, and the remaining 80% of transactions can only bring 20% ??of profits. Therefore, investors need to use 80% of their funds and energy to focus on the most critical 20% of investment stocks and 20% of transactions.
20% of institutions and large investors in the stock market hold 80% of mainstream funds, and 80% of retail investors hold 20% of funds. Therefore, investors can only make stable profits by grasping the trends of mainstream funds. Successful investors spend 80% of their time studying and researching and 20% of their time practicing. Failed investors spend 80% of their time making real offers and 20% of their time regretting it. The stock price is in a state of quantitative change 80% of the time, and it is in a state of qualitative change only 20% of the time. Successful investors spend 20% of their time participating in the process of qualitative changes in stock prices and spend 80% of their time resting. Failed investors spend 80% of their time participating in the process of quantitative changes in stock prices and spend 20% of their time resting.
The law of decision-making
A small incentive, input and effort can usually produce large results, output or rewards. Literally speaking, it means that 80% of the results of the work you complete come from 20% of your efforts. Therefore, for all practical goals, 80% of the effort—that is, most of the effort—is only marginally related to the outcome. This situation may seem counterintuitive, but it is very common. Therefore, the 28/20 rule points out that there is an unbalanced relationship between cause and result, input and output, and effort and reward. It provides a very good measure of this unbalanced relationship: 80% of the output comes from 20% of the input; 80% of the result is attributed to 20% of the causes; 80% of the performance is attributed to 20% effort.
Marketing Law
This phenomenon exists everywhere in the business world and people’s lives. As long as you observe carefully, you will find:
——20% Products or 20% of customers earn about 80% of sales for the company;
In short, there is this imbalance between cause and result, input and output, effort and reward , can be divided into two different types:
——The majority, they can only have a small impact;
—The minority, they have a major and significant impact.
Generally, large outputs and rewards are produced by a small number of reasons, inputs and efforts.
Another example: 80% of your computer's failures are caused by 20% of the reasons; 80% of the sentences you use in your life are composed of 20% of the words in the dictionary; and in the exam, 20% of the knowledge can help you Brings 80% of the score; in the same way, 20% of your friends occupy 80% of the time you spend with your friends...
——20% of criminals’ crimes account for all crimes 80%;
——20% of car enthusiasts cause 80% of traffic accidents;
——20% of married people, accounting for 80% of the divorced population (those who continue to Divorced people distort statistics);
——About 80% of the world’s resources are consumed by 15% of the world’s population;
——The world’s wealth 80%, owned by 25% of people;
——80% of energy is wasted on combustion, only 20% of which can be applied to vehicles, and this 20% investment is returned in the future. 100% output;
——In a country’s medical system, 20% of the population and 20% of the diseases will consume 80% of the medical resources.
Application in the stock market
80% of investors in the stock market only think about how to make money, and only 20% of investors consider contingency strategies when losing money. But the result is that only 20% of investors can make long-term profits, while 80% of investors often lose money.
20% of people who make money have 80% of the correct and valuable information in the market, while 80% of people who lose money do not collect information carefully for various reasons and only get 20% of the information through stock reviews or TV.
When 80% of people are optimistic about the market outlook, the stock market is close to the short-term top; when 80% of people are bearish about the market outlook, the stock market is close to the short-term bottom. Only 20% of people can shovel the bottom and escape from the top, and 80% of people buy and sell when the stock price is halfway up the mountain.
80% of brokerage commissions come from 20% of short-term customers' transactions, but 80% of investors' profits come from 20% of the number of transactions. Therefore, unless you have skilled short-term investment skills, do not rashly participate in short-term trading.
The large-cap index stocks, which account for only 20% of the market, play an 80% role in the rise and fall of the index. When studying and judging the trend of the market, we must pay close attention to the performance of these index stocks.
Only 20% of stocks can become dark horses in a market round, and 80% of stocks will fluctuate with the market. 80% of investors will miss the dark horse, but only 20% of investors have a chance to be with the dark horse, and even fewer can truly ride the dark horse.
80% of investment profits come from 20% of investment stocks, and the remaining 20% ??of investment profits come from 80% of investment stocks. 80% of investment income comes from 20% of transactions, and the remaining 80% of transactions can only bring 20% ??of profits. Therefore, investors need to use 80% of their funds and energy to focus on the most critical 20% of investment stocks and 20% of transactions.
20% of institutions and large investors in the stock market hold 80% of mainstream funds, and 80% of retail investors hold 20% of funds. Therefore, investors can only make stable profits by grasping the trends of mainstream funds.
Successful investors spend 80% of their time studying and researching and 20% of their time practicing. Failed investors spend 80% of their time doing real trading and 20% of their time regretting it.
The stock price is in a state of quantitative change 80% of the time, and it is in a state of qualitative change only 20% of the time. Successful investors spend 20% of their time participating in the process of qualitative changes in stock prices and spend 80% of their time resting. Unsuccessful investors spend 80% of their time participating in the process of quantitative changes in stock prices and spend 20% of their time resting.
Time management application
Clear attitudes, prioritize, and set long-term and short-term goals;
Re-examine the work schedule and separate things Prioritize and abandon low-value activities ruthlessly;
Always do the most important things first.
Core concept: 20% of the resources of human society are related to 80% of resource activities.
Application key points: important things first, important products first, key people first, and core links first.
Application fields: politics, economy, military, social life, business operations, organizational management.
Application list
1. Time management issues
2. Key customer issues
3. Wealth distribution issues
< p>4. Resource allocation issues5. Core product issues
6. Key talent issues
7. Core profit issues
and personal happiness
Clear your goals and figure out what is most important to you.
Discover the noble people in life, friends are not about the number, but about their true value.
Discover your strengths and the easiest shortcuts to success.
Dedicate your energy to the most important things in life.
Work hard 20% more on the existing basis.
Get rid of the hustle and bustle and enjoy 80% of the happiness in life.
With your life
20% of people succeed-----------------80% of people fail
20% of people make money from the neck up---------80% of people make money from the neck down
20% of people think positively---------- ---80% of people think negatively
20% of people buy time----------------80% of people sell time
20% of people find a good employee----------80% of people find a good job
20% of people dominate others--------- -----80% of people are dominated by others
20% of people do business----------------80% of people do things
20% of people value experience--------------80% of people value academic qualifications
20% of people believe that actions have results---- --80% of the people believe that knowledge is power
20% of the people believe that knowledge is what they need to do to make money------80% of the people believe that knowledge is what they need to do to make money
20% of people love investing-----------------80% of people love shopping
20% of people have goals------ ----------80% of people like to think blindly
20% of people look for answers in questions--------80% of people look for questions in answers
20% of people are taking a long-term view-----80% of people are only looking at the present
20% of people are seizing opportunities----- ----------80% of people miss opportunities
20% of people plan for the future--------------80% of people don’t think about it until they wake up in the morning What are you doing today
20% of people act according to successful experience----80% of people act according to their own wishes
20% of people do simple things ----------80% of people are unwilling to do simple things
20% of people will do tomorrow's things today------80% of people will do today's things tomorrow Do
How can 20% of people do it---------80% of people can't do it
20% of people take notes- ---------------80% of people are forgetful
20% of people are influenced by successful people--------80% of people Influenced by losers
20% of people are in good condition --------------80% of people have bad attitude
20% People believe that they will succeed--------------80% of people are unwilling to change the environment
20% of people always praise and encourage-------- ------80% of people will always criticize and criticize
20% of people will persist--------------80% of people will give up
20% of people dare to face difficulties--------------80% of people escape from reality
Perception analysis
1. Grasp the main contradiction;
2. It takes seven inches to hit a snake;
3. Look for 20% of life and let it bear the sweetest fruit. God plays dice with the entire universe, but the dice are manipulated. We need to understand how it is manipulated and how we should deal with it to achieve our goals;
4. The power of the team is huge. The 28/20 law tells us that 100% of the team's wealth Eighty percent of it is created by 20% of the team members. That is to say, for example, if your company is already at an imbalance point between profits and members, and the team cannot immediately bring new people to this Wealth value, then you must decisively choose to lay off employees immediately.
Long Tail Theory
The "Long Tail Theory" is considered to be a complete rebellion against the traditional "20-80 Law".
Although it sounds a bit academic, in fact it is not difficult to understand-human beings have been using the 80/20 rule to define the mainstream and calculate the efficiency of input and output. It pervades the entire life and business community. This is a statistical conclusion drawn by Italian economist Pareto in 1897, that is, 20% of the population enjoys 80% of the wealth. Of course, this is not an exact proportional number, but it shows an imbalanced relationship, that is, a small number of mainstream people (or things) can have a major and significant impact. So in marketing, in order to improve efficiency, manufacturers are accustomed to focusing on the 20% of mainstream products that 80% of customers buy, and focusing on maintaining the 20% of mainstream customers who buy 80% of their products.
The 80% that is ignored in the above theory is the long tail. Chris Anderson said: "We have been enduring these lowest common denominator tyranny... Our thinking is blocked in an economic model driven by mainstream needs." But people see that under the promotion of the Internet, what is regarded as tradition The "28/20 rule" of the business bible has begun to have the possibility of being changed. This is particularly evident in the media and entertainment industry, where the economic-driven model is shifting from mainstream markets to non-mainstream markets.
Is the long tail theory everywhere? The application of long tail theory is by no means limited to the Internet and entertainment media industries.
The traditional market curve is in line with the iron law of 80/20. In order to seize the best-selling product market that brings 80% of profits, we are fighting hard, but our so-called popular products are becoming more and more unworthy of their name. For example, the ratings of prime television programs have been shrinking for decades. If it were placed in 1970, it would be difficult for one of the best programs today to even crack the top 10. In short, while we're still fascinated by the big hits, their economic power isn't what it once was. So where have those fickle consumers turned? The answer is not unique. They are scattered in all directions because the market has been divided into countless different areas. The emergence of the Internet has changed this situation, allowing 99% of goods to have the opportunity to be sold. The long tail of the market curve (so-called niche products) has also turned around and become a new profit that we can place high hopes on. growth point.
The long tail theory is a subversion of the 20/80 law in classic business activities. Please look at this statistics. The horizontal axis is the variety and the vertical axis is the sales volume. A typical situation is that only a few products have high sales, and most of the remaining products have low sales. The traditional 80/20 rule (or 20/80 rule) focuses on the red part and believes that 20% of the varieties bring 80% of the sales, so only this part should be retained, and the rest should be discarded. The long tail theory focuses on the blue long tail and believes that this part can accumulate a large enough market share to even exceed the red part.
Google adwords, Amazon, and Itune are all excellent examples of the long tail theory. But there are also many losers who do not really understand the conditions for realizing the long tail theory.
First of all, the long tail theory counts sales, not profits. Administrative costs are the most critical factor. Selling each product requires a certain cost, and the costs of increasing varieties must also be shared. Therefore, the profit of each variety is directly proportional to the sales volume. When the sales volume reaches a certain limit, there will be a loss. A sensible retailer would not sell merchandise that would cause a loss. This is the basis of the 80/20 rule.
Supermarkets reduce the sales cost of single products, thereby reducing the loss-stopping sales of each variety and expanding sales varieties. To attract customers and create the image of a well-stocked store, supermarkets may even be able to sell some items at a loss. However, due to the cost of warehousing and distribution, supermarkets’ affordability is limited.
Internet companies can further reduce the cost of selling single products, even without real inventory, and website traffic and maintenance costs are far lower than traditional stores, so they can greatly expand sales varieties. This is the case with Amazon, for example. Moreover, the Internet economy has the characteristics of winner-take-all, so websites can invest wildly regardless of costs in the early stage, which intensifies the expansion of varieties.
If an Internet company sells virtual products, the payment and distribution costs will be almost zero, which can take the long tail theory to its extreme. Google adwords and Itune music downloads all fall into this situation. It can be said that virtual product sales are inherently suitable for the long tail theory.
Secondly, to make the long tail theory more effective, the tail should be enlarged as much as possible. That is to lower the threshold and create small consumers. Different from traditional businesses’ big orders and traditional Internet companies’ membership fees, Internet marketing should focus on making the cake bigger. By encouraging users to try, numerous negligible scattered traffic can be gathered into huge business value.
Google adsense is such a cake making machine. Before, ordinary personal websites had almost no profit opportunities. Adsense brings webmasters a new low-threshold profit channel by publishing relevant advertisements on small websites. At the same time, the traffic of many small websites is gathered into a unified advertising media.
Of course, there is also the issue of reducing management costs here. If not handled properly, customer service costs will rise rapidly and become the main contradiction. Google uses algorithms to reduce the workload of manual management, but it is only unsatisfactory.
When using the long-tail theory, one must be careful to ensure that any cost does not surge with the increase in sales, or at worst, increase year-on-year. Otherwise, it will lead to a dead end. The most ideal long-tail business model is that costs are fixed and sales can grow indefinitely. This requires an infrastructure that can be expanded at low cost, as is the case with Google's bigTable.
The 20/80 law means that 80% of the results often come from 20% of the sources. For example, for a company, 80% of profits often come from 20% of the best-selling products; 80% of profits come from the most loyal 20% of customers; 80% of sales or profits come from 20% of the most successful online marketing channels. Or investment; 80% of sales come from 20% of the best marketers, etc. There are many 20/80 phenomena in real life. 80% of the gains often come from 20% of the time or investment, while the other 80% of the investment only produces 20% of the returns. Therefore, classic business theories remind everyone to find the most effective 20% of hot-selling products, channels or sales personnel, invest more efforts in the most effective 20%, and minimize waste in the 80% of inefficient areas.
In contrast to the 20/80 law and the long tail theory, marketers may diverge in their action directions. According to the long tail theory, the total sales and profits contributed by the 80% of products or users with low demand and low sales do not necessarily lose to the 20% of products and users at the top, so we cannot ignore them. Markets in the long tail. The 20/80 rule suggests not to waste time on this part of the long tail.
The reason is that the premise of the long tail theory is that the channels for product sales are wide enough, and the production and delivery costs of the products are low enough. For example, on the Amazon bookstore, because the website is large enough, there are already hundreds of thousands or even more Millions of different products, in this case can show the long tail effect. However, for many small and medium-sized enterprise websites, there are only dozens of products, or even hundreds or thousands of products, which is not enough to create a long tail phenomenon. The 20/80 law still dominates.