Save Time and Double Your ROI: A Guide to Applying the 80/20 Rule to Your Marketing

roi

Marketing is rarely your only job…

…even if you\’re a marketer.

Whether your job title is “marketer” or you own your own business and need to market it, marketing is only a part of your job.

You probably also help out with sales, product development, customer service, and any other tasks that need your attention.

This is why people often say that marketers wear many hats.

Can I tell you something that most people never learn?

It doesn\’t have to be like this. The reason why marketers are forced to do so many things is because there\’s too much to do.

Let me put it in other terms: most businesses want to do many things that barely help them grow.

They\’re wasting time on non-productive work (also called “busy work”).

So, what\’s the alternative?

It may or may not be obvious to you. You have to cut out unproductive activities.

And the best way I know how to do that is to use the 80/20 rule.

It applies to just about every aspect of life, including marketing. I\’m going to show you six different ways you can apply the 80/20 rule to your marketing to not only save time but also get better results from your efforts.

If you haven\’t used this rule before, this article could be one of the most important things you ever read.

How the 80/20 rule could change your life

The 80/20 rule came from an observation made by Vilfredo Pareto.

He found that when he plotted the frequency of an activity, 20% of the activities resulted in 80% of the cumulative results.

image07

He saw that this applied to almost every part of life, including business.

The chart above clearly highlights the three biggest problems a company could have.

Wouldn\’t it make sense to spend your effort on those three and not worry about the really small problems?

Of course, it would.

The 80/20 rule doesn\’t just apply to specific problems; it also applies to effort (activities).

image02

It\’s really simple:

20% of your effort produces 80% of the results. This also means that 80% of your effort produces only 20% of your results.

If it\’s not 100% clear how it\’s going to help you as a marketer right now, don\’t worry.

Throughout this post, I\’ll go into several specific situations that will make the application of the Pareto principle in your marketing crystal clear.

1. Find the marketing channel that works for you and double-down

There are thousands of marketing channels out there.

Most likely, you focus on 5-10 of them (maybe more if you have a big team).

The truth is that you\’re probably using too many marketing channels.

Applying the 80/20 rule to the situation, we can say that about 20% of your marketing channels produce 80% of your marketing results (likely sales).

Identifying your most effective marketing channels: I don\’t want you to just take my word for it; I want you to apply the Pareto principle to your marketing yourself.

It\’s not difficult, and I\’ll walk you through the process.

Start by identifying all the marketing channels you use on a regular basis.

Record them in a spreadsheet in a column.

Next, start by figuring out how much time you\’ve spent on each channel. The time period doesn\’t matter as long as you know how much you\’ve produced during that time.

For example, you could say that you spent 20 hours on producing five blog posts last month. As long as you\’re tracking the results from those specific posts, you\’ll get an accurate assessment.

Then, assign a value to your time because it sure isn\’t free.

Finally, add a column for any additional money you spent on creating or promoting content.

When you\’re done, your table should look something like this (a hypothetical example):

image13

Next, add up those costs (your time plus money spent) in a new column.

Then, create a new column beside that one, and record the number of sales you made from each channel in the specific time period you tracked.

Here\’s our updated chart:

image04

We\’re almost done; there are just two more columns left.

In the next column, we have to account for the fact that we put a different amount of time into each channel.

This column will be for the profit you made for each channel divided by the time spent on it.

For example, the profit from Facebook advertising in the above example is $3,000 – $1,000 = $2,000.

Dividing that by the 5 hours spent yields $500 of profit per hour.

Do that for all your channels. Now that they all use the same unit of measure, we can add them up to get a total (meaningless other than for the final step).

image09

Finally, we need to calculate for how much of that total each marketing channel accounts.

In your final column, divide the “profit per hour” number by the “total sales” number, and multiply it by 100 to get a percentage.

Here\’s the full chart.

image06

If you\’d like to create a Pareto chart of your own, it\’s pretty easy to do.

Copy the channel column along with that final percentage of total column next to each other somewhere else in your sheet.

Then, sort the percentages from high to low.

Finally, add a column for the “cumulative total.” The first value is simply the same as the percentage of total value. From here, just add the previous cumulative total to the “percentage of total” value for the current channel.

Here\’s what it looks like:

image05

Do you see that the cumulative total for Facebook Advertising is 43.15 + 27.25?

Finally, let\’s plot the channels against the cumulative total. You could make it fancier, but it should look something like this (I added an additional red line at 80%):

image14

The graph makes it really clear that right about 80% of the sales come from the three marketing channels.

You could also see this by simply looking at the numbers beforehand, but if you\’re trying to justify some of the things in this article to a boss, a Pareto chart always looks nice.

Three out of eight channels isn\’t exactly 20% of your input, but it\’s close. You likely won\’t hit a perfect 80/20 ratio, but you\’ll see that a minority of channels produce most of your results.

It\’s important that you understand this process because we\’ll be repeating it throughout this post (I won\’t go into quite as much detail then).

How to take advantage of the 80/20 rule in this situation: Why did we do all of that?

For fun? Not quite.

Let me ask you a question:

What would happen if you just stopped using those marketing channels that produced less than 20% of your overall results but took up about 80% of your time?

Well, it\’d be logical to say that your sales (or whatever metric you\’re using) would decline by about 20%.

A serious amount, but not devastating.

But one other thing would happen: you\’d free up about 80% of your time!

Do you see where I\’m going with this? With all that free time, you can redirect it to the marketing channels that produce the most bang for your buck.

In our hypothetical example, we could spend more time on:

  • affiliates
  • Facebook advertising
  • blogging

A note about scale: You will find that some channels scale better than others.

For example, the time associated with “affiliates” is really spent on just managing them and sending them resources from time to time. You can\’t spend more time doing that because the results won\’t change.

You could, however, spend more time recruiting affiliates. This may or may not produce a good return, so you\’d have to test it.

But some channels scale really well, e.g., advertising channels.

There are very few reasons, besides exhausting your entire target audience, why you couldn\’t spend more time creating and running Facebook campaigns. The sales may not scale up perfectly, but you\’ll get most of the results.

In my example, there were 151 hours in total.

By cutting those low performing channels, we could free up 112 of your hours (74% of time spent).

If we spent those 112 hours on advertising, even getting 50% of the results, our overall profits would increase from $15,700 to $30,300.

That\’s an incredible difference.

Most likely, you\’d be able to get more than 50% of the results from your extra advertising because it scales well. You could also spend some of this time trying out some other advertising channels.

Blogging falls in the middle of these two other channels when it comes to scaling. Yes, you can create more posts and get more results, but there\’s a limit.

If you\’re producing so much content that not even your die-hard fans can keep up with you, you\’re not going to see much of a benefit.

With any channel, you want to find out whether spending extra time on it is effective. Invest your newly recovered free time in the channels that produce the most results.

A million user case study: The 80/20 rule isn\’t new, and there are many case studies that demonstrate its successful application.

One of my favorite examples is Noah Kagan\’s marketing strategy when he headed marketing at Mint.

He had one single focus: get more users.

And when he analyzed his results, he found that email marketing was the best way of getting new users.

So, all of his effort was focused on getting more emails.

He primarily used advertising and guest posting to achieve this because he determined that they were by far the most effective channels for getting subscribers.

How did he do?

Well, after a year, Mint had crushed its initial goal of getting 100,000 users when the company amassed over 1,000,000 users.

image15

2. Not all customers are equal – find your best ones (and your worst)

I bet you\’ve noticed that some of your customers are great and some are terrible.

But you might not know how to utilize this information in a productive way.

That\’s where the 80/20 rule comes in.

When it comes to your customers, you can apply the Pareto principle in two ways.

Way #1 – 20% of customers drive 80% of revenue: Assuming you have a developed product line, you\’ll find that 20% of your customers are responsible for 80% of your revenue.

These are the customers who buy in bulk, buy tons of your different products, or just buy consistently, time after time.

They are easy to find as well.

You can make another chart, just like we did before.

In this chart, you\’ll want to include five parameters (one column for each):

  1. A list of all your customers.
  2. How much revenue they\’ve produced.
  3. How long they\’ve been a customer (could do months or years).
  4. The revenue divided by that time period so that you can compare it fairly. Add it up to get a total.
  5. The percentage of total revenue (during that time period) that each customer produced (divide their revenue per month by the total, e.g., 100 / 2,790 x 100).

I put together a hypothetical table as an example:

image12

Likely, you\’ll have more than 10 customers, which should make your numbers work even better.

In my example case, 30% of the customers produced 75% of the revenue.

What can we do with this information?

This is really where the fun stuff begins, and you have to be prepared to put in a bit of work.

Your job now is to research your customers and find out in what way your top customers differ from your other customers.

What should you look for? Some things to start with might be:

  • reason for purchase (e.g., personal use, family event, business event, etc.)
  • size of business (if B2B sales)
  • demographics (e.g., age, location, income level, gender, etc.)
  • referral source (i.e., how did they first hear about your business?)

You\’ll find that your average top customer is very different from your other customers in a few important ways.

For example, you might find that all your top customers are businesses who order on a regular basis in large volumes.

Do you know what you need to do with this information now?

Unlike in previous examples, you don\’t need to drop those 80% of low revenue producing customers.

However, you don\’t want to waste your time trying to get more of them.

Instead, now that you know the key aspects of your top customers, find more like them.

You need to revamp your marketing and sales strategy so that you\’re going after those new customers who will produce big gains for your revenue. It\’s as simple as that.

Way #2 – 20% of customers produce 80% of complaints: Complaints are a tricky part of business because they can mean a couple of different things:

  1. The customer isn\’t good – some people just love to complain no matter what. They waste your customer service time and resources.
  2. There is an issue – complaints also often give you an opportunity to improve your product and marketing.

What you want to do is get a list of all your customer complaints as well as who made them.

Remove the ones that represent an actual issue with your product that needs to be fixed. You want to hear those complaints.

Then, you\’re left with complaints that come from picky customers.

Take a minute to check whether those customers fall into the top 20% that you just identified above. If so, they\’re probably worth the hassle, so remove them from this list.

From this remaining list, you should find that around 80% of the complaints come from just 20% of your customers.

If you\’re spending serious customer service resources on these low value customers, it\’s not worth it.

Not only does it kill your profit margins, but it\’s also just a stream of consistent headaches to deal with.

If at all possible, drop these 20% of customers who have nothing better to do than to find issues where they don\’t exist.

It sounds harsh, but your work will become much more pleasant and easier because of it.

The money you\’ll save from not having to deal with these issues will usually cover the small loss of revenue from these complainers.

You\’ll also probably find that the biggest complainers are from the smallest purchasers, which is the case for almost every business.

3. How to cut your content creation time with the 80/20 rule

In the life of a marketer, fewer things take up as much time as content creation does.

If you can outsource it, that will help but cost you a lot.

What most marketers don\’t realize is that they\’re creating a lot more content than they need to.

We\’re going to find out if you\’re one of those marketers, using something called the 80/20 rule. Have you heard of it?

Can you guess how it applies to your content production?

Here\’s my take:

20% of your posts will produce 80% of your traffic or email subscribers.

The approach we want to take here is exactly the same as the one I just showed you in the previous section.

By studying those top 20% of posts, we can discover what it is about them that produces more traffic than all the others.

Applying the 80/20 rule: This is a very easy area to apply the rule to because you likely have all the data prepared for you already in Google Analytics.

Go to “Behavior > Site Content > All Pages” in Google Analytics to see all of your posts along with the number of pageviews they\’ve had.

image01

I\’d select a time period of 6-12 months.

Export your data into a spreadsheet, and get a total amount of traffic by adding up all the pageviews.

Finally, create another column where you can calculate the percentage of your total traffic that each page has had.

As expected, a small portion of your pages will produce most of the traffic.

Now it\’s time to analyze: Knowing which pages produce the most traffic alone doesn\’t help you. You need to analyze it.

To do so, create a column for each of the following characteristics of your content, and fill them out for all of your posts:

  • topic – write down a category that each post falls into
  • length – how long is your content (the word count)?
  • form of content – is it a blog post, infographic, video, etc.?
  • type of content – is it a tutorial, an opinion piece, a Q&A article, etc.?

Compare all the top articles to the bottom ones to spot trends.

Ideally, you\’ll see that certain topics usually produce top articles. Or maybe really long content produces more views, or videos…and so on.

Once you know the reason why certain posts are more likely to perform well, stop employing the tactics that you find in the bottom 80% of your content.

At the same time, shift your content production strategy to produce more of the content you find in the top 20%.

If you\’ve really been struggling to produce enough content, consider scaling back on your production. Just by focusing on more effective types of content, you\’ll be growing your traffic much faster than before.

4. Content promotion is the 80% when it comes to content

This application of the 80/20 rule is a bit different.

Because you don\’t have to do any analysis of your own, I\’m just going to tell you the answers.

What you could do is analyze both your content creation time and content promotion time and compare them in terms of your results (traffic, email subscribers, or whatever you measure).

What you would find is that unless you already have a large readership, the promotion work is what produces real results.

The more time is put into promotion, the better your results will be.

In this sense, we\’re going to apply the 80/20 rule backwards: Your goal should be to use approximately 80% of your time towards content promotion and 20% towards content creation.

So, if you\’re currently spending 5 hours creating a post, spend about 20 promoting it.

If you go all out and create a guide that takes you 20 hours to create, spend about 80 promoting it.

When I tell marketers to do this, most reply with: “How am I supposed to promote something for that long? I\’ll run out of stuff to do.”

This may require you to learn new promotional tactics or to dive deeper than you ever have before.

Many marketers find a few hundred email contacts to send their content to. Try finding thousands. It\’s not easy at first, but the more you practice, the better you get.

It\’s the same when it comes to all promotional tactics: create more ads, post more on forums and groups, and so on.

5. Stop wasting your time on outdated promotional tactics

It\’s time to clear something up from the previous section.

Just because you should spend more time on content promotion (even if that means cutting back on content creation) doesn\’t mean you should waste that time.

It means that you should spend that time on the promotional tactics that produce the best results for your time.

Applying the 80/20 rule yields something like:

20% of your promotional effort will produce 80% of your results.

In this case, results might be traffic, subscribers, sales, or backlinks.

Time to track and analyze: This process is similar to the other examples we\’ve looked at so far, so I won\’t go into quite as much detail.

This time, you\’ll want the following 5 columns in your table:

  • promotional activity – what you did to promote your content
  • time spent – how many hours you spent doing it
  • traffic as a result – it could be a different metric such as backlinks or subscribers
  • traffic per hour – the traffic in the previous column divided by the time spent; add up the total at the bottom
  • percentage of result – divide the traffic per hour value by the total value for each activity (e.g., 300/1,466 for email outreach).

Here are some completely hypothetical results:

image00

The results are pretty clear.

In terms of productivity (results for the time spent), email outreach and emailing subscribers produce almost all of the results.

They take up 5.5 out of 11.5 total hours, yet produce 88% of the results.

Now what? Let\’s take a second to think about your options.

I\’d suggest starting by cutting those low performing activities. In this example, you\’d save 5.5 out of 11.5 hours and only lose 12% of your traffic.

Like we saw before, when it comes to marketing channels, not all promotional tactics are scalable.

You can\’t spend any extra time emailing your subscribers.

But you could spend that extra time trying to get more subscribers.

Or you can spend that time on tactics that do scale.

Email outreach scales incredibly well if you\’re willing to dig past the first few pages of Google results and get creative.

Consider our example situation if we invested those 5.5 hours into email outreach. Total traffic would increase by 40% from 2,500 to 3,500.

That\’s a big increase when you consider that you\’re spending the same amount of time on your promotion as you did before.

On top of that, remember that in the previous section, I recommended that you spend more time on promotion.

It becomes even more important to use effective promotional tactics when you\’re spending more time on them.

Making these two key changes (spending more time and focusing on the most effective 20%) will have a huge impact on the results of your content marketing.

6. The Pareto principle applies to individual marketing channels too

Finally, the Pareto principle can be applied to individual channels, particularly SEO.

Go to Google Analytics, navigate to “Acquisition > All Traffic > Channels,” and click on the “organic search” link that comes up.

Finally, click on “landing page” as your primary dimension.

You\’ll see a list of your posts, organized by the volume of search traffic they\’ve gotten. Change the time period to at least 4-6 months.

Upon analysis, we\’ll see that:

80% of your search traffic comes from 20% of your content.

Export those results from Google Analytics into a spreadsheet, and then add columns for percentage and cumulative percentage to it:

image03

To get the percentage value, divide the number of visits to a page by the total number of visits overall.

Then, calculate the cumulative percentage like we did earlier. Make sure the list is sorted by most traffic to least traffic, and then add the percentage to the previous cumulative percentage value (for example: on the chart below – 35.647% = 16.404% + 19.243%).

image11

These top 20% of posts or so are the ones you need to focus on.

They are the pages that not only have the most search authority but clearly already contain things that people are searching for.

It makes sense then to focus on improving the search authority of these pages.

They likely rank near the top 10 for all sorts of terms. It\’s much easier to move those to the top 3 results than to start with content that ranks on page 2+ for most terms.

Next steps: If you want to know which keywords those pages rank well for (but not top 3), you can head to Google Webmasters Tools/Search Console (or GA if you have GWT integrated).

Go to the “Search traffic” option in the left menu and then to the queries sub-option. Finally, click on the “pages” radio button on the screen that comes up:

image10

Here\’s what the pages button looks like:

image08

Then you can click on each page and see what keywords it ranks for.

Finally, adjust your link building efforts to focus on only these top pages. Just changing your focus will bring substantial gains in your search traffic within a relatively short time.

Conclusion

As a marketer, you\’ll always feel like you have more work to do.

Instead of burning yourself out, look for ways to do things more efficiently.

The 80/20 rule is one of those ways. I\’ve shown you six different applications of the rule that you can use to improve your marketing and possibly business as a whole.

If you actually apply some of them, you will be able to get the same results in half the time.

And now, you know how to use the extra time to get even better results out of it.

If you have any questions about the 80/20 rule or have any experience applying it in your life or business, leave your thoughts in a comment below–I\’d love to hear from you.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s