Improving Marketing Productivity: The 80/20 Principle Revisited

by Alan Dubinsky, Richard Hansen

Fall 1982

Volume 25
Issue 1

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The article focuses on improving marketing productivity. A small proportion of an organization's marketing units often generates a large proportion of the profits. The 80/20 principle describes situations where 80 percent of a firm's profits emanate from 20 percent of its customers, salespeople, or products. Although the percentages will vary depending upon the situation, the essence of the principle is that a very small proportion of a firm's marketing units are in fact super units providing a large percentage of company profits, and the remaining marketing units actually add very little to the firm's profits. The existence of an 80/20 condition can indeed constrain profits. The rationale for the preceding statement is that not all marketing units provide an equal profit contribution. Despite this situation, it is not unusual for companies to provide relatively comparable marketing resource support to units having dramatically different profit contributions. Companies experiencing the 80/20 principle may find it rewarding to alter the ratio in an attempt to increase profits. The reason for such efforts is that the development of more super units will generate a larger profit pie.

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