The problem with the 80-20 rule.

If you breakdown the sales of a typical newsagent you may find that 80% of the sales comes from just 20% of the items they stock. They could reduce the size of their shop in theory, lower their inventory considerably and still trade profitably. The loss of those sales in the 20% category would be compensated by the lower rent and cost of stocking them. However, people go to that shop to buy an ‘unregular’ item and buy the regular items whilst there too. Once they learn that the essential ‘unregular’ item is no longer carried in that shop they take all of their business elsewhere.

Some supermarkets notice this 80/20 rule and will foray into areas that are outside of the usual food and drinks market. They may create a small book stand limited to the top sellers only. They do not wish to set aside a lot of precious room for books that only sell occasionally. The effect of this is to make it harder for a book shop to thrive. The result is less choice for all customers. When you want a book on a specialist subject it becomes difficult to obtain. Some will not see this as a problem because such textbooks are readily available online. However, perusing the shelves for something a little different, serendipitously stumbling on something new becomes less frequent.

The 80-20 rule can be applied to many things including, say, friendships. The problem is that those that bring the rule to your attention fail to recognise the potential consequences of what they are doing. Suddenly a new rule is seen in many areas of your life and a sense of obligation to change is felt. Your life does not get better, it fits other people view of how it ought to be, more, instead. You have been manipulated.

I will bring up my own 97-3 observation. It is not a rule but something I noticed and capitalised on. Whilst selling an item that was ‘print on demand’, something that can be readily made to order, I saw that some items were sell-every-day and others sell-once-a-month. Lots of other people also sold these sell-every-day items and provided a fair degree of competition. Few, if any, bothered with the sell-once-a-month items. A fair degree of effort is required to make a once-in-a-month item available and if it panned out to be a once-a-year item then it was a waste of time. Having lots of once-a-month items was valuable though. As nobody else was offering them, customers could only come to you. Adding a small premium to the price increased the bounty.

People have done well by creating a one stop destination for everything people need, chucking out the 80-20 rule and spending a little time removing just the 1% of items that do nothing but clutter.

And, the real point? So much of psychology is based on false premises. It seems convincing, but so frequently discounts a lot of what is good about life.



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