Pareto's Principle

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Questions and Answers

According to Pareto's law, what percentage of consequences come from a small percentage of causes?

  • 50%
  • 10%
  • 20%
  • 80% (correct)

In marketing, Pareto's law can be applied to which of the following?

  • 20% of your business activity comes from 80% of your network
  • 20% of your business activity comes from 20% of your network
  • 80% of your business activity comes from 80% of your network
  • 80% of your business activity comes from 20% of your network (correct)

Pareto's Law is fractal, what does this mean?

  • It does not apply to any systems
  • It applies to both large-scale and small-scale systems (correct)
  • It only applies to small-scale systems
  • It only applies to large-scale systems

What percentage of revenue comes from a small percentage of customers according to Pareto's law?

<p>80% (A)</p> Signup and view all the answers

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Study Notes

Pareto's Law

  • 80% of consequences come from 20% of causes, according to Pareto's law.
  • In marketing, Pareto's law can be applied to customer segmentation, where a small percentage of customers generate a significant percentage of revenue.

Characteristics of Pareto's Law

  • Pareto's Law is fractal, meaning that it exhibits self-similarity at different scales, and the 80/20 ratio is observed at various levels of magnification.

Business Applications

  • 80% of revenue comes from 20% of customers, according to Pareto's law, highlighting the importance of identifying and prioritizing high-value customers.

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