The Pareto Rule is an awesome tool and can be used in many situations. Here Paul Coles shares his insights with how companies focus on the wrong side of the equation at times.
Originally posted on Paul Coles's Blog:
When I left university I joined the British retailing institution that is Marks and Spencer, and of the many things that I learned about business, the most precious of all was that you set your business up for the 99% not the other 1%.
I know you are thinking what the hell is this guy talking about? So I will explain. Back in those heady days of the mid ’80s I queried why we were merchandising some of the most expensive product that was prone to shop lifting right next to the doorway. The answer was simple, 99% of our customers don’t steal, so make it easy for them to buy what they want, and don’t ever lose sight of this, setting yourself up for the 1% you will be destined to fail. This lesson is beautifully illustrated in a great book “Sway: The irresistible pull of irrational behaviour” by Ori & Rom Brafman, the book draws on research from social psychology, behavioral economics, and organizational behavior and reveals forces that influence every aspect of our personal and business lives, including loss aversion and in particular our tendency to go to great lengths to avoid perceived losses.
This is perhaps the reason that increasing numbers of oil companies via their service stations, make you pre pay for your fuel. Its dumb, it plays to the 1%, it at best irritates us and at worst drives us to an alternative.