Marketing’s 60/20 Pareto Law

5 Pages Posted: 19 Dec 2019

See all articles by Byron Sharp

Byron Sharp

University of South Australia - Ehrenberg Bass Institute of Marketing Science

Jenni Romaniuk

Ehrenberg-Bass Institute, University of South Australia

Charles Graham

London South Bank University; Ehrenberg Bass Institute for Marketing Science

Date Written: December 4, 2019

Abstract

We confirm our 2007 conclusions concerning the Pareto Law. Our conclusions are now supported by many other data sets, and independent analyses.

It’s wrong to talk about an 80/20 law in marketing. A brand’s heaviest 20% of buyers generally contribute not much more than half of a brand’s sales, and these same buyers will contribute less in the following time period. Indeed, even for stable brands half of last year’s heavy buyers will then not even qualify to be in the top 20%, while the people who were light or non-brand buyers last year will contribute more to sales this year than they did last year.

The exact sales contribution of the top 20% (a brand’s Pareto share metric) depends on the time period and some other technical decisions made by the person calculating the metric, and brand size and some category characteristics. But it’s reasonable to expect that almost half of your brand’s sales will always come from your very lightest 80% of buyers. It is also apparent that growth comes largely from these light, very light/non-brand buyers and so it would be foolhardy to ignore them.

Keywords: Pareto, Buyer Behaviour, Brand, Marketing

Suggested Citation

Sharp, Byron and Romaniuk, Jenni and Graham, Charles, Marketing’s 60/20 Pareto Law (December 4, 2019). Available at SSRN: https://ssrn.com/abstract=3498097 or http://dx.doi.org/10.2139/ssrn.3498097

Byron Sharp (Contact Author)

University of South Australia - Ehrenberg Bass Institute of Marketing Science ( email )

GPO Box 2471
Adelaide, 5001
Australia

Jenni Romaniuk

Ehrenberg-Bass Institute, University of South Australia ( email )

37-44 North Terrace, City West Campus
Adelaide, South Australia 5001
Australia

Charles Graham

London South Bank University ( email )

103 Borough Road
London, Greater London SE1 OAA
United Kingdom

Ehrenberg Bass Institute for Marketing Science ( email )

GPO Box 2471
Adelaide, 5001
Australia

HOME PAGE: http://https://www.marketingscience.info/staff/dr-charles-graham/

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