The 80:20 Rule- Your Formula For SuccessWritten by John Payne
The previous 'dirt-world' retail business I managed had a large turnover, a very high profit, and less than 100 lines. Early in 2001, I was contracted to manage another business. This one carries over 800 different lines, yet has a turnover of only about a sixth of other business, and a lower profit margin. They both have a comparable amount of traffic and credibility in market, so how can it be that results are so different?The explanation starts with Vilfredo Pareto, an Italian economist and political sociologist who lived from 1848 to 1923. He devised law of 'trivial many and critical few', better known as Pareto's Law, or 80:20 rule. This rule says that, in many business activities, 80% of potential value can be achieved from just 20% of effort, and that one can spend remaining 80% of effort for relatively little return. Old Vilfredo might have lived a century ago, but he was spot on. I've been in business a long time, and I can confirm almost universal truth of 80:20 rule, in many forms. - When Sales Manager of a Realty office, I had 19 sales staff working to me. About 85% of business was written by four top staff. - In a Consumer Electrical business I owned, around 75% of turnover came from the best-selling 20% of stock. - In an eco-tourism business I now manage, there are almost 40 Departments of stock. One department alone produces over 25% of profit; next five departments produce next quarter of profit; next seven another quarter, and next twenty-five or so together only produce last quarter of profit. The 80:20 Rule applies in almost every sphere. It's uncanny. In almost any field, 20% of resources produce 80% of result. It's vital to understand that reverse is also true- things that take up 80% of your time and resources, will only produce 20% of your results.
| | MARKETING COMMUNICATIONS AND PUBLIC RELATIONS STRATEGIES FOR THE RECESSIONWritten by Jon Boroshok
Many companies are now paying price for following bad counsel during 1999-2000 tech gold rush. While entrepreneurs and VCs vaguely understood that a strong marketing communications (marcom) and PR campaign is needed to create awareness, build brands, and drive sales, too many were ignorant when it came to deciding how to select right agency to help maximize return in investment. Using a rationale that paralleled old adage, "nobody ever got fired for picking IBM," companies were often advised by VCs and investors to retain a large, "brand name" PR agency with a posh downtown address. These agencies often came with a premium price and inexperienced junior staffs. There was no emphasis on value. Of course many of these larger agencies were often "friends" of VCs, with referrals and finders fees - often a conflict of interest -- being rule rather than exception. Despite current recession economy, massive layoffs, and dismal earnings announcements, many tech companies are remaining in business, doing their best within a labor market where top producers are still in demand. Because they have been reluctant to cut highly sought technical personnel, their public relations and marketing departments are often first to be downsized or last to be built up, often to point of counter-productivity. Some companies cutting back or just starting to build their marcom efforts have begun looking outside their organizations and "outside box" for value from PR and other marcom services. They are learning that they can get more for less, particularly in tough times. It's a new concept to VCs. As funding has dried up, companies have cut their PR and marketing communications budgets. These companies -- along with VCs and investors -- are becoming better-educated buyers of marcom services. The same marcom/PR agencies that once commanded a monthly retainer of $30,000 are suddenly offering same services for much less. They've also been downsizing, and staff turnover may lead to new, inexperienced members of account team. While investors and tech companies are still scratching their heads trying to figure out what all extra costs were for, they're finding that traditional tech PR agencies still insist upon selling more services than necessary, and require retainers in excess of $15,000 per month. This is frequently beyond what a pared-down budget can afford, especially when a company is simply looking to maintain visibility or beef up its own efforts. Whether downsizing or ramping up responsibly, economically-astute investors and companies are discovering option of outsourcing marketing communications and PR to providers who can pick up slack and provide services on a smaller, flexible scale, often on a project-basis. Smaller ("boutique") agencies, virtual PR teams, and individual practitioners are a growing alternative for companies of all sizes, particularly those with monthly marcom budgets well under $10,000. Like their clients, these alternatives have to work smarter, faster, and cheaper in a slowing economy. Working on a project basis usually goes against grain of business models of larger agencies. Downtown offices with skyline views, employee salaries, benefits, and equipment are all overhead costs that must be passed along to client. Large agencies need steady retainers to make sure financial goals and obligations are met. They may offer prestigious addresses and a recognizable CEO, but who is day to day contact performing actual account work? Is retaining services of a large agency really a prudent investment or just a "C.Y.A." maneuver?
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