The Pareto principle

The Pareto principle - also known as the 80/20 rule - is a recurring pattern in business: a small proportion of the causes create the majority of the results. The principle is named after the Italian economist Vilfredo Pareto, who in 1896 observed that 80% of Italy's land was owned by 20% of the population.

In e-commerce, you typically see the same pattern: about 20% of the products generate about 80% of the revenue. This is the basic principle behind ABC analysis, which uses the Pareto principle to classify products into three groups: A (top 80%), B (80-95%) and C (the last 5%).

The principle doesn't only apply to products. It is also seen in customer data (few customers account for the majority of revenue), in marketing (few channels drive the majority of traffic) and in support (few problem types account for the majority of inquiries).

80/20 is a rule of thumb, not a law of nature. The split can be 70/30 or 90/10 - the point is that the split is rarely even and it pays to focus on what pays the most.