The Pareto 80-20 rule and your web site
The Pareto principle states that “80% of the effects comes from 20% of the causes”. Originally used in 1906 by Italian economist Vilfredo Pareto to describe the unequal distribution of wealth in his country, it can be applied to almost any situation or model, including web site structure and content.
So let’s look at this in more depth using an online shop as a scenario. Assume your shop is well stocked with products and you have a lot of visitors each day, but you want to improve sales. After analysing your visitor to sales ratio you find that most of your visitors don’t buy anything.
The cause and effect
80% of your visitors only account for 20% of sales
20% of your visitors account for 80% of your sales
It doesn’t matter if you don’t get exactly 80/20 but using this model you can say that the majority of your visitors don’t buy very much, why is that? Short of asking every visitor their reasons why they didn’t purchase anything you’ll have to make some more assumptions.
I should add at this point that it is possible to add a short survey to any site to get real customer feedback, but for the purposes of this article we’ll assume that the following items are what your customers are telling you.
- 20% made a purchase
- 40% were looking for the best prices but didn’t buy
- 15% looked but you didn’t have what they wanted
- 10% were put off by your postage/shipping rates
- 10% couldn’t find what they were looking for
- 5% couldn’t find the right product information
Using these examples the obvious target for improvement are people that are looking for the best prices.
Improving the effect
So you want to increase your sales volume? You already know that 20% of your visitors are buying from you but wouldn’t it be nice if you could get some additional sales from the remaining 80%!
Most of your visitors come to your because they want to see the sort of products you sell. By looking at the reasons why people don’t buy you can prioritise the improvement opportunities.
40% were looking for the best prices but didn’t buy
This represents the largest amount of your visitors and is the obvious place to start. The internet is a very competitive environment allowing people to shop around to find the best deals. Maybe your pricing doesn’t reflect this or you need to offer more value? Not everyone is looking for the cheapest products but offering incentives such as free shipping or buy 2 get 1 free can help clinch a sale even if your base pricing is more expensive that your next competitor.
Concentrating on the main reason for failure is likely to bring the biggest successes
5% couldn’t find the right product information
The represents only a small amount of your visitors so has a lower priority. Are you giving them the right information and is it understandable, ie, jargon free? Will it fit? Is it compatible? Is there a warranty? Will it arrive on time? Informed customer are more likely to trust and buy.
Concentrating on the least reason for failure requires the most effort to rectify
Prioritising your actions
In this example the smallest reason for people not buying from you - the 5% - will require the most effort to improve on so this is a low priority area. The biggest reason for people not buying from you - the 40% - will always be the easiest to improve on and should be your main priority, in theory small changes here can make a big difference. Always tackle the biggest reason first for the easiest results, then move to the next biggest and so on.
There will be a point where the effort outstrips the benefits, only you will be able to decide where this point is and whether to continue the process - but there again you can always apply the 80/20 rule again!
You can read more on the 80/20 rule in the About.com article on Pareto’s Principle.
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