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The Pareto rule in marketing revisited: is it 80/20 or 70/20?

  • Daniel M. McCarthyEmail author
  • Russell S. Winer
Article

Abstract

In a recent paper, Kim, Singh, and Winer (Marketing Letters 491–507, 2017) studied the Pareto rule across 22 different CPG categories. The authors found an average Pareto ratio (PR) of .73, meaning that 73% of sales came from the top 20% of customers. In this paper, we use a unique dataset of 339 publicly traded non-CPG companies to see whether/when the Kim et al. result holds. We have additional data on these companies, including whether they are product or service companies, whether they sell to customers on a subscription or non-subscription basis, financial and industry information, and summaries of customer purchase behavior. We find that the overall average PR is .67 with product companies having a ratio of .67, and service companies .66. We find that non-subscription businesses have a PR of .68, substantially higher than that of subscription businesses at .59. We estimate the correlates of PR by industry and other factors. Preliminary results show much higher PRs for profits than sales.

Keywords

Pareto rule 80/20 Empirical generalizations 

Notes

Acknowledgements

The authors acknowledge the support of Second Measure, who provided access to data used in the manuscript. The authors do not have any financial interest, direct or indirect, in the companies studied in the manuscript.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Goizueta Business SchoolEmory UniversityAtlantaUSA
  2. 2.Stern School of BusinessNew York UniversityNew YorkUSA

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