The Pareto Principle in business is an axiom of business management: 80% of sales come from 20% of clients. An axiom is a statement that is taken to be true - and is the base of further arguments, although beware as it may not always be true! Generally speaking, the Pareto Principle is used in business to help managers understand that 20% of their clients are the most profitable. These are the repeat customers that use the higher end of a service - and so more attention needs to be paid to them. For instance, airlines recognize this principle by focusing resources on business customers by offering special services such as faster boarding, better seats, and lounges. This helps these customers remain loyal and impedes switching behavior.
Service Thlinking is a blog of Associate Professor Janet Sayers, School of Management, Massey University, New Zealand. Key concepts and terms used in classes are explained in words, videos, and images. The blog is co-created with students. I also post about my research and publications to encourage integration between research and teaching in courses I teach.
Sunday, August 11, 2019
Pareto Principle - Airlines
The Pareto Principle in business is an axiom of business management: 80% of sales come from 20% of clients. An axiom is a statement that is taken to be true - and is the base of further arguments, although beware as it may not always be true! Generally speaking, the Pareto Principle is used in business to help managers understand that 20% of their clients are the most profitable. These are the repeat customers that use the higher end of a service - and so more attention needs to be paid to them. For instance, airlines recognize this principle by focusing resources on business customers by offering special services such as faster boarding, better seats, and lounges. This helps these customers remain loyal and impedes switching behavior.
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