I bought Richard’s book 20 years ago, and it transformed my analytical team’s approach to understanding our banking customer’s profiles – from both a customer value and marketing opportunity perspective.

We applied Pareto to our Activity Based Costing metrics for banking customers, and it helped to surface our customers with the best customer lifetime values. It also helped focus our outbound marketing efforts to grow the lifetime value of segments with identified potential.

What Is Pareto Analysis?

pIn the early 1900s, Italian economist Vilfredo Pareto, made an interesting observation. He noticed that 80% of the land in Italy was owned by just 20% of the people. But what was more interesting, is that this relationship was repeated in other countries throughout Europe.

Over time, he realised that this 80/20 relationship was not limited to land ownership, or limited to human behaviour. He discovered that even nature exhibits the existence of 80/20 relationships – illustrated by the fact that 20% of the pea pods in Pareto’s garden produced 80% of the peas he harvested …

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