What You Really Need to Know About Marketing's 80/20 Principle to Succeed

The following excerpt is from Perry Marshall, Mike Rhodes and Bryan Todd’s book Ultimate Guide to Google AdWords. Buy it now from Amazon | Barnes & Noble | iTunes | IndieBound

The 80/20 Rule, aka the Pareto Principle, says:

80 percent of what you get comes from 20 percent of that you do: small effort, big reward.
20 percent of what you get comes from the other 80 percent that you do: Big effort, small reward.

80/20 applies to just about everything you can measure in a business. Sources of incoming phone calls, sizes of commissions for salespeople, sizes of customers, physical location of customers, popularity of products and quantity of each type of product defect can all benefit from applying the 80/20 principle. And yes, AdWords stuff too: keywords, impressions, ads, conversions and visits to web pages.

This means four-fifths of everything is trivial and only one-fifth really matters. This is a huge time saver. But, that’s only the tip of the iceberg. Let’s look at how 80/20 works specifically in Google AdWords.

First, it’s important to note that the numbers “80” and “20” aren’t carved in stone. Sometimes it’s 70/30, sometimes 60/40, 90/10 or 99/1. Keyword lists are very consistently 95/5. Since five percent of your keywords generate 95 percent of your traffic, you can optimize five percent of your keywords by peeling them out and sticking each one into its own unique ad group.

You get 95 percent of the optimization by doing five percent of the work!

“Peel and stick” is the single most important AdWords skill next to split testing. That’s because it allows you to happily ignore up to 95 percent of the stuff in your ad campaigns!

This isn’t only true at the keyword level. It’s also true at the campaign level. 80/20 also describes:

How many clicks your ads get in each of the 11 ad positions on Google search (the top three premium spots get 80 percent of the traffic)
Traffic from placements on the Display Network
Conversions from placements on the Display Network (top conversion sources will be different from top traffic sources)
Visitors by city or state or country
Conversions by city or state or country (top conversion sources will be different from top traffic sources)
Clicks on the various ad formats and sizes
Traffic to each page on your website
Sales for each page on your website
How many page views you get from the people who click on to your site
How much time your visitors spend on your site
How much money your buyers spend with you
How many times your buyers buy
How frequently your buyers buy
How long customers stay loyal to you

The 80/20 pattern is truly everywhere. 80/20 radically changes how you manage your campaigns and your business. It means that most impressions, most clicks, most ads, most keywords, most ad groups, most web pages, most prospects and most customers simply don’t matter very much.

It also means that a few impressions, a few clicks, a few ads, a few keywords and ad groups and web pages and customers determine almost everything!

When you start, your job is to throw just enough spaghetti against the wall to start to see where it is starting to stick, then immediately channel your efforts into improving what’s working. But, the real power of 80/20 comes when you make it three-dimensional. Your ads are showing on 15,000 placement sites, but 50 percent of your traffic comes from 10 of them. You have 20 landing pages, but 75 percent of your leads come from one of them. You have 86 ads, but 20 percent of your sales come from one of them.

So you copy your best ads and you do peel and stick for each of those placement sites. You also copy your best landing pages and make unique pages just for them.

Then you optimize. The ideal ad and landing page for each site is going to be different. So you start split-testing ads and A/B landing pages. It’s not unrealistic to expect that even if you already did a good job testing before, that this new level of refinement could double your sales.

Those 10 placements were sending you 50 percent of your traffic, and since you doubled your conversions, now your whole business has grown 50 percent. And you did it with ten minor changes.

You can also peel and stick geographical locations — but only do it for the highest-converting cities. If San Francisco is a great city for you because it’s one percent of the U.S. population but 10 percent of your sales, then you create a campaign just for San Francisco. You might use unique ads and color schemes.

An inevitable consequence of 80/20 is that you sometimes feel like all your eggs are in one basket. And yes, there will always be a few baskets that have a lot of eggs. But, as Warren Buffett says, “Keep all your eggs in one basket, but watch that basket closely.” If you can keep an eye on these well-performing baskets, you’ll be in good shape.

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