Does the Pareto Rule Hold for Customers
The rule that a fifth of customers bring four fifths of sales was named by Joseph Juran, who later wrote that Pareto's models were not meant for other fields. Three studies of customer data average between about 50 and 73 per cent for the top fifth, and none averages 80.
Answer to the question
Does the 80/20 rule hold for customers?
Not as an average. Three studies put the top fifth of buyers at about 73 per cent of brand sales in Nielsen panel data, 49 to 55 per cent in Byron Sharp's tables and 67 per cent across 339 listed companies. The Pareto rule fits the shape of customer data better than its size.
Key takeaways
- Joseph Juran's 1974 paper "The Non-Pareto Principle; Mea Culpa" says the principle as a universal was not original with Pareto, whose models were not meant for other fields, and neither 80 nor 20 appears in it.
- Kim and colleagues (2017) found a mean brand-level ratio of 0.73 in Nielsen panel data covering six years and more than 100,000 households, and called the principle generally valid for packaged goods.
- Byron Sharp's tables in How Brands Grow (2010) average 50, 51, 55 and 49 per cent for the top fifth, though the book names the pattern the 60/20 law.
- McCarthy and Winer (2019) found 0.67 across 339 listed companies outside packaged goods, 0.59 for subscription businesses, and preliminary signs that profit is more concentrated than sales.
- At any of those ratios the lightest four fifths of buyers supply between 27 and 50 per cent of sales.
Joseph Juran, editor of the Quality Control Handbook, gave the Pareto rule its name, and later wrote a paper about it titled "The Non-Pareto Principle; Mea Culpa". The paper is in the Juran Institute's archive, and it sets out how he first met Pareto's work, why he gave the principle Pareto's name and what he made of the result. The text is candid on all three points. Its title is an apology, and neither number of the slogan appears anywhere in the text. Its central admission is that Vilfredo Pareto's models "were not intended to be applied to other fields".
The version most managers quote, that a fifth of customers bring in four fifths of sales, has been measured since then, and the measurements disagree with the slogan and with each other. In three studies of customer data, the average share of sales from the top fifth of buyers sits well below four fifths.
Three questions to ask before quoting any ratio
Before repeating the Pareto rule about a business, ask what is being counted, what is being summed and over what period. Counted: buyers of one brand, customers of one company, or households in a whole category. Summed: sales or profit. Period: three months, a year or six years.
A figure that cannot answer those three is a slogan. The sections below show why each question moves the number, using Byron Sharp's How Brands Grow and two peer-reviewed papers that measured the Pareto rule with different data. Anyone who wants the other half of the story, why the group in the top fifth keeps changing from one year to the next, will find it in [Why Your Best Customers Don't Stay Best](https://thewhyweproject.com/articles/why-your-best-customers-dont-stay-best).
What did Juran actually apologise for in 1974?
Juran says he met Pareto's work in the late 1930s through an executive who presided over the executive salary programme at General Motors. Pareto, Juran writes, "had made extensive studies of the unequal distribution of wealth". He compared General Motors' own salary pattern with one of Pareto's models, Juran says. Pareto's own law, in the Library of Economics and Liberty's summary, linked income levels to the number of people earning more than each level, drawn from British income data and checked against Prussia, Saxony, Paris and some Italian cities. That summary does not mention an 80/20 split.
Juran generalised the pattern and called it "the vital few and trivial many". His reference list includes a 1950 article titled "Pareto, Lorenz, Cournot, Bernoulli, Juran and Others" and a 1954 piece in The Management Review that he marks as likely the first published use of the phrase. He wrote that he named the principle after Pareto as shorthand, and with some candour about why: "Had I been structured along different lines, assuredly I would have called it the Juran principle." He also wrote: "The Pareto principle as a universal was not original with Pareto."
So the name credits an economist for an idea that was later applied well outside economics, customer lists included. That does not make the idea wrong. It means nothing in Juran's own account ties the figure of 80 per cent to customers.
What the customer studies measured, and how
Baek Jung Kim and colleagues, among them Russell Winer, tested the Pareto rule on A.C. Nielsen household panel data covering six years and more than 100,000 households. They concluded in Marketing Letters in 2017 that the principle "generally holds" across packaged-goods categories. The mean brand-level ratio was 0.73, the share of a brand's sales coming from its top fifth of buyers.
Niche brands scored higher, and larger brands and larger categories scored lower.
Sharp, in chapter 4 of How Brands Grow, reads similar kinds of data and concludes the opposite. The annual share of the top fifth is, in his words, "usually not far over 50% and rarely anything like the proverbial 80%". The book names the pattern the 60/20 law, though the tables printed in it average 50, 51, 55 and 49 per cent, nearer fifty than sixty. In the British body-spray table the average is 39 per cent over three months and 50 over twelve. Its tables derive from an Ehrenberg-Bass report available only to corporate members.
A 2019 working paper by Sharp and two colleagues repeats the case and lists what moves the top fifth's share: the length of the period, the technical choices of whoever calculates it, brand size and category. It also reports that even for stable brands about half of last year's heaviest buyers fall out of the top fifth the following year, so the ratio describes a group whose membership keeps turning over.
Both teams use the word Pareto for numbers that differ by more than twenty points. Kim and colleagues call 73 per cent a rule that holds. Sharp reads about 50 per cent as a rule that fails.
Neither paper's abstract refers to the other.
Daniel McCarthy and Russell Winer moved outside packaged goods. Using data on 339 publicly traded companies that do not sell packaged goods, they found an average ratio of 0.67 in Marketing Letters in 2019. Product companies and service companies were close together, at 0.67 and 0.66. Subscription businesses came in lower, at 0.59 against 0.68 for the rest.
| Study | Data | Top fifth's share of sales |
|---|---|---|
| Kim and colleagues (2017) | Nielsen household panel, six years | 73 per cent, brand average |
| Sharp (2010), Table 4.1 | Twenty British body-spray brands, one year | 50 per cent, brand average |
| Sharp (2010), Table 4.2 | Twenty-two American categories, one year | 51 per cent, category average |
| McCarthy and Winer (2019) | 339 listed companies outside packaged goods | 67 per cent overall, 59 for subscription |
That paper also reports preliminary results that profit is far more concentrated than sales. That is the figure a finance director would want, and the one with the thinnest evidence behind it so far, since the authors describe it as preliminary. If it holds up, a fifth of customers that supplies two thirds of sales may supply a larger share of profit.
The shape survives every one of these datasets. In each, a minority of buyers account for a disproportionate share of sales. The disagreement is over how disproportionate, and the answer moves with the category, the brand's size and the way the ratio is calculated.
What are the many worth to a business?
A ratio can be turned around. At 0.50, the bottom four fifths of a brand's buyers supply half its sales. At 0.59 they supply 41 per cent, at 0.67 they supply 33, and at 0.73 they supply 27. The abstract of the 2019 working paper draws the same conclusion from its own data: almost half of a brand's sales are likely to come from the lightest 80 per cent of buyers.
That is the practical use of the three questions. A team that says its top fifth brings in 80 per cent of sales is making a claim about its own customers that it can test with one export. A team that quotes the Pareto rule from a book is quoting a figure that no study in this piece found as an average. A team that finds 67 per cent, or 50, has learned how much of its revenue sits with customers it has been calling an afterthought. Sharp's wider case, that growth comes from reaching many buyers and not from a precisely targeted few, is set out in [Brand Loyalty Is Mostly Brand Size](https://thewhyweproject.com/articles/brand-loyalty-is-mostly-brand-size) and [What Psychographic Targeting Can Do](https://thewhyweproject.com/articles/what-psychographic-targeting-can-do).
A footnote to Juran's apology records that he later renamed the larger group "the useful many", a better description of the four fifths of customers that the headline ratio sets aside whenever it is quoted without its context.
Common questions
Does the 80/20 rule hold for customers?
Not as an average, in the studies reviewed here. The top fifth of buyers supplied about 73 per cent of brand sales in a Nielsen panel study, 49 to 55 per cent in the tables of How Brands Grow, and 67 per cent across 339 listed companies. The Pareto rule describes the shape of the data better than its size.
Who came up with the Pareto rule?
Vilfredo Pareto studied the unequal distribution of wealth, according to Joseph Juran, who generalised the pattern in the mid twentieth century and named it after him. Juran wrote that the principle as a universal was not original with Pareto and that Pareto's models were not meant for other fields.
Is the Pareto rule about sales or profit?
It can be either, and the ratio differs. McCarthy and Winer report preliminary results that profit is much more concentrated than sales, so a ratio quoted for sales may understate how much the top fifth contributes to profit.
Sources
Juran, J. M. (1974). 'The Non-Pareto Principle; Mea Culpa.' Juran Institute archive. https://www.juran.com/wp-content/uploads/2021/03/The-Non-Pareto-Principle-1974.pdf
Kim, B. J., Singh, V., & Winer, R. S. (2017). 'The Pareto rule for frequently purchased packaged goods: an empirical generalization.' Marketing Letters, 28(4), 491-507. doi:10.1007/s11002-017-9442-5. https://doi.org/10.1007/s11002-017-9442-5
McCarthy, D. M., & Winer, R. S. (2019). 'The Pareto rule in marketing revisited.' Marketing Letters, 30(2), 139-150. doi:10.1007/s11002-019-09490-y.
Sharp, B. (2010). How Brands Grow: What Marketers Don't Know. Oxford University Press, 2026-10-08. Ch. 4, pp. 39-55; the sentence at p. 46; Tables 4.1 to 4.3.
Sharp, B., Romaniuk, J., & Graham, C. (2019). “Marketing's 60/20 Pareto law.” SSRN working paper 3498097. doi:10.2139/ssrn.3498097.