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Why Pareto Analysis is Important for Product Managers
It is key to making better prioritization decisions
Prioritization is a critical skill for product managers. Google reports over 12,200,000 results for “product manager prioritization”. Prioritization is a key skill.product managers use for feature selection, tech debt prioritization, sales campaign prioritization, and packaging/pricing decisions to name a few. There are a few fundamental techniques like Pareto analysis that can help support the myriad of product management prioritization frameworks.
What is Pareto Analysis?
Pareto was appointed professor of economics (1893) at the University of Lausanne, where he remained for the rest of his life. In 1906 he made the famous observation that 20% of the population owned 80% of the property in Italy, later generalized by Joseph M. Juran on the Pareto principle (also known as the 80–20 rule ).
From a product management perspective, Pareto analysis translates into 80% of the outcomes are due to 20% of the causes. In other words, focus first on the items that have the most impact. Here’s an example that categorizes customers’ revenue contribution:
