80-20 rule and the Internet

A typical definition of 80-20 rule in the field of product development is 80% users use 20% features of any product. A slightly different interpretation – 80% of time a user ends up using 20% features of a product. This is true for any product in the software industry out there and lots of companies have become successful by pioneering those bare minimum 20% features of the products. The question that arises here is how? How can a company survive without fulfilling 100% customer requirements? Or in other words, why does a customer stick to a product which only fulfils 80% of their requirements? I think there are several reasons for that. First and foremost, is the barrier to change. Most customers start using a product when they feel that the product is fulfilling most of its requirement, which the product does. Now when they come across one requirement which is not fulfilled by the product, their natural tendency is to find a work around for this feature rather than abandoning the product and using something else. Another reason, cost associated with the change. Customers who paid certain amount to purchase the product that fulfills most of their requirement, normally chooses not to pay again in order to get a product that meets those edge case requirements. And if for any reason, that edge case becomes a common one, if starts getting close to that 20% basket and gets added to the product feature list.

This is the case for a typical software product out there installed on a customer’s computer. Now lets move on to the Internet. Is it the same there? Does this 80-20 rule works there as well? I think we should consider the points that help 80-20 rule work for desktop products and see their standing in the Internet world. First, the barrier to change. The barrier to change for a typical application on WWW, like search or online store is as negligible as typing a new url in the Address Bar. So if some customer is trying to search lyrics of a not so common song or looking for some special merchandise and cannot find it at one particular destination, they can just type in a different web site address and see if they can find it there (Yeah there is some barrier in case of an online store if you want to buy something you need to provide a payment source and your address, but I think you won’t mind doing that if you find a merchandise you didn’t find at your regular store). Second, cost of change. Well with most applications not charging anything to the end user to use it, I think the user has no cost of change. Talking about our previous applications, search run on advertisement revenue, so are free for the end user and an online store only charges a user when they are buying something over there. This means the 80-20 rule doesn’t work that well for a Web based product.

In fact, I think this 80-20 rule sometimes work against the product if the customer is able to locate an alternative with answers to all their requirements. If I am looking for some very uncommon information and I find it through one particular search engine, that search engine promptly secures a place in my list of favorites. Now I will know that whatever I want to search, I will look for it here. So now slowly I will start using this for my other 80% of the common queries as well. Similarly for an online store. If I find a not so common merchandise on a particular online store, the next time I want to buy something, I will go back to this store hoping that I have a much better chance of finding the product here. This is the reason behind the success of lots of Web based companies. They try to fulfill 100% of customer requirement. How do they do that? Its by maintaining a long tail…whether you do it by writing a better algorithm that fulfills all customer’s search requests or by supporting a more exhaustive inventory to find the customer any merchandise they are looking for. To sum up, these companies need to be highly customer focused and align their products and services to address customer needs in agile and innovative ways.

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