Sunday, July 5, 2009

Pareto Squared in Action I

Following on from my blog explaining Pareto Squared, here is another example of applying the principle.

An organisation has 20,000 donors. It has a limited budget, but a tough target. Provided it is not mailing it's donors too often (which many think would be over 30 times a year, so this is not likely) then it would make more money mailing the top 20% of donors (4,000) at least twice, and then just mailing as many of the next 16,000 that budget allows.

In other words:
Mail 20,000 donors at a cost of, say, $20,000. ($1 per pack)

Or Mail
Top 4,000 with a better pack costing $6,000 ($1.50 per pack)
Mail those 4,000 again with a reminder pack costing $6,000 again
Use remaining $8,000 to mail the 'best' of the remaining 16,000 donors with a cheaper - say just 8,000 at $1 per pack.

In the end, only 12,000 of the 20,000 donors are mailed BUT you will make more money.


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