Truth in Concentration in the Land of (80/20) Laws
David C. Schmittlein,
Lee G. Cooper and
Donald G. Morrison Additional contact information David C. Schmittlein: University of Pennsylvania
Lee G. Cooper: University of California, Los Angeles
Donald G. Morrison: University of California, Los Angeles
Among the more prominent truisms in marketing are 80/20 type laws, e.g., 20 percent of the customers account for 80 percent of the purchases. These kinds of statistics indicate a certain degree of in customer purchases; i.e., the extent to which a large portion of the product's total purchases are made by a small fraction of all customers. Such concentration levels, suggesting that markets can be segmented in various ways, are often reported in basic marketing texts. We show that a of these concentration statistics is not nearly as easy or immediate as it is to compute them. The key factors influencing the degree of in purchases are reviewed, and we present a modeling approach for estimating the true level of among customers.