A fast food chain has determined that for every $1 spent by a 'light user,' each 'heavy user' spends $5. Which statement best describes this situation?
A)Eighty percent of a firm's first time users will become brand loyal and twenty percent of the firm's first time users will use the product only once.
B)Eighty percent of a firm's sales are obtained from twenty percent of its customers.
C)Eighty percent of a firm's expenditures are tax deductible and twenty percent are not.
D)Eighty percent of a firm's inventory should be readily available, and twenty percent should be reserved for emergency demand.

Question

Quizplus · Accepted Answer

This situation is describing the Pareto Principle, also known as the 80/20 rule, which states that 80% of a firm's sales come from 20% of its customers. In this case, the 'heavy users' make up the 20% of customers who generate 80% of the chain's sales, while the 'light users' make up the remaining 80% of customers who only generate 20% of the sales.

A Fast Food Chain Has Determined That for Every $1