The Pareto Segmentation Construct: Focus Where It Matters Most
The Pareto Segmentation Construct: Focus Where It Matters Most
In almost every business, a small percentage of contributors drive the majority of results.
The Pareto Segmentation Construct captures that principle, structuring models to focus detail where it delivers the most value.
How It Works
Also known as the 80/20 rule, Pareto segmentation divides a population into two parts:
The top-performing group (roughly 20%) that drives most outcomes
The long tail (roughly 80%) that can be aggregated for efficiency
You don’t model every customer or SKU individually.
Instead, you build detailed forecasts for the top tier, and roll up the rest into a simplified structure.
Key Design Considerations
Thresholds: Define what qualifies as “top tier” — revenue, margin, or strategic importance.
Update Frequency: Determine how often to refresh segmentation to reflect business shifts.
Flexibility: Ensure your system allows re-segmentation without rebuilding the model.
In practice, this means your planning tool must easily recategorize groups and apply different levels of granularity without duplicating logic.
Why It Matters
Efficiency: Reduces unnecessary model complexity.
Focus: Directs attention and precision to where it drives the most value.
Scalability: Keeps models performant even as data grows.
Relevance: Reflects how most businesses actually operate.
Pareto segmentation ensures that your team spends time on the decisions that move the needle.
Implementation in Pigment
Pigment’s flexible dimensional modeling makes it easy to maintain separate hierarchies or aggregation layers for top-tier and long-tail segments.
With dynamic filters and versioning, you can adjust thresholds or tier definitions without rewriting formulas.
The Broader Framework
Pareto Segmentation is one of Bright Point’s 11 Planning Constructs — a principle that helps organizations balance precision with efficiency across their models.
Bright Point’s Perspective
At Bright Point, we believe not all data deserves equal attention.
Pareto Segmentation lets finance focus on what truly drives performance — clarity over clutter.
