Rule of ten percent
DESCRIPTION
The generalization that it is almost impossible for any single research study to come up with a variable which accounts for more than ten percent of the variation in any particular measure of business performance.
The generalization that it is almost impossible for any single research study to come up with a variable which accounts for more than ten percent of the variation in any particular measure of business performance.
KEY INSIGHTS
Put forth by Wensley (1997), the rule of ten percent (or rule of 10%) is a generalization that draws upon decades of research on factors that seek to explain business performance. In particular, reviews of such studies lead to the generally accepted conclusion among marketing researchers that the number of factors which account for business performance is so many that it is extremely unlikely that any single research study will ever be able to explain more than 10% of the variability in any business performance measure (e.g. return on investment). While the inclusion of additional measures has been shown to explain a considerably greater amount of variation in performance between different businesses—in some cases between 25% and 33%—the disadvantage of the complexity introduced by such studies is that they present a far greater challenge to providing managerially useful guidance.
Put forth by Wensley (1997), the rule of ten percent (or rule of 10%) is a generalization that draws upon decades of research on factors that seek to explain business performance. In particular, reviews of such studies lead to the generally accepted conclusion among marketing researchers that the number of factors which account for business performance is so many that it is extremely unlikely that any single research study will ever be able to explain more than 10% of the variability in any business performance measure (e.g. return on investment). While the inclusion of additional measures has been shown to explain a considerably greater amount of variation in performance between different businesses—in some cases between 25% and 33%—the disadvantage of the complexity introduced by such studies is that they present a far greater challenge to providing managerially useful guidance.
KEYWORDS Marketing research, firm performance, management guidance
IMPLICATIONS
Based upon the rule of 10%, marketers should be wary of pursuing strategies based on the assumption that there exists a simple relationship between a particular business approach and the achievement of strong business performance. Instead, marketers should recognize that there are, more often than not, multiple and interacting factors that influence business performance and any strategy based on the pursuit of a single approach to achieve success is likely to be poorly guided and ultimately insufficient.
Based upon the rule of 10%, marketers should be wary of pursuing strategies based on the assumption that there exists a simple relationship between a particular business approach and the achievement of strong business performance. Instead, marketers should recognize that there are, more often than not, multiple and interacting factors that influence business performance and any strategy based on the pursuit of a single approach to achieve success is likely to be poorly guided and ultimately insufficient.
APPLICATION AREAS AND FURTHER READINGS
Marketing Strategy
Vining, A., and Meredith, L. (2000). ‘Metachoice for Strategic Analysis,’ European Management Journal, 18(6), 605–618.
Vining, A., and Meredith, L. (2000). ‘Metachoice for Strategic Analysis,’ European Management Journal, 18(6), 605–618.
BIBLIOGRAPHY
Wensley, Robin (1997). ‘Explaining Success: The Rule of Ten Percent and the Example of Market Share,’ Business Strategy Review, 8(1), 63–70.
Wensley, Robin (1997). ‘Explaining Success: The Rule of Ten Percent and the Example of Market Share,’ Business Strategy Review, 8(1), 63–70.