July 18, 2024
The 80/20 Rule and How the Pareto Principle Applies to Sales

Ever think about the 80/20 Pareto principle and how it might be applied in the world of sales? Think of how 80/20 could be useful as possible new rules for sales professionals in relation to clients and products. These sales principles might affect how and where a salesperson meets with a new prospect, who they build lasting relationships with and why, what other products they can sell, and when is the best use of their time to do their primary work.

Before discussing how the Pareto principle applies to sales, it can be helpful to look at how it has been interpreted throughout history. The Pareto principle started as a simple statistical analysis that looks at the vital few (20{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc}) verses the larger number (80{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc}) and was originally looking at population instead of work. In Juran’s quality terms, the principle was used to refer to 80{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} of the problem effects come from only 20{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} of the possible causes. Whereas, the time management expert Lakein translated it to mean 20{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} of the work people do is important and the other 80{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} is usually mundane or trivial tasks because people tend to do work in a certain order rather than prioritizing.

Prospect Meetings

Before explaining 80/20 for meeting with the customer, understand that the salesperson should always go to the customer. This makes doing business with the selling company easier on the potential buyer. If buying is easy, orders are more likely to get placed.

Now for the rule, when holding a conversation with a potential customer, they should be the ones talking 80{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} of the time. The salesperson should only provide 20{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} of the spoken words during the meeting. And those words should be questions that get the customer talking even more. Every sales person needs to practice good listening skills and utilize those skills as much as possible. After all, it is impossible to ask good questions and learn true buyer needs without first hearing what the customer wants in a service or believes about a product line. When presenting a sales pitch, pause often to ask for feedback and read the prospect’s body language to make sure they understand the concepts and have the opportunity to agree or disagree with any points that have been made.

Customer Relationships

Business studies have shown that 20{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} of a company’s customer base usually makes up 80{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} of their business. What that means to the salesperson is that these big customers are the ones with whom they need to work hardest at maintaining a relationship with in order to keep them coming back. Check in with them to see if all their needs are being met and ask for suggestions on ways to improve the current product or service. Never let a competitor take a “best customer” because the other company was willing to take more time meeting their needs.

Of course that does not mean that the smaller customers can be ignored. For the smaller customers, sellers need to better understand the client’s business so that when they do meet with together, solutions can be offered that help with their particular problems. The more customer solutions that can be provided, the bigger or more frequent the orders may become from them.

Product Promotion

Look at the company products that are most bought. Chances are that only 20{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} of the product line is what is sustaining 80{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} of the business. Why might this be the case? Have marketing review materials and advertising for those other products. Should the materials be updated? Are there upsell alternatives and trial discounts not being explored?

Do salespeople need to be better trained on what benefits the different products can offer their current customers? It could be their customers are already using a similar product from a competitor but are unaware of the alternatives offered by their preferred vendor. Be the preferred vendor, know all possible customer needs and offer the best solutions. Do not be pushy even when presenting a particular product the customer has expressed interest in and do not forget to mention other options available. Or at least leave a full product-line brochure or fact sheet as part of the customer packet.

Selling Time

Salespeople need to review their “To Do” list and set priorities using an 80/20 time management rule. 80{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} of the time spent at work should be accomplishing top priorities. For sales people those are: prospecting, customer meetings, presenting, and selling. In “The Sales Messenger” book this is referred to using the phrase “daytime is selling time,” which means approaching current and potential customers during their open office hours. Spend selling time wisely by scheduling meetings with customers, building those relationships, and exploring all their needs.

Then for the other 20{913245eabea901723f6f23dbc2031c63ab6fa64000e98dbba261148d532be0cc} of work week, do the lower priority tasks which fall under the category of business administration. Do administrative tasks before customers open their doors or after they close up shop. Ask any sales manager if they would prefer to see a monthly sales stat-report or expense report in by 3PM or find out the company landed a new order that day. Or better yet, find someone who is willing to prepare the reports and do other administrative tasks at an affordable price so more time can be spent selling.

After looking at how the 80/20 Pareto principle can be applied to the sales world, a better understanding of what may be most relevant for time and effort spent can be achieved. With 80/20 ruling professional efforts, the sales staff can better concentrate on: prospective clients, current customers, learning other products, and how to prioritize their time.