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Understanding the 80/20 Rule in Sales

 
August 10, 2016


By Tracey E. Schelmetic, Telemarketing Software Contributor


As a sales manager, if you were to track your sales team for a year and accurately and painstakingly record each task your sales team engages in at every moment of every day (it’s not possible, but let’s imagine it is), you’d probably find that your sales personnel spend about 80 percent of their time doing tasks that don’t lead directly to sales. Whether it’s paperwork, training, data entry, phone calls to answering machines or “busywork,” it’s time-killing administrative work that generally leads nowhere.


At the same time, if you were to figure out the value of each contact your sales team makes, and even each sale, you’d probably find that about 80 percent of your sales are going to 20 percent of your prospects and customers. The 80/20 rule reverberates throughout life. Pareto’s Principle or Pareto’s Law, as it’s sometimes called, was originally formulated to reflect income inequality (20 percent of the population controlling 80 percent of the wealth), but it’s an accurate measure for many business processes, as well, according to a recent blog post by sales professional Jonathan Farrington.

“Project managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of your time and resources,” he wrote. “You can apply the 80/20 Rule to almost anything, from the science of management to the physical world. You know 20 percent of your stock takes up 80 percent of your warehouse space and that 80 percent of your stock comes from 20 percent of your suppliers. Also 80 percent of your sales will come from 20 percent of your sales staff. Twenty percent of your staff will cause 80 percent of your problems, but another 20 percent of your staff will provide 80 percent of your production.”

Identifying the all-important 20 percent is critical, but it’s a mistake to focus all efforts on 20 percent of your sales team. Sales professionals sometimes call the practice “Superstar Management,” or focusing most of their time and effort on the salespeople who do the lion’s share of selling. Farrington says it’s a mistake.

“The theory is flawed because it overlooks the fact that 80 percent of your time should be spent doing what is really important – helping the good become better is a better use of your time than helping the great become terrific,” he wrote.

Rather than ignoring most of your sales team, use Pareto’s Principle to identify the 80 percent of work your sales professionals are doing that don’t lead to sales. Are they spending all their time manually dialing telephone numbers or appointment setting on paper? Automate the process with a good telemarketing software solution. Do they have to engage in duplicate data entry? Streamline their desktop applications so they only have to log in once, and enter customer and prospect information once. Are they relying on paper scripts which can get confusing and lead to errors? Consider using logical script branching processes that help them remain responsive to customer questions and objections will still hitting all the main points.

With the help of technology and some business insight, sales managers can ensure that 80 percent of their sales team is contributing to more than 20 percent of sales. 




Edited by Alicia Young



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