Pareto law: also known as the 80/20 rule, is a theory maintaining that 80 percent of the output from a given situation or system is determined by 20 percent of the input.
In sales this means that 80% of the revenue is generated by 20% of sales team / 20% of products offering
What lessons can you learn from executing Pareto analysis within your organization?
The illusion of numbers: Perhaps your sales team meets its targets and enables you, as a manager, to show positive results. However, drilling down into each and every team member’s performance can (most probably) reveal that there are team members who are far from their targets and goals, while others are excellent performers and are actually the lighthouse of your team.
The weak spots in your sales team: Top performers and weaker performers, most sellable products, and those which are hardly sold – all these are the endpoints of your sales spectrum. Contrary to what you may think, your top performer(s) or your most sellable product can easily become your weak points. They actually produce almost 80% of your revenue, and once they are not functioning, your revenue is gone!
And your opportunity loss: Sales team members who are far from attaining their goals and targets, as well as products which do not contribute to your cash flow, are signs that you are not optimizing your full potential, that there is room for much more growth, and that opportunity loss must be minimized.
Lead the change – In light of the Pareto analysis, what should be your CTA?
Personalization, review and carefully drive your rewards, incentives and compensation strategies: Through the Pareto analysis, you can easily understand the differences in sales behavior among your sales team. More personalization in the way you acknowledge and reward your team members will boost their performance. Weak performers should be excelling more, while top performers should remain in their position, resulting in the improvement of the entire business as a whole.
Create mitigation path to low performers: Utilizing prescriptive analytic techniques, you can create a clear mitigation path for low performers, redeeming them from being at the bottom of the organization’s performers. These techniques can clearly guide them to reach their next level of performance, by focusing them on the specific product/package to sell, which will optimize their payments.
Refresh your product offering: The Pareto analysis is a great opportunity to ask questions about your product offering, and understand what changes need to be made in order to increase your market share. The Pareto analysis helps you understand which products have a higher demand, and ensure your cash flow, while others have a lower demand and hardly contribute to your cash flow. Furthermore, you can inquire as to why the low demand – Is it an indication of the product’s relevancy to the market? or perhaps connected to the way they are offered to the market.