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Observations and tips for business to business salespeople

May 1999

"Paretoing" Your Way Around the Dance Floor

jack carrollby Jack Carroll

Guess what? I learned a new word last month. And it might just be the most powerful word that anyone in business can learn and apply. The word is "Paretoing" and it comes from Wilfredo Pareto, the 19th Century Italian engineer. Pareto discovered an analytical technique that separates the major causes of a problem or an opportunity (the "vital few") from the minor ones (the "trivial many").

You probably know about Pareto's principle from its well-known application of the 80/20 rule in sales. The one that says that 80% of your sales will come from 20% of your customers. Or, 80% of the sales will be written by 20% of the sales force.

SIDEBAR: Sales Tip and Practice
Pareto your accounts into five separate and distinct categories based on sales volume from the past. If you are a salesperson, concentrate the majority of your time on the top two categories where you are getting most of your business. If you are a sales manager or company management, plan a different sales and marketing strategy that maximizes resources for each different customer segment. Generally, high volume accounts are handled direct, middle and lower volume accounts through distribution.

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Essentially, Paretoing means maximizing your efforts by focusing your activities in areas where you will get the greatest results and the most leverage—the important versus the immediate or the urgent.

Here are three very important ways that you can Pareto yourself or your sales organization:

  1. Work the major accounts that have the potential to produce the majority of your sales revenues. All customers are not created equal and should not be given equal time. Give time according to the business you are getting, or the potential.
  2. Target markets and accounts within markets that have a strong potential for a significant payoff. "He or she who tries to be all things to all people usually winds up being nothing to anybody."
  3. If you're managing a sales organization, make sure that your group is "Paretoed." Don't have high level people who are capable of working on and closing major deals with major customers, doing low-level, low-leveraged jobs like cold calling. I love cold calling and advocate it as an essential of target selling, but don't put your thoroughbreds behind the plow. Hire inside sales qualification specialists or outsource lead qualification services. In the long run it's a lot less expensive.

 

Reader Response
  • posted by Ken Gould, 07-May-1999, cisco222@hotmail.com

    Jack you are 100% right.  The single most important ratio I have learned is the 80/20 rule after reading your article I do think you forgot one minor/major aspect of it.   20% of your sales staff will make 80% of the money.  After my former sales manager told me that I realized that I HAD to be the 20% and thats why today at 20 years old I am now a sales manager on my way to a very successful career.  So one should definitely believe every word of you article because I think it is one of the 5 major steps to being successful.

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