B2B 17 pareto, targeting and sales

Note from Bruce:

I was recently asked by an interesting B2B company to write some blog posts and new business direct mail thoughts. They were interesting because <a> they wanted to focus on a smarter, more intelligent, level of thinking in their communication <b> they truly had an ‘edge’ to them in terms of attitude, and <c> they were interested in taking on specific objections they hear day in and day out in a candid fashion. It was fun for me and I generated maybe 20 draft thoughts for them in less than 3 days. The following shares my favorites <in rough draft form and the name of the company removed>.

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At the beginning of the twentieth century, the Italian economist Vilfredo Pareto observed that 80% of Italy’s wealth belonged to 20% of the population.

And that’s not all: 20% of workers do 80% of the work; 20% of criminals commit 80% of the crimes; 20% of car drivers cause 80% of the accidents; 20% of hedge funds invest 80% of the money; 20% of pub-goers consume 80% of the alcohol. We wear 20% of the clothes we have in our wardrobes and spend 80% of our time with 20% of our friends. In business meetings, 80% of the decisions are made in 20% of the time, and 20% of a company’s clients (products) are responsible for 80% of its turnover.

Of course, the Pareto rule cannot be applied to everything (mathematicians prefer the more precise ’64/4’ rule, because 80% of 80 is 64 and 20% of 20 is 4). But anybody who wants to plan their time optimally should know that roughly 20% of the time spent on a task leads to 80% of the results.

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Mikael Krogerus & Roman Tschappeler

The Pareto rule applies to B2B sales engineering, although, if you google “Pareto and B2B sales” you would never know it.

All you will see is article after article about how 20% of a sales force generates 80% of the sales. One would wonder, Company X included, why no one has thought about the sales process and Pareto to better understand the sales force dynamic.

Think about it.

A typical sales force will invest 80% of their energy on 20% of the targets on their list <which ultimately give back 80% of sales>.

Sales forces are hunters and they will try and squeeze out everything they can from the most prosperous looking hunting grounds. On occasion, as they dabble in the rest of the target possibilities, they will uncover a new ‘hunt’ and invest energy <typically shedding one of the non-producers on their current 20% focused list>. This new additional hunt happens just often enough that someone on the outside looking in would think the entire database is being worked equally and sales are being engineered efficiently & effectively.

Here is the main problem with what we just outlined.

Typically only about 20% of target decision makers may be active in the buying process at any given point. The likelihood that the 20% a sales force is working on and the 20% who are actively in the buying process are exactly the same is … well … 0%.

Okay.

Mathematically it would actually mean at any given point the sales force is actually able to work 20% of the 20%. Let’s make that … well … less than 5% of the target database is being managed effectively.

Some of our numbers may not be exactly right but you get our point.

To be fair <to sales forces>. Salespeople are motivated by money and that incentive plans drives their behavior. It is human nature to seek the 20% and make a sale.

Let’s highlight the two main issues that arise when viewing this while Pareto and typical sales force behavior:

1. It’s really 64/4.

Sales engineering also follows the Pareto Rule although we will stick with the more precise 64/4 rule.

At any given point only 64% of your target decision makers in your target list are “good” and active.

And only about 4% <or a little above> will want to have a real sales meeting in a month. Yet, a typical sales force is at best effectively interacting with only 50% of both pools of decision makers. In other words … only 32% of your list is being worked and you are missing half of possible meeting opportunities because your sales force isn’t even interacting with them.

Click here to see how Company X maximizes meeting opportunities.

<link here for ‘maximizing sales meetings’ in Methodology>

2. Behavior is hard to change: leaving a 20% you feel you can make a sale with means changing how you think about building a sale.

Every experienced salesperson has a constant eye on their sales targets. The biggest issue in sales engineering is that salespeople, like most people and the markets they serve, are reluctant to change. Yet change and adaptability is the key to engineering a buying process with multiple decision makers. Behavior can really only be changed in a sales process by taking many of the decision away from the sales people, who know how to close but are maybe a little less savvy about weaving their way thru nudging someone own a purchase cycle, and placing the decisions into the hands of, well, the decision makers. Decision maker cues should drive sales engineering actions.

Change can occur when you take emotional, or perceived ‘sales instincts’, out of the sales engineering and replace it with ‘stimulus-response’ methodology.

Click here to see how Company X engineers education outbound off of decision maker cues <insert link here for the engineering aspect of the Model>

You shouldn’t ignore the 80% of decision makers in your database simply because they are not actively in the buying process. In fact, we would argue you should invest smartly against this 80% if you want to generate consistent better sales results. That investment in time an energy pas off in better understanding the potential customers, find out when they’re ready to buy, and ultimately generate the best returns from your sales and marketing activities.

Engineering the 80% is not about making a short term sales but rather the long term understanding of motivations, interests, and their unique purchase journey. In fact, engineering the 80% effectively creates an increasingly efficient sales effort against the actual active 20%. Through learning and constant connection with decision makers you actually impose your will against the buying process and in understanding the decision maker and the environment you can actually pick and choose contacts to get better sales more often.

We have shared many numbers and lots of math <probably some bad math>.

But suffice it to say Pareto was a smart man.

If only 4% of your target decision makers are actively in the ‘time to make a purchase decision’ mode at any given point, a business’s margin of error is incredibly small and the window of sales opportunity is well defined, but also small.

Company X knows how to effectively affect decision makers at the right time, the right place and the right message to create the right amount of consistent sales a business deserves.