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Pareto's Butcher shop and Sales

Updated: Apr 11, 2022

What is Pareto's Law?

Management consultant Joseph M. Juran developed the concept in the context of quality control, and improvement, naming it after Italian economist Vilfredo Pareto, who noted the 80/20 connection while at the University of Lausanne in 1896.[4] In his first work, Cours d'économie politique, Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population. The Pareto principle is only tangentially related to Pareto efficiency. (Source Wikipedia)

In recent years, technology has advanced sales prospecting with tools for pipeline revenue management/growth, drip email campaigns and whatever else you can think of that falls into the bucket of "high velocity sales". These tools are extremely helpful and affordable, but the catch is that many sales leaders are typically focused on the top line revenue growth (the 20%) and they rarely focus on the sea of lost opportunities the sales team had to go through to achieve those wins (the 80%).

Let's use the butcher shop analogy. If Vilfredo Pareto owned a butcher shop, he would probably only sell the 3 most expensive cuts of meat; a Tenderloin (Filet), a Ribeye Steak and a T-bone. These all come from the center of the steer (and it accounts for less than 20% of the animal). The challenge with Pareto's 80/20 principal in this situation is that he probably wouldn't be able to keep the lights on too long if he only sold those three cuts of beef!

What he would hopefully soon realize is the significant amount of potential with the other cuts of meat, which accounts for more than 80% of the animal. The difference between the prime cuts and the other cuts is that there will need to be a little extra effort put into the sale. Offering a special sauce or seasoning then guiding the client with clear instructions how to prepare and cook the meal is all it takes to convert the sale and retain a satisfied client.

We're not saying that Pareto's law is flawed, it's just that the concept is heavily overused within sales departments. If more organizations were to setup their CRM's (we primarily work with SalesForce and Microsoft CE) to segment the lost opportunity data for review, then analyzed why they lost those opportunities, at least three things would happen.

  1. The organization's outbound messaging will gain significant clarity.

  2. Prospecting efforts would become more targeted and opportunity closed won rates would increase.

  3. An increase in revenue and development of meaningful customer relationships which leads to easier upsells and higher retention.

The truth is that this has been one of the biggest oversights that we've seen made over the years and we have been guilty of it as well. Our hope is to provide some color to the situation so sales teams can avoid burnout by working smarter and not harder.

A great starting point is to create segmentation in your leads. If your team is not disqualifying leads or you only have one disqualification dropdown, there is a good chance you have a graveyard or amazing prospects in your system that your team has no idea how to access.

If your organization uses SalesForce or Microsoft CE as the CRM and the sales team is heavily prospecting but struggles to hit quota, then you are an ideal client for the Carrera Consulting team. Before we get serious, let's first have a conversation and you can start that process by simply completing our contact form linked here: Contact | Carrera Consulting



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