80/20 Rule in Sales
Also known as the Pareto Principle, the 80/20 Rule is a formula stating 80% of sales are made by 20% of sales reps. It can feel impossible for underperforming reps to crawl out from under -- but it's not. Artificial Intelligence makes it easier than ever to flip the 80/20 rule on its head and make all reps high performers.
The 80/20 rule in sales, sometimes called the Pareto Principle, has been around forever. It’s a formula stating that 80% of sales are made by 20% of sales reps, and it sometimes seems as immutable as a law of physics.
Sales managers and business leaders try to move the ratio with training, but up to 87% of training content is forgotten within a few weeks. Coaching is no solution either. Sales managers typically spend 5% of their time coaching, rather than the expected 50%.
Some sales managers try to hire their way to greater productivity, but replacing salespeople is a costly proposition. Companies can spend up to $97,000 to replace a team member, and the learning curve is steep: Most new hires take about 10 months to become effective.
Sales managers try all these strategies and more to break free of the 80/20 rule. But, eventually, as if responding to the pull of gravity, sales performance reverts to 80/20 or a number close to it.
The good news is a new technology is emerging with the power to flip the script on the 80/20 rule: artificial intelligence (AI). AI is already improving sales operations by automating tedious tasks like updating the CRM system giving reps more time to focus on sales. But AI is capable of so much more. Here are three ways AI is poised to fundamentally transform the 80/20 rule in sales.
How AI is Flipping the Script on the 80/20 Rule
1. AI will provide guidance based on real-time marketplace factors
Instead of a traditional static playbook, AI provides a dynamic playbook guiding salespeople so they can maximize opportunities. AI can analyze enormous datasets and recognize complex patterns that humans can’t detect.
It can ingest marketplace data about new product releases, changes in buyer behavior online, and factor it all in producing guidance personalized for each opportunity.
A dynamic, AI-driven playbook in action might work like this: Picture a sports equipment sales team trying to sell a basic line of elliptical machines to a hotel chain. Negotiations seem to be going well, but suddenly, the buyer isn’t returning calls.
An AI-enabled sales tool detects a marketplace shift; a competitor is offering a discount on machines that sync with smartwatches. And armed with that information, the original sales team upgrades its offer and stays in the hunt.
2. AI delivers intelligent recommendations
Because it’s capable of weighing so many factors simultaneously, AI can provide salespeople with intelligent recommendations that make a sale much more likely.
It also explains the rationale behind the recommendations it provides, giving the sales team valuable customer knowledge and talking points to help close the deal. This ability eliminates the risk posed by a “one-size-fits-all” approach to sales.
For example, say a sales team is trying to meet a quarterly sales volume target for Product X. Naturally, they’d focus on moving that product when meeting contacts. But there might be signals they miss for other opportunities.
An AI-enabled sales solution could pick up on those signals, such as a LinkedIn article or social media chatter a prospect posted about a need best met by Product Z. The AI tool can recommend a product that will resonate with the prospect -- and tell the rep why.
3. AI identifies the right communication channel for each contact
Some people respond immediately to texts and ignore emails. Others ignore sales-related texts and prefer to converse on the phone. And others respond best to face-to-face meetings. The problem is, salespeople who deal with hundreds of prospects will find it difficult to remember individual preferences.
AI doesn’t have that problem — an AI-enabled tool can identify which communication channels work best for each prospect and steer the rep in the right direction every time.
AI factors in not only which communication channels were used recently but also analyzes data on contacts and transactions, identifying which communication modes were used before previous sales were made, as well as other factors to find the right channel for a specific contact.
These three AI capabilities only scratch the surface of what’s possible when big data and machine learning are combined in a continuously improving AI tool. By providing guidance that’s tailored to each opportunity, delivering intelligent recommendations, and identifying the most effective communication channel AI-enabled sales tools can do the unthinkable: flip the script on the 80/20 rule.
According to Harvard Business Review, a scientific approach to improving sales effectiveness can increase productivity in salespeople in the lower performance quartiles by up to 200%. Top performers benefit from a science-based strategy too, with an average productivity increase of 50% across the entire salesforce.
AI-enabled sales support can keep the 20% of the salesforce that carries 80% of the load producing at peak levels, while bringing the 80% of reps who underperform up to speed. Cracking the 80/20 rule is a true game-changer. Companies that adopt AI tools and supercharge performance across their sales organization will gain an unbeatable competitive edge.