The Importance of the Pareto Principle

The Pareto principle (also known as the 80/20 rule, the law of the vital few) states that, for many events, roughly 80% of the effects come from 20% of the cause.

When selling cars, however, we must look at this principle in reverse. Not doing so is a typical pitfall in sales; the salesperson is too concerned with getting the customer on the “numbers” rather than focusing their attention on the vehicle they are trying to sell the customer.

80% of a salesperson’s time should be spent selling the customer on the features and benefits of the car he is interested in. More and more often, salespeople fail at this by focusing only on filling an order.

This is what it looks like when the principle of spending 20% of the time on selling (versus 80%) is utilized:

It’s a win-win-win for the customer, the dealer, and the salesperson. As a salesperson, you benefit from the opportunity to serve the customer long-term, and the customer benefits from a great customer experience and the beginning of a long-term relationship with someone who wants to service him.

There are two types of salespeople (known as “the order taker” and “the low grosser”) who use the Pareto Principle incorrectly, by spending the majority of his time either trying to fill the order or “give the customer a deal.”

that they give the customer a negative experience and loss the value and should spend 80% of the time building value in themselves, the dealership and the product they are selling.

The Order Taker is content on selling the minimal amount required in order to stay on the team. He knows the product well enough but lacks the desire to put any more effort or skill into his process because he is comfortable with the way he sells.

This type of salesperson is focused on selling the customer what he thinks the customer wants rather than actually listening to him and helping him find something he might enjoy more.

DO INSTEAD: Listen to the customer’s needs and wants, and sell him what you have in stock that will benefit him and meet all of his needs and wants.

The Low Grosser thinks he’s working for the customer’s benefit but, in the end, he doesn’t get a paycheck and does get a bad CSI score.

The customer feels as though he was misled by the salesperson into thinking there was “more meat on the bone,” and the customer doesn’t believe he’s won. The salesperson often ends up quitting because he can’t figure out why he can’t make any money. The dealership loses a customer because he feels—after spending hours trying to negotiate—that the dealership still made lots of money off of him.

This scenario is a lose-lose-lose for everyone: the dealership, the customer and the salesperson. The customer never feels good about his purchase and, therefore, and the dealership loses a potential long-term customer and referral source.

Tips to ensure you’re executing on the Pareto Principle correctly

  1. Build value in yourself—customers buy from people they like
  2. Build value in the dealership—sell the customer on the merits of the dealership and why he should continue to do business with them
  3. Build value in the product you’re selling—know your product and build value in the features it has and how those features benefit the customer

If you focus 80% of your time doing this with the customer, you’ll create a better customer experience, lifelong customers and the opportunity to stay and grow in the car business.



Leave a Reply

Your email address will not be published. Required fields are marked *