Selling Cars Using the 80/20 Rule

Are you familiar with the 80/20 Rule?

If you work in sales at a dealership, you might be thinking of the saying “80 percent on your feet, 20 percent in your seat,” which basically means that sales consultants who spend the majority of their time walking around with the customer showing off the features of the car are more successful. Only a small amount of time should be spent discussing the numbers, the saying suggests.

Why? Because, well, customer experience. Or maybe it could be called car experience: the test drive, hands on the wheel and feeling the road, the walkaround, seeing their reflection in that perfect paint job, etc. All of those things that the customer can’t do online, or even in their mind.

Think about that for a minute. It’s pretty powerful! That’s where tools like AutoAlert really shine. They give customers the numbers before they even step foot in the store – numbers that make sense to that particular customer, for deals that are personalized and desirable. Which gives the sales consultant ample opportunity to focus purely on the experience.

All of that is certainly helpful. The 80/20 Rule, however, dates back to just before the automotive industry was born. It is a broader, economics-based principle that has its origins in late-1800s land ownership in Europe, but has spun off into a multitude of practical business theories, including those that apply to car sales.

80/20 Roots

The Pareto principle (AKA the 80/20 Rule, or the law of the vital few) was named after Italian economist Vilfredo Pareto. It states that, for many events, roughly 80 percent of the effects come from 20 percent of the causes.

Pareto was an Italian economist who noted that approximately 80 percent of the land in England was owned by 20 percent of the population. He then discovered that this pattern typically held true across different time periods and different countries. Mathematically, many natural phenomena exhibit this “power law distribution” for a particular set of parameters.

It is a truism of business management that “80 percent of sales come from 20 percent of clients.” Entrepreneur and management consultant Richard Koch has written several books on how to apply the Pareto principle in sales environments – in fact, in all walks of life – and has made a fortune himself from the concepts.

Applying 80/20 to Car Sales

When it comes to automotive sales and marketing, a few of Richard Koch’s 80/20 Rule observations are particularly helpful:

1. “If most results come from few causes, there is great mileage in isolating the few causes that have the greatest results. For example, it may [be] that 80 percent of what you achieve in your work comes from 20 percent of the effort or time spent. If this is true – and it usually is – four-fifths of the effort and time is largely irrelevant.”

That loosely translates to “Focus on what’s important.” This is one of the biggest benefits of the AutoAlert platform – it allows dealerships to cut through the clutter by giving them transparent deals for every customer, and ranking those deals according to profitability and the customer’s likelihood of buying every day.

2. “In business, many examples of 80/20 have been validated. 20 percent of products usually account for 80 percent of sales value; so do 20 percent of customers. Even more vital – a fifth of products and customers typically yield four-fifths of profits. Companies have far too many products and customers, many or most of which are unprofitable.

Dealerships using AutoAlert always know who their top 20 percentile of customers are, because they know the rankings of all customers.

3. “Identify your market and your core customers – those who like you best and give you most of your profits – and serve them best.”

So perhaps “80 percent on your feet and 20 percent in your seat” is a reflection of the 80/20 Rule – because engaging with the right customer, creating a truly memorable experience, holds a lot of value.

When it comes down to it, AutoAlert gives your team the data, the numbers, the deals to succeed, but it also provides the intangible: the time to spend with the customer, develop a real relationship, and provide a stellar experience. That in itself is a win – 100 percent of the time.

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