Communication is successful, only if it achieves your desired results. It doesn’t matter if you think you’ve communicated well or if you think you’ve been crystal clear, what matters is that your communication is received and acted upon in the manner you wanted.

How many times have you said something to another person who has totally misinterpreted what you meant? Equally, sometimes we are on the receiving end of communication that makes us feel bad. If we can look beyond the communication and try to see a positive intention behind another person’s behaviour, then our relationships and interactions with people become more constructive and empowering.

When we communicate with people and if they are ‘not getting’ our point, then the responsibility is ours to adapt our approach until they do.

For example; if we have communicated a price increase and the reasons for that price increase, and our customers have not understood those reasons, the responsibility for this mis-communication lies with ourselves. Therefore, we can only judge the success of what we have communicated based on the reactions we get from other people.

Resistance from another person usually signals a lack of rapport.

Rapport is a vital ingredient when developing relationships because it builds trust and allows communication to flow. When that state of rapport is there, communication is a lot easier even if you do not agree with the other person. When we do not feel that rapport or connection, we have a tendency to ‘nit-pick’ or find fault.

Customers respond to people they perceive understand their position and are on the same wavelength. If we are encountering lots of resistance from a prospect or a customer, then it helps us to notice that we have not built sufficient rapport. Even if our prospect does not agree with what we are saying, rapport enables us to have an open discussion where we can get an honest reason for their reaction rather than a ‘prickly’ brick wall.

Flexibility improves success.

The greater your flexibility, the greater your chances for achieving what you want. If we accept that, every person is a unique individual then we have to accept that each prospect and customer will require a different approach. Using the same approach with all prospects and customers is like playing the lottery; the chances of getting it right are extremely low. If we have high levels of flexibility that allows us to adapt to each prospect and customer’s style then we are able to build more rapport and reduce resistance.

Albert Einstein gave the definition of insanity as doing the same thing repeatedly whilst expecting a different result.

As an example, think about a fly…have you watched how many times a fly bumps its head trying to fly out of a window? I guess that is why it is a fly. The more we are able to adapt, the more opportunities we create.

If what you are doing is not working, try something different and if that does not work try something different again. Flexibility of thinking and behaviour creates awesome sales people.

Of course there is failure. If you take a driving test or an exam, you either pass or fail. 

Salespeople will either succeed in achieving their monthly sales targets or fail to meet them.

The key is how you perceive ‘failure’.

Every failure can be looked at as a learning opportunity that is beautifully epitomised by Thomas Edison, the inventor of the light bulb. Despite more than 10,000 failures, he stood by his dream until he made it a physical reality. He said that every discarded idea took him one-step closer towards finding the idea that would work.

One of the most powerful self-coaching questions sales people can ask is, “What will I do differently next time?” or “What can I learn from this?”

Salespeople who make mistakes and learn from those mistakes have a tendency to do better than salespeople who are scared to fail. Therefore if you can see that when you don’t achieve your targets you have an opportunity to learn, because you have been given great feedback on what not to do next month.

Accepting 100% responsibility creates transformation.

Every action you take creates a reaction that is based on the formula of cause and effect. Everything that happens is the effect of an underlying cause.

Most people spend their lives operating at effect….”It’s not my fault I always end up in bad relationships.” “Life’s so unfair, things always happen to me.” “We’re in a recession, that’s why I haven’t achieved target.” “If I could only match our competitor’s prices, I’d win more deals.”

True personal power can be achieved when an individual accepts 100% responsibility for what they create in their lives.

To put it another way, you get one of two things; the result or outcome you want or the reasons why you did not (you may recognize these as ‘excuses’!)

The more you focus on the reasons (excuses) and blame circumstances beyond your control, you push away your personal power.

Therefore, if you believe that you are in control of the situations that life ‘appears’ to throw at you, then you are in control of your thinking and emotions, and therefore in control of your own life.

This belief has given thousands of salespeople the determination to break through so many barriers and overcome countless challenges when at times it was tempting to wallow in self-pity.

If something good or bad happens, ask yourself, “How did I create that?”

This question enables you to tap into your brain’s infinite potential and it will give you all the answers you need.

If you are prepared to commit 100% to taking responsibility, the results can be extraordinary.

News: We now have a ten day countdown to the most ambitious, and hopefully, the most significant online sales event ever. If you have been hiding away in a Tibetan monastery for the past two weeks, it is highly probable you will have no idea what I am talking about. If you haven’t been hiding away in a Tibetan monastery for the past two weeks, and still have no idea what I am talking about, be very embarrassed!!!

May I ask both groups to make your way over to the 2011 Sales & Marketing Success Conference  in aid of the Japanese Disaster Fund, as quickly as you can please – no dawdling, places are limited.

Thank you!

There are two escalating pressures in today’s marketplace that are creating a need for a more disciplined approach towards sales opportunities:

o The need to be more specialized and individualized in dealing with clients because we can no longer afford to treat all situations in the same way.

o The reality of competition - Often to increase market share, you must do so at the direct expense of the competition. The competitive intensity of the sales environment is escalating with the globalisation of the economy.

These are the main “drivers” behind the demand that organizations adopt methodologies and processes to manage these issues.

By utilizing a rigorous and formal opportunity assessment, we are aiming to achieve two sets of objectives:

Business Objectives

o Determine which sales opportunities should be pursued at the direct expense of others

o Given resource limitations, decide where and on what basis resource should be allocated to a sales opportunity.

o Determine whether our company is over-investing or under-investing in a sales opportunity.

o Enhance forecast accuracy.

o Use “proven” criteria to reduce the cost of sales

Sales Objectives

o Identify, quantify and categorize opportunity assessment criteria.

o Increase “Hit-Rate” (Win – Loss ratios) by avoiding unsuitable business

o Discover where we and our competition stand with a customer

o Gain a complete and accurate view of a sales situation prior to writing a sales plan to win.

o Calculate the probability of winning or losing a deal early in the sales process

All sales professionals claim to be permanently time constrained – we always have limited time and resources with which to achieve our targets.

We can be involved in only so many accounts or sales situations before we begin to lose our ability to manage what is taking place. At that point, we lose control and the competition takes control.

We can only control and manage what we understand and that is the real value of continuous and rigorous assessment of our pipelines.

The reality is that at least 33% of opportunities currently residing within your pipeline will never close – this will be for a number of reasons …

• You haven’t qualified it out rigorously enough, and there are buying issues that you are unaware of.

• You haven’t penetrated the “formal decision making unit” and you are only dealing at “recommender” level – or worse, “user” level. As a consequence, you are relying on your contact(s) to sell your solution upwards for you.

• You are merely “quotation fodder” The customer’s buying process requires at least three bids, but they already have a preferred supplier, who will simply adjust their bid after the rest are received.

• This is a “desire” purchase and not a “must have” one, which means there may not be available funding available.

• Budget has not been approved, and may never be. (Did you ask that question during your early qualification?)

• The requirement is dependent on them winning a contract with their client/customer.

• You will be outsold by a competitor who has superior solutions/price/selling skills etc.

• Your solution is not a perfect fit and you are hoping that this will not be noticed – despite your very best efforts, it will be, eventually, believe me.

• There are political issues involved which you have failed to identify – there are always political issues lurking somewhere in the background, waiting to trip up the unsuspecting and inexperienced salesman/saleswoman.

• The “psychographics” are wrong and this order is not winnable. You are out of your league, and despite your excitement at uncovering this once in a sales lifetime opportunity, your company is simply not geared up to deliver such a large order. Eventually, the buyer will uncover your inexperience and remove you unceremoniously from the bidding list – after you have wasted weeks, even months working on it.

So, when you examine your own pipeline, can you identify those 33%?

There are no prizes for having an over-inflated pipeline; there are only prizes for closing business!!

I personally usually have no problem generating solid referrals. This is because I do genuinely strive to “exceed my client’s expectations” although I actually abhor that much over-used and often derided term. However, in the absence of a suitable alternative to describe my organization’s endeavours to provide a service which goes beyond what my client expects - and has paid for - then I’ll continue to use it.

For example …

“Jonathan has trained us to ever higher levels in Sales and Customer Care and everyone in the company has taken some benefit from his input. Jonathan’s input has undoubtedly had a positive effect on our sales and on our bottom line and we thank him for it. If it is a weakness then he has over-delivered because of his enthusiasm and desire for us to succeed, if this is not a weakness then as far as we are aware he only has strengths ….”

Or

“Jonathan is intuitive, highly motivated with an outstanding dedication to the task. It has been impossible to avoid being overwhelmed by his enthusiasm and commitment which is both inspiring and motivational to all involved. As I said, how frustrating! His training efforts have created a happier and more productive team, which I consider even more incredible, due to the fact that we already had a happy and highly motivated team …” And so on.

If at the conclusion of any assignment, I do not receive endorsements of that quality, then I really feel as if I have failed, and not earned my fees.

So why are referrals so important?

We all understand that generally speaking referred prospects will accelerate through the sales pipeline at a much faster rate than other types of opportunities, and they will also be more receptive towards providing future referrals.

What are the biggest barriers to getting referrals?

If asking for referrals has not been included and communicated in the sales process, this will deter salespeople’s focus as they will see asking for referrals as a ‘nice to do’ rather than a ‘must do’. This in turn usually means that there is no rigorous method for measuring and monitoring how many referrals are generated and what the conversion ratios are for closing referred customer business.

Energy goes where attention flows, so without specific attention to this salespeople are unlikely to invest their energy in this direction. (Even if they are firm believers in the positive impact that referrals can create!). For many salespeople asking for referrals is uncomfortable because they feel unsure about how to do this effectively, and they aren’t confident they will get their desired response.

If people don’t know how to do something and they believe that what they are doing will damage their existing relationships, then it’s better to avoid it all together. Additionally, if salespeople make the common mistake of asking for referrals too early on in the relationship this can result in more refusals that further erode salespeople’s confidence.

Therefore, to optimise the use of referral-based selling the following components are vital:

1. Asking for referrals and acting on them needs to be incorporated in the overall sales process.

2. Metrics around referrals should be sought and evaluated on a regular basis, because this contributes towards furthering the rationale for generating them.

3. Development and training needs to be delivered to the sales team so they can maximise the impact of referrals and feel confident with this skill.

When is the best time to ask for referrals?

People will freely give referrals when they have benefited from your product/service and have an established relationship with you. This rarely occurs during the initial meeting because whilst they may like you, they haven’t yet validated what you can do for them. That’s why asking for referrals should be when the relationship you have established is strong enough to ensure their trust and belief in you.

Assessing the strength of your existing customer relationships can be very subjective unless there is a meaningful set of relationship criteria in place.

Although these will vary from organization to organization, they may include factors like:
- Communication frequency with key influencers
- Satisfaction with product/service
- Speed of response to queries/problems
- Length of relationship

The customers with the highest scores (based on the relationship criteria) are those that should be approached for referrals.

What is the best way of generating referrals?

1. Prepare a description in the form of a criteria list that specifies the type of person or organization that you are looking to approach. This should be based on the profile of your “Ideal Customer.”

2. Evaluate all your customers using a relationship criterion and identify a list of those with the highest scores. For every customer your aim is to generate a minimum of 5 referrals. Therefore, if you have 25 customers on your list, your target number of referrals will be 125.

3. Contact each customer on your list and take the pressure of them by explaining that you don’t want to sell to them, you would like their help.

For example: “Do you know anyone (specify your criteria) that would be interested in learning about how our products/services can benefit them?”

Preface your question with a softener such as: “I wonder if you can help me” or “I would really appreciate some advice.”

4. When customers give you referrals, ask their permission to use their name when making contact. Alternatively, where your relationship is ‘rock solid’ ask customers to make the initial introduction by letter or email. Often customers will give a glowing testimonial and create a relevant context when introducing people.

5. Thank customers for referrals and keep them apprised of your progress. This creates a positive association towards the giving of more referrals in the future.

Problem solved?

I do coach referral sales skills, but I have two very good chums who are widely acknowledged as the very best on the planet in this very specialized area, so if you are seeking advice, may I point you towards:

Joanne Black, author of the bestselling “No More Cold Calling” – Go to site HERE

And Paul McCord, author of the bestselling “Creating a Million Dollar a Year Sales Income: Sales Success through Client Referrals” You will find Paul HERE

It is fairly common knowledge that even today, in most industries, a very high percentage of training budgets are spent on “product knowledge” workshops and training sessions. This is understandable to a degree – particularly in the more technical sectors – but what about all the other types of “knowledge?”

The task of selling never becomes any easier and, as competition continues to intensify; sales people will face issues that can be extremely difficult to deal with – i.e. decreased product uniqueness, increased competition within ‘safe’ markets, longer sales cycles and shorter product life spans.

Every organization that intends to survive in the re-engineered environment that arrived with the new millennium must, in my view, respond to those realities.

Today’s clients/customers are looking for vendors who can be business partners, who are willing and able to share risks and who are able to properly manage the entire sales process -not just simply demonstrate products. 

On-going research demonstrates that today’s ‘average’ salesperson is just as effective as the high performer in explaining features and benefits effectively, relating a service or product to customer needs and closing a sale. But, above this Level 1 plateau of competence, the exceptional salesperson is busy defining the “basic skills of tomorrow” This includes broad based business knowledge, industry knowledge, sector knowledge, knowledge of one’s own company and of course, knowledge of oneself.

It is suggested that 84% of buying decisions are based on emotion – if that really is the case, buyers will not buy because they like us, but rather because they trust us.

Logically, we are far more likely to trust someone if we sense synergy; if the seller talks our language, and if they are “knowledgeable!”

As playing fields become even flatter, and differentiation becomes much more difficult to prove, knowledge will become a key issue.

News:

As I shared with you yesterday, we are beginning the countdown to the most ambitious online sales summit ever staged: Thirty five presentations, delivered by thirty six of the world’s top sales and marketing experts, with just one aim … to raise money for the Japanes Disaster Fund.

Have you reserved your place yet?

This week, I am going to be promoting the event one day at a time, hoping to prick your conscience and spur you into action …

Just $5 buys you a front row seat for any one of the following:

Tuesday May 10th: All times are Eastern (for GMT, add +5)

Selling Is At An Inflection Point – How Can You Succeed From Here On In?
Presented at: 12:00 – 12:30 EASTERN
by Dave Brock
CEO of Partners in EXCELLENCE

Build the Success of Your Sales Team with 3 Simple Steps to Improve Skill and Will 
Presented at: 12:45 – 1:15 EASTERN
by Nancy Bleeke
President of Sales Pro Insider
 
Winning sales in 2011: How to arm today’s BtoB sales force with the tools and skills to compete- and win 
Presented at: 1:30 – 2:00 EASTERN
by Michael C. Bird
Chief Revenue Officer at NetProspex
 
Social Media Strategies for Lead Generation Success 
Presented at: 2:15 – 2:45 EASTERN
by Kendra Lee
CEO of the KLA Group
 
14 Edgy Ways to Break All the Sales Rules and Be Madly Successful Doing It 
Presented at: 3:00 – 3:30 EASTERN
by Dan Waldschmidt
Co-Founder of IntroMojo
 
Success Tactics to Generate Red-Hot Prospects 
Presented at: 3:45 – 4:15 EASTERN
by Joanne Black
Best Selling Author of “No More Cold Calling”
 
Improve Your Cold Calling Success 700% 
Presented at: 4:30 – 5:00 EASTERN
by Nigel Edelshain
CEO of Sales 2.0 (LLC).

 Please, please get registering – places are strictly limited, and I really do want you to be there.

Most professional frontline sales professionals – at least those working in a B2B environment – will tell you that they always (try) to work to “win-win” principles, but in order to fully comprehend the significance of “win-win” we must also appreciate why “lose-win” and “win-lose” are rarely, if ever acceptable outcomes. Here is my interpretation.

“Lose-win” means we have accepted terms or reached an agreement that has insufficient value for us; it has produced an inappropriate level of profit, and it may have no strategic value – that is to say, there is no long-term value either. No matter how much ground bait you throw in, it is not going create a proper return on your investment.

With “win-lose” we appear to gain a financial advantage at the expense of the buyer. This approach may be acceptable in some commodity sales environments, where you are totally driven by top-line revenue, and the opportunity for repeat business is negligible, but even then, most companies are waking up to the value of repeat business – even your local restaurant.

You see, your customer will find out that they have paid over the odds, or they have been treated unfairly, and they will vote with their feet, and may never return.

That leaves us with just one final possible outcome, “lose-lose”

I suspect that as many as 80% of frontline sales professionals will shudder at the thought of “lose-lose” No deal, no commission, angry boss for losing the order. This is a very short-sighted and commercially naive viewpoint.

The scenario often plays out something like this: We work conscientiously throughout the sales/buying cycle; we understand the rules; we are totally aware of the steps our prospective buyer intends to take, and we accept them. Then at the death, the rules are changed. Typically price becomes a far more critical issue, and we discover that we are being rapidly pushed towards a “lose-win” outcome.

So now we have two choices. We can agree to the revised terms; drop our pants and cave in just to save the order, and earn a reduced commission – and of course much less profit for our company. Alternatively, we can accept “lose-lose”

There are, you may be surprised to learn, benefits from opting for “lose-lose”

You walk away with dignity. You send out a message that you fully appreciate the value of your products/solutions, your company and yourself. You are letting your prospective purchaser know that your company is also in business to make a profit.

By standing your ground, you will, in all probability, gain an even higher level of respect from the other side – and you will have the opportunity to do business together in the future – no, does not mean never.

News:

Ok, we are beginning the countdown to the most ambitious online sales summit ever staged: Thirty five presentations, delivered by thirty six of the world’s top sales and marketing experts, with just one aim … to raise money for the Japanes Disaster Fund.

Have you reserved your place yet?

This week, I am going to be promoting the event one day at a time, hoping to prick your conscience and spur you into action …

Just $5 buys you a front row seat for any one of the following:

Monday May 9th: All times are Eastern (for GMT, add +5)

Selling Successfully to Crazy-Busy People
Presented at: 12 noon – 12:30 by Jill Konrath

Achieve More Sales Success by Ditching
Your Pitch!
Presented at: 12:45 – 13:15 by Kelley Robertson

Expect Success – Creating a Culture
of Positive Expectations
Presented at: 13:30 – 14:00 by Kevin Eikenberry

A Gourmet Life for Personal
and Professional Success
Presented at: 14:15 – 14:45 by Ken Thoreson

5 Must-do’s to Leverage Social Selling
for Your Lead Generation and Sales Teams
Presented at: 15:00 – 15:30 by Koka Sexton

Successfully Profiting from the New
Buying Cycle
Presented at:15:45 – 16:15 by Colleen Francis

How to Successfully Increase your Prices
in a B2B World
Presented at: 16:30 – 17:00 by Mark Hunter

Please, please support us, register TODAY! 

I usually ask just three very straightforward questions in order to identify why a salesperson is underachieving:

• Are they visiting/talking to enough clients/prospects? Whilst activity alone does not make a salesperson successful, the right type of activity is a major factor.

• Are they talking to the right people within those client/prospect organisations? In other words, are they able to first identify, and then penetrate the formal decision making unit, or are they operating in their comfort zone, and wasting time with people without power or influence.

• Are they saying/doing the right things? This is really the skills elements – opportunity assessment, communication, presentation, negotiation, closing, relationship building etc.

However, we can look more closely, and these eight reasons always provide at least one answer:

1. Wrong or no selection process - The wrong person for the position
2. Wrong or no training - Insufficiently developed
3. Wrong or no planning - Expected to do all of their own planning
4. Wrong or no supervision - Left without competent supervision
5. Wrong or no motivation - Not properly motivated to meet objectives
6. Wrong or no stimulation - Not stimulated by appropriate incentives
7. Wrong or no evaluation - Not regularly appraised against a set of agreed objectives
8. Wrong or no executive action - Not adequately supported by a competent manager

In Summary:
Management has responsibility for all of these, including the last one! If any member of your sales team fails, you fail – that is the reality.

You may also enjoy this interview I recently recorded with Erik Luhrs of  GuruSelling.com “Salespeople Don’t Fail, But Sales Managers Do”

Download HERE

As it is Easter, I do hope that you will allow a small self-indulgence from this all round good egg? Fact is if I don’t tell you about this, it is quite likely that nobody else will! 

Last week I was honored by EzineArticles – Expert Author Showcase: Jonathan Farrington

I have been submitting my work to Ezine for almost five years, and as I suggested in the comments section of the post …

“Trust me, nobody comes anywhere near in terms of consistent professionalism, innovation, and all round excellence. I just hope my experiences will inspire others to express themselves through the written word, and share their expertise with a voracious global audience”

I do have a very small number of “specialist” locations to whom I regularly contribute my work – Salesopedia, Rain Today, EyesonSales, ChangingMinds, Evan Carmichael - the elite, “creme de la creme” of sales resource locations, and not forgetting Top Sales World of course!

But, Ezine was the very first site that I contributed to, and of course they are the largest – almost 400.000 authors, and their monthly vistors exceed all of the sales related sites, including Selling Power and AllBusiness combined.

What has been their secret? Why have they thrived when so many similiar sites have perished?

Largely down to the vision of this man .. founder and CEO, Chris Knight. Never afraid to challenge paradigms; continually working with a “how can we do it better” mind-set; incredibly commercially astute; totally customer focused. That is how you build and maintain a “Rolls Royce”

So, a big thank you again to Chris and his team for playing such a significant role in my own success.

You can enjoy the write-up here: Expert Author Showcase: Jonathan Farrington

One of the key tasks of a sales manager is to continually seek ways to improve the manner in which their team operates – constantly challenging paradigms and questioning “the way we do things around here” will ensure the team remains at optimum performance levels.

However, it is also important to stay within an overall long term strategy and not effect change for change’s sake. Here are some thoughts on moving forward in a structured manner.

First, keep the key management functions in mind

• Define objectives (your own and others)

• Plan (and time) action

• Communicate (throughout the process)

• Support others’ action

• Evaluate performance (and link to the future)

• Then relate this to the task, the team and the individual people

Keeping the Overall Management Process in Mind

Define Objectives:

• Task – Identify task and constraints

• Team – Set targets and Involve team

• Individual needs – Agree targets and responsibilities

Plan:

• Task – Establish priorities

• Team – Structure and delegate

• Individual needs – Assess skills, train and delegate

Communicate:

• Task – Brief and check understanding

• Team – Consult, obtain feedback

• Individual needs – Listen, advise and enthuse

Support/Control:

• Task – Monitor progress, check standards

• Team – Co-ordinate, reconcile conflict

• Individual needs – Recognize, encourage and counsel

Evaluate:

• Task – Review, re-plan and summaries

• Team – Reward success; learn from failure (and success)

• Individual Needs – Appraise, guide and train for the future

This view encapsulates, and simplifies, the whole process.

With this picture in mind, certain key issues are worth a mention:

Link to the Future

Ongoing success, as a manager, is influenced by:

• The attitude you take to the transition

• What you do before you move into a new appointment

• The early focus you bring to bear on key issues

• The relationship you thus cultivate with staff

• The working habits you create for yourself (and others) in process

Together, all the above influence early success in the job – and how you take things forward into the future.

Key Issues

From the beginning, always operate on the basis that managing people:

• Takes time – you cannot get so bound up in your own workload that you skimp on time you should spend with others

• Takes effort – it is a challenge, there are no magic formulae or quick fixes that will do the job for you

• Needs thought – the obvious or immediate answer may not be best, things may well need research, analysis and thinking through

• Is not a solo effort – seek and take advice from where you can, including your own staff

• Will not always go right – as Oscar Wilde said, “Experience is the name so many people give to their mistakes.” Admit your mistakes (publicity if necessary) and learn from your experience

Remember too that managing people:

• Is a process of helping others to be self-sufficient – this implies trust and that management works best when you take a positive view of what people can do (and do not see your role as a sort of corporate security guard)

• Is based on good, regular and open communication – something that pervades many issues commented on in these pages

• Needs to be acceptable to people before it can be effective – hence the crucial role of motivation as part of the management task

• Become self-sustaining when it works – i.e. if people find your management helpful (to the job, the organisation and to them) then they will support it and support you

Overall, management is not what you do to people, but the process of how you work with people to help prompt their performance. Work with people from day one, and go on doing it throughout your management career.

At the end of the day, success comes down to a considered approach. Charge in, desperate to make an impression, go at everything at once in order to make an impression, and disaster may closely follow. ‘Twas ever thus:

“First organize the near at hand, then organize the far removed

First organize the inner, then organize the outer

First organize the basic, then organize the derivative

First organize the strong, then organize the weak

First organize the great, then organize the small

First organize yourself, then organize others.”

General Zhuge Liang

Perhaps we should highlight the last sentence: “First organize yourself, then organize others.”

Last Word

Being a manager is a challenge, but it is also almost infinitely rewarding to create and maintain a team of people who deliver excellent performance and produce whatever results are targeted. It is a task that takes time, requires effort and needs a considered approach.

All sorts of things can help, but only one person can guarantee that you become a good manager – and that’s you!

Pareto’s Analysis is a very simple technique that helps you to choose the most effective changes to make.
 
It uses the Pareto principle – the idea that by doing 20% of work you can generate 80% of the advantage of doing the entire job. Pareto analysis is a formal technique for finding the changes that will give the biggest benefits. It is useful where many possible courses of action are competing for your attention.
 
How to use the tool …

To start using the tool, write out a list of the changes you could make. If you have a long list, group it into related changes.

Then score the items or groups. The scoring method you use depends on the sort of problem you are trying to solve. For example, if you are trying to improve profitability, you would score options on the basis of the profit each group might generate. If you are trying to improve customer satisfaction, you might score on the basis of the number of complaints eliminated by each change.
 
The first change to tackle is the one that has the highest score. This one will give you the biggest benefit if you solve it.
 
The options with the lowest scores will probably not even be worth bothering with – solving these problems may cost you more than the solutions are worth.
 
Example

A manager has taken over a failing service center. He commissions research to find out why customers think that service is poor.
 
He gets the following comments back from the customers:

• Phones are only answered after many rings
• Staff seem distracted and under pressure
• Engineers do not appear to be well organized. They need second visits to bring extra parts. This means that customers have to take another day off work to be there a second time
• They do not know what time they will arrive. This means that customers may have to be in all day waiting for an engineer to visit
• Staff members do not always seem to know what they are doing

The manager groups these problems together. He then scores each group by the number of complaints, and orders the list:

• Lack of staff training: 6.51 complaints
• Too few staff: 4.21 complaints
• Poor organization and preparation: 2 complaints

By doing the Pareto analysis above, the manager can better see that the vast majority of problems (69%) can be solved by improving staff skills.

Once this is done, it may be worth looking at increasing the number of staff members.

Alternatively, as staff members become more able to solve problems over the phone, maybe the need for new staff members may decline.

It looks as if comments on poor organisation and preparation may be rare and could be caused by problems beyond the manager’s control.

By carrying out a Pareto Analysis, the manager is able to focus on training as an issue, rather than spreading effort over training, taking on new staff members and possibly installing a new computer system.

Key Points

Pareto Analysis is a simple technique that helps you to identify the most important problem to solve.

To use it:

• List the problems you face, or the options you have available
• Group options where they are facets of the same larger problem
• Apply an appropriate score to each group
• Work on the group with the highest score

Pareto analysis not only shows you the most important problem to solve, it also gives you a score, showing how severe the problem is.
 
This is only one application of this important 80/20 principle. It shows the lack of symmetry that almost always appears between work put in and results achieved. This can be seen in area after area of competitive activity. The figures 80 and 20 are illustrative – for example, 13% of work could generate 92% of returns.

Did Vilfredo Pareto create the first sales tool?

I use the principle in virtually every area of my life – try it for yourself, it really works