The 80/20 rule in sales – fact or fiction?
Fifteen years ago, a study by the Sales Executive Council in the US busted one of the most common armchair myths in sales performance – the 80/20 rule. The top 20% of your salespeople are not in fact responsible for 80% of revenue.
The reality? In a typical sales team, the top 20% are responsible for about a third of revenue. It does vary of course, but even in very complex sales environments, the best performers are rarely contributing more than 40% to revenue over extended periods.
It’s an open question how well this finding translates to the distribution of revenue generated across partners in a channel model. Our experience in the Australian IT channel suggests that the 80/20 rule may hold more weight.
However, this myth busting finding reveals just how much untapped potential there is in your individual partners’ sales teams. It stresses the importance of not just appealing to one or two top performers from each partner, but to reach deeper into the rest of their teams to engage and enable the “B team” performers to sell more for your brand.
Don’t they just follow the A Team’s lead?
When we think about it for a moment, this really comes as no surprise. Then why, after 15 years of knowing this, do we still focus our incentive and sales engagement efforts on the top 20% of sales people? We tend to keep rewarding the same people, and sometimes we wonder whether this is just creating an expectation that they deserve more than their salary and compensation structure, rather than actually driving better performance.
The honest answer is that it’s hard to reach everyone, and if we can at least motivate the people at the top, then hopefully they’ll bring the others with them by example. We tell ourselves, that if only we can reach that next tier of salespeople and bring a few of them up, then we’ve succeeded.
There is truth to this logic and the reality is that salespeople are competitive and these competitions and incentives help them strive to out-do each other, on top of just attaining their personal KPIs.
Increase your revenue by 70% more
But what if I told you that you can increase your revenue by 70% more when you focus on the middle 60%? This is a second revelation out of the 2003 study. The SEC found that an increase in performance of 5% by the middle 60% (the “B Team”) can improve your revenue more than an equivalent shift of 5% in your top 20%.
Not only is there a larger group of people to engage with here, but they all have more room for improvement, on average, than the top performers. It’s very difficult to get top performers to improve much when they’re already performing so well. Whereas the low performers stand to gain a lot more benefit from training and enablement – and if this can be tied to effective incentivisation, you can drive incredible results.
So how do you engage the B Team?
It’s all well and good to make this point in theory but the reason we’re in this position is because it’s so much harder to reach the middle. So, let’s discuss a few ways that you can start better engaging the middle.
1. Target them specifically
The good thing is that the B Team is used to being ignored, so you can get some early wins just be making it clear that you’re making them a focus.
Some ways to do this:
Design a whole program where entry criteria is restricted to salespeople who haven’t sold your product much before (e.g. less than 5 sales).
Incorporate a second tier into your existing program that focuses rewards on training and sales development activities, with realistic quick wins available
2. How do you find them?
One challenge for a channel vendor or distributor is finding these people! The best way to start is with the people you do know. A simple referral incentive, that gives your existing A Team instant rewards for signing up their team is a great place to start.
3. Listen to their needs
Once you’ve got a chance to reach them, take the time to listen to their pain points and ensure that what you’re providing is actually what they need.
For example, instead of focusing your training on product-based information on features and benefits of your latest offering, you could:
Run training that focuses on dealing with common objections or competitive sales positioning
Offer joint customer meetings with your own sales reps to help them get that tough deal across the line
Incentivise these activities with instant rewards like virtual gift cards, before they’ve even closed a deal – rewarding incremental behaviour towards your end goal is key
Now the reality is that you may not currently have the time or resources to put something so tailored into place right away, but you can always get started somewhere.
Don’t even have anything in place at the moment? Why not start with a good old leader board prize for the top performers?
Feel like your top performers already receive enough from the compensation packages? Start with a simple training incentive for the B-Players.
Already got a few things in place but they’re not working very well? Step back, take a lot at how performance is spread across your team or partner network. Identify their different needs and set some realistic goals. It’s rarely one size fits all.
The trick is not to reinvent the wheel with a brand-new incentive program or blitz every time your sales forecasts look a bit worrying. Start by understanding the real distribution of talent and needs in your salespeople and then implement strategic improvements and track against measurable outcomes.
Good luck! If you need any more help, why not reach out to the team at Hachiko – we can help design, build a run a program that’s sure to get results.