Does the 80/20 Sales Rule Apply to Your Business?
The 80/20 rule for sales has been a tried-and-true principle used by sales organizations for more than a century. But is it really the most effective revenue strategy? Has it stood the test of time?
The short answer is no—your business can and should be diversifying revenue across every customer group, both to minimize risk and maximize growth potential. In this article, we’ll talk about how.
In the sections that follow, we’ll cover what you need to know about moving past the 80/20 rule to achieve sales results that set your business apart from the competition.
- The 80/20 rule originated in 1906 and proposes that 80% of your outcomes come from 20% of your effort.
- Depending on a small portion of your customers to generate most of your revenue is a risky strategy for any business.
- You can diversify your revenue across all customer segments by knowing and targeting the right ICPs and personas, executing a data-driven strategy, personalizing outreach, and continually monitoring and optimizing performance.
What is the 80/20 Rule for Sales?
The 80/20 rule—also known as the Pareto Principle—says that approximately 80% of outcomes come from 20% of your efforts or inputs. The concept originated more than a century ago with Italian economist Vilfredo Pareto, who noticed 80% of the wealth in Italy was controlled by 20% of the families who lived there.
In a sales context, the 80/20 rule implies that 80% of your sales revenue is generated by 20% of your customers or clients. This small group of customers is often referred to as your “high-value” or “key” accounts. Conversely, the remaining 80% contribute to only 20% of your sales revenue.
The 80/20 rule is widely used by companies aiming to prioritize their efforts and resources to convert and retain this small but critical subset of customers. By focusing on the most profitable customers, it’s thought that sales strategies can be optimized more effectively.
For example: This high-value group might receive special attention, personalized services, or tailored offers to keep them happy and provide them an exceptional customer experience.
But despite its long-established position as a sales strategy staple, our take at RevBoss—one based on extensive outbound sales experience across B2B industries— is that the 80/20 rule for sales isn’t all it’s cracked up to be.
The rule has inherent problems at risks that can keep companies from reaching their full potential when it’s depended on too fully to guide sales and revenue strategy.
Why the 80/20 Sales Rule Should Not Apply to Your Business
In short: Because your business can be better. Your sales strategy doesn’t need to be beholden to an age-old rule of thumb that may or may not be true. Some of the specific issues with using the 80/20 sales rule to guide your strategy and assess your sales performance include:
It’s Old and Outdated
The 80/20 rule for sales was built on an observation from the early 1900s. A full century later—and especially in the past few decades—technology has transformed the way sales is executed and the capabilities teams have to optimize results.
The 80/20 sales rule has not been systematically applied to these new situations and deeply understood to be true in a variety of sales scenarios.
There’s No Real Evidence Behind It
The 80/20 rule is highly anecdotal. You’ll be hard-pressed to find reliable, qualitative scientific evidence that proves the 80/20 rule to be consistently true for sales in different industries, for different target audiences, and for different types of companies. Applying it to your sales strategy, then, is a gamble.
It’s Risky for Your Business
Depending on one-fifth of your customer base to account for a whopping 80% of your revenue is a seriously risky endeavor—especially if you’re a startup or small business. What if you lose one or two or even three of those clients in a short period of time? Your revenue stream would be dramatically different and your business could struggle to recover as a result.
How to Be More Consistent than 80/20
You can be smarter and savvier than your competitors that depend on the 80/20 rule by knowing with confidence where your revenue is coming from at all times, and balancing out revenue across the customer segments you serve.
To do it, you need a marketing and sales strategy that’s detailed, data-driven, customer-centric, and personalized.
Know Your Customers
Successful sales starts with knowing your customer base. Develop accurate and detailed ideal customer profiles (ICPs) and buyer personas that describe your business clients and the decision makers within them.
Use your ICPs and personas to segment your customers into groups, target your outreach, and personalize the experiences your prospects and customers have throughout their sales journey.
Adopt a Great CRM
A great CRM system is the foundation of every successful strategy—especially one built to surpass the 80/20 rule. Sales today requires real-time pipeline data tracking from a high level and for each individual prospect or customer.
Adopt a CRM system with key features like customization capabilities, workflow automation, and easy third-party integration with your other key systems.
Use Data-Driven Prospecting
To beat the 80/20 rule, you need to get data-driven about your sales prospecting strategy. Old methods of casting the widest next possible and hoping for results isn’t going to work in the competitive sales landscape we operate in today. Leverage demographic and behavioral data to track how segments move through the sales process, and understand how each one generates revenue for your business in different ways.
Personalize Your Outreach
Personalization is table-stakes for every sales organization today. Not only do customers expect personalized experiences, they look elsewhere when they don’t receive them. To diversify your sales revenue beyond 80/20, you need a way to automate personalization throughout the sales process and deliver customized experiences at every stage.
Start with a technology-driven prospecting strategy that customizes outreach channels, content, and messaging to each customer segment you target.
Track Important Metrics and KPIs
Performance tracking is an essential part of maximizing sales revenue across your customer base. By tracking important sales metrics and KPIs, including those that are important for specific segments, you can better understand how to refine and optimize your outreach and strategies for better results.
Speaking of optimization—it should be a continual process for your sales team. Maximizing your sales revenue potential and diversifying it across your customer base requires being actively engaged and in tune with your current performance and taking steps to make it better. The best way to do this is with an integrated marketing/sales tech stack.
Over to You
Looking to maximize the sales revenue so every customer segment in your portfolio makes an impact? RevBoss can help. Our outbound email and lead generation services are custom-built for startups, consultancies, marketing agencies, and other B2B organizations.
Schedule a quick call with us and find out how we can help you win more clients.