The 80/20 Principle Can Transform Your Dealership (and Change Your Life, If You Let It)

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Baseball is 90% mental and the other half is physical.

—Yogi Berra

There’s a lot to unpack in that famous quote from Yogi Berra, the New York Yankees manager as legendary for his “Yogisms” as he was for his coaching. While Berra’s math doesn’t add up, his idea does: Seemingly small things can have an enormous, disproportionate impact.

In some ways, Berra was giving us a modern (if somewhat scrambled) take on the classic “Pareto Principle,” also known as the 80/20 Principle. The Pareto Principle states that 20% of the actions someone takes drive 80% of the results. For example, 20% of your sales bring in 80% of your profit.

But that’s a glass-half-full reading. The glass-half-empty interpretation is that, without real effort, 80% of what you’re doing may be a waste of time and resources. Who can afford to throw away that kind of cash?

In today’s competitive market, dealers are desperately trying anything and everything that might make a difference to their bottom lines. But the lesson of Pareto is to analyze what you’re doing, use this data to identify key issues, and then do those well. And that could change everything.

Let’s go over some examples of how you can apply this principle to your dealership.

Stop Wasting 80% of Your Marketing Budget

Look at where your marketing money is going. When you use third-party referral sites, or generic marketing within a large geographic area, 80% of your marketing dollars are wasted on people who aren’t interested in what you have to sell. The wider you cast your net, the less exposure you get to your target audience.

Similarly, don’t waste time on generic promotions to increase foot traffic. These will just bring in more people who aren’t in your core market.

Create tailored campaigns that appeal directly to your ideal clients. Reach them where they are—in their neighborhoods, on social media, and elsewhere.

With tools like AdCue, you can do just that by specifically targeting your marketing and promotions to your desired customer base.

Go After the Top 20% of Clients

As we mentioned earlier, 20% of your clients bring in 80% of your revenue. Therefore, your focus should be on how to best take care of those top 20%.

Use data analytics to identify who these core customers are. Then, learn everything you can about them and determine how to meet their needs. Are they commercial clients who will be regularly purchasing multiple vehicles? Are they buying high-end or family SUVs? New or used? Do they finance, trade-in, or pay cash?

Don’t worry about stocking every type of vehicle in the hopes that someone will walk in asking for it. Focus on your best clients and keep them happy so they’ll keep coming back and even refer their friends.

Meet their needs and forget the rest.

Go Reward Your Top 20% Staff

Traditionally, dealers use bonuses, contests, and other tools to motivate their sales staff.

But when you walk into a dealership and see a “Salesperson of the Month” plaque, how often do you see the same few names appearing on that list, again and again? You have stars—the 20% who make 80% of your sales. Focus on them, just as you target your ideal customers.

Give all of your performers the tools to succeed, but give your top performers what they need to thrive. Recognizing them is just the first step. Next, send your best staff on vacation or to a sales training conference to further develop their skills. Upgrade their vehicles. Invest in them.

And stop the ultra-competitive sales contests. These just pit the best members of your staff against each other, while the lesser ones check out.

Be loyal to your best team members, so they’ll be loyal to you.

Stop Going for Broke: Use the 80/20 Rule

According to Forbes, by correctly using the Pareto Principle, you’ll not only transform your company but also transform your life.

The Pareto Principle is about efficiency and time management. It’s about getting rid of the things that drag you down and making sure you get the most out of every opportunity.

Maybe the best idea that comes out of Pareto is that you don’t need to change everything to make a huge difference. Making just a couple of small adjustments can have an enormous impact.

 

 

 

Ben Putano

Ben is a writer, marketer, and entrepreneur specializing in tech and automotive. His agency, Damn Gravity, helps automotive tech companies grow through content and inbound marketing.

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