Posted on Apr 05, 2011
We are all familiar with the Pareto Principle - often known as the 80/20 rule - whereby 80% of the outcomes are caused by 20% of the actions. 80% of road accidents are caused by less than 20% of drivers. 80% of your sales come from 20% of your customers. Additional to that, 80% of your profits come from just 20% of your transactions.
Expedio is reliant on commercial real estate agents as our sales force - both to bring us suitable purchases, and to sell and lease our existing properties. Whilst we are not a developer, we do have a significant number of buying, selling and leasing transactions.
Yet we find that nearly 100% of our transactions are due to just 10% of the agents on our mailing list. If we look at including opportunities,properties promoted and deals not done, then it is classic Pareto Principle, i.e. 80% of the activity is due to just 20% of the agents.
So why do we bother to continue to communicate with the other 80% - who don't bother to do anything for us ? It's a little like the old joke about advertising. 50% of all money spent on advertising is wasted. It's working out which 50% that's the problem. So we want to make sure that the 20% we communicate with - and give our business and commissions to - are the right 20%. And of course there is always the thought that one of the other 80% may tomorrow bring us a great opportunity to buy, or lease one of our buildings.
But realistically, it makes good business sense to focus on those agents who actively understand what we do and want to work with us.Therefore as a part of a review of our future sales and purchasing strategy, we are trying to find a better way.
Is there a business case for only talking to those agents who actively work our interest - bringing opportunities to us, and working on selling and leasing our properties? Should we be rewarding those agents differently or better for their loyalty and efforts?
As always at Expedio we are very open to finding better ways to do business.We would welcome submission and thoughts from agents as to ways that we could all do business better in the future.