improve dealership performance

Can this principle change the way you run your dealership completely?

Running a dealership is not the smooth process that we all dream about – there are many cogs in the machine, and just one seemingly small detail falling through the cracks can lead to a disruption to the whole process overall. Sometimes, it can seem overwhelming when you are trying to micromanage every single small detail along the way. However, there are ways to make your busy life as the manager of a business less stressful – including introducing the Pareto principle into your dealership.

If you haven’t heard of the Pareto principle before, you may have heard of it by one of its many other names (the 80/20 rule, or the principle of factor sparsity to name a couple). It’s a pretty simple idea: for many events going on in your dealership, 80 percent of the effects come from 20 percent of the causes. This is not only applicable to your dealership, but is also used for analysis of the economy, sports, and in mathematical fields.

Put into business terms, 20 percent of your sales bring in 80 percent of your profit. While this might not sound too bad up front, this brings up an important question that everyone who works in sales should consider: if only 20 percent of my actions drive 80 percent of the results, then the other 80 percent of my actions might be a waste of effort, time, and valuable resources. No one wants to hear that 80% of their actions go to waste. So how can we take the Pareto principle and begin to apply it to our dealership?

  • Take a look at your marketing budget. If you are paying for generic marketing or third-party referral sites, there’s a good chance that you are marketing towards people who aren’t even interested in buying from your dealership. You should create ad campaigns that are specifically targeted towards the clients you want to see at your dealership – target certain neighborhoods or social media apps of the clients you want to see. Stop casting a wide net and start casting a net specifically for your target customer base. Don’t let your marketing budget go to waste.
  • Reach for the top 20% of clients. If 20% of clients bring in 80% of the profit, then targeting those clients specifically will make sure that your effort does not go to waste. Pay attention to who your core customers at your dealership are, and focus on making their experience the best that it can be.
  • Reward the top 20% of staff. Dealers know who their best salespeople are, and you should focus on rewarding the stars of your business just like you are targeting your ideal customer base. Give all of your staff the tools to succeed, but put extra effort into your top performers. Make sure they know that you appreciate their work, and invest in them so that they feel motivated to keep up the hard work. Having a good relationship with your staff can go a very long way for a business.

These are just a few ways to apply the Pareto principle to your dealership. Remember, just 20% of your efforts often lead to 80% of the profits – don’t let the rest of your effort go to waste. Focus in on the 20% of clients, staff members, and marketing that yields the most return, and you will see a humongous change in your dealership in no time. And, for the super passionate, you can use other aspects of this principle to improve other areas of your life as well! 

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