Are you familiar with the Pareto principle?
Before you say ‘no’, allow us to explain. In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. More commonly this is known as the 80/20 rule and is summarized that 20% of actions/causes /inputs, etc. will lead to 80% of consequences/effects/outputs. Sound familiar now? We thought so.
Recently, we had heard many theories circulating that this was the case in the Chicago agent community. Whether it was a 5/95, 40/60, or 80/20 we weren’t sure, but we decided to take a look.
For this pull we took total transaction volume per active agent (one with a transaction in the period)- both buyer and seller side – and compared that to overall transaction volume in market. We also compared their percentage as one agent out of the total in Chicagoland, and ran those numbers comparatively. What we found ran directly inline with the Pareto Principle – a substantial amount of business is being done by a relatively small number of agents.
Take market leader Mario Greco, for instance. While Mr. Greco makes up just .005 percent of the total active agents out there, he accounts for a .35 percent of business transactions. Continuing down the list until we get to the 1000th agent, we see that Michael Zapart and the 999 agents before him make up only 5.02 percent of all agents, yet a staggering 39.6 percent of business volume. Keying in on original principle more accurately, we have to look at the 80 percentile of business volume. Sure enough, we find that 80 percent of business transactions are completed by just 27.74 percent of total agent.
While the disparity can feel a bit frustrating, the principle does not mean that agents do not move into smaller percentiles/greater transaction volumes. Instead, it reiterates the fact that many agents that are doing the “same old thing” and failing to use new marketing techniques and technologies will likely stay in the same 80% percent group with their peers. Those who use progressive tactics are likely to stand out from the pack, and therefore increase transactions and their percentage of the market.