How Words Matter in Sales and Marketing
Did you know that you can change one word in your sales and marketing, and as a result, you can quadruple your return? Let me explain.
Many small business executives or owners situated in the States have retained companies that handle their pension plans. There are a large number of these companies, and they make up a separate industry known as Third Party Administrators, or TPAs, for short. By law, insurance companies are prohibited from overseeing their plans, but that doesn’t apply to individuals. They can, of course, manage and handle their pension plan. But there’s a catch. It requires expertise to do so – so seeking the services of a TPA is a prudent choice.
TPAs can expertly set up these pension plans where a relatively high percentage of a person’s wages can be contributed to their pension plan, often significantly more than what an individual can set aside by themselves. TPAs generally deal with people who are high-wage earners, so the amount that can be allocated to a private pension plan can become rather substantial indeed.
TPAs ensure that the plan is set up correctly and monitors that the plan always conforms with all the ever-changing regulations and rules that apply to these types of plans. They need to do this because the tax authorities will disqualify a specific plan if they find it doesn’t conform to these regulations and rules. Also, due to this disqualification, any funds related to the plan are subject to immediate taxation. Imagine this scenario: someone close to retiring has their pension plan disqualified. That person might have been paying into their pension plan for decades – we could be talking about a plan valued at over $5 million or even more. When the plan is disqualified, the person will have that total plan amount deposited as income for one calendar year, but over half of that amount will be swallowed up by them having to pay marginal taxes. That’s a devastating amount when you thought you would be very comfortable in retirement, but now, half of your nest egg has disappeared through mismanagement of your pension plan!
I get it, but what has this got to do with pricing? Well, let me continue with this story as a further example:
Many people see “administration” as a sales and marketing word with very low value. For me, it means making sure all my files are in the proper order, or I’ve attended to the ever-growing paper mountain on my desk. But do you know I’m not the only one with this perception about “administration?” I tested customers’ willingness to pay for TPA services and found, not surprisingly, that those seeking the services of a TPA were only willing to pay a reasonably low amount.
Demand for a service such as “administration” peaks anywhere between $250 to $500 per annum. For the same service, revenue is maximized at $1,000. Demand is minuscule above $1,000.
But look what happens when the sales and marketing descriptor word changes from “administration” to “compliance” – willingness to pay changes dramatically. The demand for “compliance” now peaks between $2,000 and $2,500 and is virtually flat up to $5,000; this is the point where any revenue made will be maximized. You have to admit, this is amazing! One word change has significantly affected the pricing landscape and the willingness to pay for these services.
In a nutshell, there’s a whole industry comprised of thousands of companies that (with one exception) have a practice of describing what they offer in such a poor way that the amount of money they leave on their respective tables is massive. But what’s even more ridiculous is that these companies are supposed to “ensure compliance” for those they serve. What they continue to do – makes no sense at all. My findings clearly show that in this industry, it pays to inform the customer what they can expect from the services that you offer them, rather than using a sales and marketing word like “administration” that affects the revenue you can make, but don’t.
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