← The Game with Alex Hormozi
The Game with Alex Hormozi
The Downsell Math and How to Build an Offer Worth 10x More | Ep 986
00:09:36
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In 2016, I had $1,000 to my name sleeping on a gym floor. Nine years later, I broke the Guinness World record for the fastest selling nonfiction book and generated over $106 million in sales in a weekend. In this video, I'm going to show you how I'd build a business if I started all over. So first, either sell extremely expensive stuff to a select few or sell something super cheap to everyone. The middle is where people die. The thing is, is even if, and let me do the math for you, because this is important. Let's say you have $100 thing and you have a thousand dollar thing. And let's say of the 100 people, 10 of the hundred are buying the really expensive thing. So 90% of people buy the $100 thing. What does that do to your business? Guess what it does. It doubles the revenue of your business. And not only that, all of that incremental revenue, the stuff that came from those top 10 people, is 100% margin. So let's say that on your hundred you make 40% margin. So you're actually making 40 bucks on those 90 people. So you're making $3,600 in profit off of 90 of your 100 buyers. Now the other 10 you make 10 times 1000, so you make $10,000. So you actually make three times the profit on your expensive thing and one times the profit on your cheaper thing. So three quarters of what you make comes from this thing. That's why people miss it, is they don't get the math behind it. You have the expensive thing because even in tiny, tiny volumes, lots of zeros still add up. And so if you're getting started, I would strongly recommend if, even if you have a scalable thing, even if you're on school, you have a community, you charge hundred bucks a month, whatever it is, have something that's $1,000 a month, have something that's $10,000 one time, have it up there. Just make it available. And so I'm going to give you three different frames to working through this. The frame number one is, what if we charged 10x or 100x more than your current thing? What would you include? Just go crazy with it. Just think if instead of $1,000, if someone gave me $100,000, what would I do? Just write down everything you would do and then look at the cost of doing all those things. What you'd be amazed by is many of the things that you have these ideas for don't actually cost that much. And so cross out the Ones that have hard costs and then look at what's left and then say, well, I think I could do that. And then we ask the question, would you be okay doing that for 1,000 or $10,000? You might say like, well, yeah, for 10 grand, I would do that. Make it available. The second way to think about this is if I had to make a service or a product that was only grown off of word of mouth alone, and all you have is this one customer in front of you, and the only way that you will be able to get more customers is if you get that customer to tell their friends about your stuff. What would that customer's experience, what would the service, what would the components of the offer look like if that was the requirement? Write down all of that stuff. And if you're willing to do that for a higher price, present it. An amount greater than zero will say yes. And I'll give you a third frame. This is different than the other two, but I think that still very valuable. When you're thinking through how do I make something, well, more valuable. If we had to take everything out of it that is unscalable, but we have to make it worth ten times as much now, how do we do it? So this gives you three different intellectual attack vectors to think through. The value creation for making your more expensive one on one unscalable thing that in many times will make you more money, especially in the beginning, than your less expensive thing. And the other part of this is that it makes for great marketing. One, because you can say this, one of my clients, one of my private clients, one of my, my individual clients. And, and what that does is people are like, oh, this guy must be a little bit, you know, has more authority, right? On top of that, when you share the learnings from those, quote, private clients, it gives you marketing material to actually talk about, right? And where do you think your best case studies are gonna come from there? And so you're gonna get amazing case studies. You're gonna have amazing marketing materials in terms of the learnings and lessons that you're gonna have. And then one of the things that I personally prefer is that these people are way cooler and they will be people that you actually end up being friends with that you like. And they're the ones who actually shift your worldview because you actually will spend more time with these people than all of these people. And that will shift you in the correct direction. Now let's deconstruct value in a tactical way so that we can take that the Three frames that I just gave and do even more with it. Here are the two steps, very straightforward. Pick the right avatar. Do not try to make your unscalable, expensive thing. And then think about the person who is currently buying your thing for $100 and think, what would this $100 person be willing to spend $1,000 for? Do not think that likely. The person that's going to spend the thousand dollars is a different person. So you have to think about that person that, not the person underneath. Next, once you have this avatar, they have the money, they feel the pain, they're easy to reach, right? Then we have to think, how can we describe their pain more accurately than they can describe it themselves. And so the big hack, and this is also new with some of the AI stuff that's out there, is go into the books that people are buying in your niche and then extract the reviews and then get the quotes that are specific to, to their pain. And so one of the really interesting things about Copy is that if you can articulate someone's problem better than they can, they will inherently believe that you can solve it. So this is what we're talking about, the dream outcome. It's like, make sure we're talking about the right avatar, about what they really want in the way that resonates with them specifically. Because pain and persuasion only exist in the specific, never the vague. And if you do this successfully, their pain and your description of their pain can be a better motivator of persuasion and action than a greater promise. So how do we then reverse engineer what someone actually wants? They don't really want your time, they want to buy an outcome. Now why is one on one a valuable vehicle? Because the perceived likelihood of achievement when you do something one on one in an unskillable way actually goes through the roof. So if I had a meal plan that I gave you as a PDF or I said I will talk to you one on one every day, the outcome is still, I want to lose weight, but the likelihood that they're going to get there is going to be significantly higher. The likelihood, the ease, how easy it is for them is going to go up. And all of these components play with one another. So that's the outcome side. Underneath of that, we have perceived like of achievement, which I touched on briefly within the vehicle of one on one. But within this case, your reputation over time acts as almost an implied guarantee. And the nature of the delivery also has some level of implication that, that they're going to get the completeness of you and so as long as they believe you are competent, number one and two, have strong intention to help. The likelihood that they believe that giving you money will help them get what they want goes really high. And so that's why I like one on one. That's why I like unscalable. And to be clear, just cap it. It doesn't mean you have to do it all the time because that will get in your way long term. But in the short term it can allow you to live on this and then cash flow, all the growth. And so this is me giving you kind of like the, the bootstrap strategies to growing a big business is like be willing to take 5, 5, 10% of your time, charge 10 times more and make enough income from that that you can take all the other money and go aggressive, go on the offense with it. So third one is speed. Now if I had to pick one thing that I could do to maximize persuasion, it is speed or the inverse latency. How do I decrease latency? How do I increase speed so I can make sure the outcome happens as fast as possible? Because latency beats magnitude speed seven days a week and twice on Sunday. The reason that this is important is that it will motivate someone's action to buy more than just about anything else. So you're not going to sell someone who's wealthy on how much money you're going to save them. You'll sell someone who's wealthy based on how much time you're going to save them even more. Because money has an implicit value. Their time is the one that over time will become significantly more value than money. One of the things that anyone can do to sell that expensive thing is just take whatever the delivery time you currently have is and cut it in half, cut it in two thirds. And if you have a one on one service or a higher tier service that should add a zero or more, you can just say you will always have priority. You will always be first in line. When I have a new thing, you'll be the first one to see it. Whenever there's an emergency, you'll be the first to respond. I'll pull someone off a job to come to your house. All of these things are about speed. Those things like think about the vectors of value. The higher the number, the more done for you, the more turnkey someone expects something to be. This is how you reverse engineer ease. You go through the customer experience and you take a note every time you have to do something. Now you might find out that in order for someone to get the outcome that you want, they might have to take 10,000 actions. And so then what we do is we systematically go and reverse and delete friction point by friction point actions that they need to take. And so this is the process of making an exceptional product. Now it might cost you more money to make this product, which is why you charge more money for it. So if you have, of course there's technology that can automate some of this. But for many services that exist in the real world, which 70% of people or 80% of people in the US at least are service based businesses, then you're going to spend some more money. Now here's the magic of this. Well, some of my business relies on other vendors or other parties. Guess what happens when you charge ten times as much. You can pay them more to prioritize your customers. And so this allows you to make your own priority ring on top of that, that allows you to consistently out compete competition because you pay your vendors, you pay your partners better than anyone else does because you have this service tier. And so the TLDR big picture is that no matter what, no matter how many customers you have, if you Simply make a 10 times more expensive offer, you will have a percentage likelihood that is greater than zero that someone will buy it. And when that happens, you, you will be reinforced for doing so. And I think you will actually see how powerful adding one, sometimes two zeros to your price tag really is. Thank you for coming to my TED talk. Charge more money.