← The Game with Alex Hormozi
Loading summary
Transcript1 lines
- [00:00]
A
This one equation will make you rich. I recently spoke at AdWorld. If you stay to the very end, you'll understand how you can use the equation to sell lots of stuff for lots of money and make yourself unreasonably wealthy. Keep being awesome and enjoy big picture. There's two things I don't want to talk about. One is how do you create and sell valuable things? Right? You probably hear people say, hey, like, provide more value, give value away. Like, it's all about value, value, value. But, like, no one defines what is value. What does that even mean? Right? What are the components that create a more or less valuable product or service? The. The second part is one of the four different things that you can do to enhance value. All right? So once you have a valuable thing, you can enhance it by adding scarcity, you can enhance it by adding urgency, you can enhance it by adding bonuses, or you can enhance it by adding guarantees. And you can also, as a fifth half bonus for you guys, you can enhance the value by simply naming it in a way that resonates more with your avatar or the type of person you want to sell to. Okay? And so if those are the five things that can enhance the value of the thing that you're selling, if you have all five and you do them well, you will sell more than you would if you didn't have them. And now I won't have time to get into all five. I'm just going to talk about one of them, which is guarantees. It's a big picture. We're going to talk about how to create and destroy value in the things that we sell. And we'll talk about how to reverse risk through guarantees to make the things that we are selling more compelling to them. Because now they won't fear that they're not going to get the outcome that we promised. Cool. Awesome. I spent a very long time trying to figure out what value meant, and it's because I. We worked with a lot of portfolio companies and we want to think about how we can create new product offerings that are going to be. That are going to sell for lots of money with big margins and make us all rich, right? I wanted to come up with an equation that would encapsulate this so that we could basically formulate or formulaically approach the problem. So it's like if we check these boxes, we're going to get something valuable. Then we can just do this over and over and over again. And I had to do it that way because I can't be the person who's making the products in every one of these companies at this point. So I have to create a process around it. Okay. The four variables are as follows. So if you're taking notes or you have something on your side screen, this is the, these are the writer downers. Number one is the dream outcome is the thing that we are promising something that people actually want. Alright. And I'm going to dive into each of these four in a second but I want to just give you the four and then we'll double click. Alright, so that's number one and when you're writing these down, write it down like a fraction. So draw a line right in the middle of your paper or whatever and you'll have two on the top and two on the bottom. So number one is your dream outcome. Number two is the perceived likelihood of achievement. How likely does someone believe that if they purchase your thing, they're going to achieve the outcome that we are promising? A lot of words, hopefully a simple concept. Number three is the time component. In essence, how quickly are they going to get the thing after they pay? The fourth is the dual sided coin of effort and sacrifice. What does someone have to start doing that they don't want to do as a result of this purchase? And then what are the things that they have to stop doing that they would like to keep doing that they cannot no longer do as a result of this purchase? Alright, so those are the four things and what I'd like you to do in thinking through this as we break it down is think about your own products and services that you have and think about how they stack up in using this equation. Alright, I'm going to give you a big picture back and forth example and then I'm going to dive into each of them in more detail if we were to think about an ideal outcome. All right, so let's use weight loss because it's an example that most people can understand. Alright, so why is it that let's say you have some things that you can sell for weight loss, like $50,000 surgeries for liposuction, and on the other hand you've got a $5 ebook that promises a skinny tummy if they make the same promise, right? Which is the dream outcome number one? How is that these two things are so different in price, right? Well it's the other three variables, right? Because the dream outcome people want to lose weight, right? And so that's unit number one. Now the reason that that is number one of the four is that if I were to say, hey, I Can make you a million dollars versus losing weight. Most people, many men especially, would probably value making money more than they would value losing weight. Not always, but oftentimes as a category. Investment things, franchise opportunities, business opportunities tend to sell for a higher price, which is kind of the component of B2B. Business to business versus business to consumer. By and large, when you have two different things like that, we use the dream outcome to differentiate entire industries or categories of products as being more or less expensive. Now, once we have the same dream outcome, like weight loss being delivered, then we move on to the other three parts of the equation. Let's go on to perceived likelihood of achievement. If I have two people who are selling the same exact thing, let's use a doctor in that weight loss example, like the liposuction guy. And let's say that liposuction guy, a doctor, has done 10,000 surgeries of liposuction. And let's say Dr. B has done one same surgery, same dream outcome. It's going to take same amount of time, same amount of effort for you. This guy might even spend more time on you than this guy because he's not as experienced. Which one are you going to go with? Probably the 10,000 guy. Why? Because of the perceived likelihood of achievement. We have lower risk associated with making this purchase because we believe that if we give this money, we're going to have the outcome that we desire. And so if you think through this in terms of your own products, you're like, am I doing a good enough job before the purchase of increasing someone's perceived likelihood of achievement? Because in a very real way that confers itself or it translates into higher prices, this guy, even though it probably takes him less time to do the surgery, he actually can charge more than this guy. Isn't that wild? So we've got the dream outcome. Is the thing something people actually want? What's the perceived likelihood of achievement? Now if we stop there between making big promises and making people believe that it's actually going to happen for them, that is what the majority of young and new entrepreneurs spend their time on. Most people, myself included, spent the first half, two thirds of my career trying to beef up the top side. I would promise bigger and I would show more testimonials, more results. Promise bigger, more testimonials, more results. Right. More third party edification, more celebrity endorsements, etc. Right. But I believe now, now I've done this a little bit, that the actual fortunes rely on the bottom side of the equation. Okay? So remember this is the top side that creates value. The bottom side of this fraction are the things that destroy value. Our goal is to increase the top side and decrease the bottom side. So with time, there's two components of time. We have the time delay between when you buy and when you get, and then the amount of time to immediately start seeing any kind of outcome. So it's like the experience along with. So for example, if I signed up for a gym membership, right, using this weight loss example, I might know that I'm not going to lose the weight for a year. But if I start seeing value from the community, I start feeling more upbeat, etc. I'm going to start experiencing benefits that be my big goal, But I'm going to have other things along the way that are going to still deliver value quickly. The whole component of time here is how quickly between when I buy and when I get. I'll give you a B2B example and a B2C example. In a B2B example, let's see you on a marketing firm. So this is ad world. So I'm sure this will resonate with a lot of you guys. If you have two agencies that are side by side and they both say, hey, I'm going to do some marketing for you and I'm going to get your phone to ring one way or another, marketing agency A says, okay, now that we're doing this, you're going to have to start recording lots of ads for us. And we're going to be meeting three times a week, an hour each time, and you're probably gonna take four hours a week to record these, these ads for us. And it's Gonna take us 60 days to get this stuff done. At day 60, your phone starts ringing from the ads that they do. Okay, marketing agent number two, you sign the paper, and as soon as you sign the paper and they process your credit card, your phone rings and it's a lead. Within seconds, same product time collapse. And so one of the easiest things, I had a mentor once, they say this, he said, one of the easiest ways to figure out what product to sell is look at the products everyone else is selling and, and deliver the same thing in half the time. And so when we think about the products that we sell, is there a way that we can condense ttv, which is time to value? And so one of the key, one of the huge ways that we focus on when we bring a portfolio company in@acquisite.com is we say, how can we look at this, this service delivery and see if we can do it faster now before the people who are in the room who are like, well, my business is different. We have a company that publishes books, for God's sake. So a very long process. But what we were trying to figure out, because they had the same situation where it's like, it just takes time for someone to, like, write a book. Like, how can we deliver this value faster? And so the thing is, is it just like that gym example that I said? It's not that you necessarily have to deliver the longest result first, but you want to deliver a result first. You want to have a tangible outcome that someone can experience literally holding their hands. And so one of the things that they did was created a little seven day kind of mini book boot camp. And when they did that, people at the end of seven days could have an actual mini book published and live. Now, they make it clear this is not the book that's going to make you a millionaire, but what it was was to break the belief and to prove the concept that they could really do it. And then they got the buy in and really built the, you know, the real book that was going to end up making the money, et cetera, right? And so the idea here is that if you are creative and if you are a loser, then don't think this way. But if you are a winner, there's always the question, which is, how can I make this work for me? All right? And so you have to think, it's like if you're a real estate agent, you're like, well, it takes 90 days to sell a house. How can you give someone an outcome before that? It's like, well, what else happens? They have to clean the house, they have to inspect the house, they have to, they want to know about ways to make more value. There's lawn care, there's fixes, there's a million things that have to happen. Is there other things that I can do along this journey that I can provide more value this person earlier so they can get a better experience? In a B2C example, let's say I'm on the Internet and I'm trying to buy something for weight loss, right? And I click the button that says six minute abs, and then six minutes later, I have abs. How? Like, literally I look at my shirt like, holy shit, how valuable would whatever that thing be if in six minutes I would have abs? Probably infinitely valuable. And so when we can find ways to deliver the outcomes to our customers, sooner or faster, they will value it a lot more, not just a little Bit more, a lot more. Speed is one of the best all time competitive advantages. And so the last one is effort and sacrifice. So I said it's two sides of the same coin because when you take on a new customer, you have to have that. They have to start doing things that they weren't doing before, right? That's effort. They didn't. And they probably don't want to do it because they weren't doing it before, which is why they don't want to do it, right? And on the flip side, they've got stuff that they stop doing that they do want to do, right? And that's why they're two sides of the same point. In that marketing example I just gave with the agency, right, let's say marketing agency A and B, and I said A had, you know, you have to three, three, three meetings a week and you've got four hours to deliver us copy and creative and whatever, right? Versus the other agency. It's like, oh, we've already tested all the stuff for your industry and we've got videographers and whatnot who can, who can already just start running the stuff. Like you just pass and it's taken care of. How much more valuable is the guy who takes none of your effort and sacrifice takes no effort on your part to make this outcome occur. So if you're thinking about this within your own business, the way that we like to think about these four variables, right, when we have the effort and sacrifice, the goal, just like time, is to decrease it. And if we're repeating the same activities with every one of our customers, how can we streamline that? How can we predict what is going to happen? And how can we make, you know, three onboarding calls into one and how can we make one onboarding call into a checklist? So how can we streamline this process such that it's seamless and effortless and ideally immediate for them to achieve the result? And so I said there's four variables in the value equation. You've got a big dream outcome that people want to experience. They believe that the likelihood they're going to experience it is very high. The time that they have to wait between when they buy and when they get is as little as possible. And then the effort and sacrifice is zero. And when you put those four things together, you have a very valuable product. And so when I said that the bottom half of the equation is the more valuable thing that, as I've learned, is that it's very easy to make bigger promises and throw testimonials and things like that, it's much harder to actually have the operational effectiveness to drive results faster and decrease the amount of effort that a customer has to put forth. And so the competitive modes that exist in the big businesses are on the bottom side of the equation. Netflix took over Blockbuster because they made consumption of movies and TV shows immediately your effort and sacrifice. If you didn't have to get up in your car, drive around the corner 15 minutes, walk around, grab the thing and then not to mention return it three days later, which is zero value add to you, right? Without getting your late fee, they just got rid of all that. So you could just take your phone and start watching. But the actual dream outcome and perceived likelihood on both of those occasions that people thought they were going to watch a movie or watch a TV show and they were very certain they wanted to do it right. So like the top side was the same. The bottom side of the equation is where they killed everyone. If you look at Amazon, they made the purchasing process seamless on two angles. If I can click with one button and it comes tomorrow. They made the effort and sacrifice virtually nothing in terms of the purchasing. And then the time delay is virtually nothing in terms of getting the thing. And they continue to shrink that time gap. They sell the same products as everyone else, literally. But what did they do? They increased the perceived likelihood of achievement by adding all the reviews. So people believe that when they buy the thing, they're going to get the outcome. They really want the job. They hired the product to solve. They believe they have when they have that because of the reviews that Amazon leaves right the time because they get it immediately and it's. And they can buy it quickly. And the same thing with the effort and sacrifice, right? And so that's ultimately how Amazon is able to beat because they provide value. All right, is this making sense? This is cool. You guys dig in this. Okay, I'll give you one cool benefit of that four part stack and then I'll segue into the guarantees portion. All right, so I gave you four variables. Guess what those four variables also equate to? They equate to headlines and copy. So if I want to promise something to a prospect, what am I going to say? Here's the dream outcome. Here's a number that is related to the amount of people who have helped achieve this thing. Here's how long it took them to achieve that thing, and then here are stipulations around that claim. And if you have data from your customer success department, which hopefully you do right which is percentage of customers who maybe leave a five star review, or percentage of customers who achieve X outcome by X date under this condition. Now, you have claims that you can use that are very compelling in your marketing and your copy. These can be headlines and emails, they can be headlines and ads, they can be on your sales pages, they can be hooks in your videos and creative content. And so when you think through these four variables, they are the consistent variables of claims in general. So when you want to communicate to a chiropractor that you can help market for his facility, you're going to say, 70% of our chiropractors that we work with achieve over 100 patients in their first 30 days without having to make an ad effort and sacrifice. And so when you do something like that, you use those four parts of the equation that is also reverse engineers copy because they should be related, because value is what people want to buy. And so your ability to persuade and your ability to understand and communicate value should be married. When you're thinking about your products and services and you have these four variables, you're like, okay, how do I do this? Right? So the way that we think through this is that we create a big list of problems, all right? Which is I like to think about in sequence, which is what is every single mini micro step as chunk down as humanly possible that someone has to go through to experience this result. So if you're in the physical products business, then you're going to. That's why Amazon spent so much time on the actual purchasing, because there's not a ton that they have to do. But once the person receives the product, what their first impression of the box, the unpackaging, the directions that they get in order to use it, what the using it experience looks like the first time, the second time, etc. How can we streamline that process for them? How can we give them different ways that they can use the same thing, right? In the services side, there's probably a lot more micro steps that somebody's going to have to take in order to achieve the outcome, right? And so the idea is we want to write down every single problem they could possibly encounter throughout their entire journey with us. And then we want to write out what the solution of that would look like. Now we're just putting, we're in fictitious world here. We're saying, you know, blue ocean, what would we do to solve every one of these problems, right? And we get this huge list. A lot of guys who go through the book have 100 plus different little mini micro problems and mini micro solutions that they have. Now once you have this huge thing, this is a fun activity to do with your team is how can we make the thing we sell more valuable, Right. Once you have that list, you then do something I call the trim and stack, which is, you look at that list, you say which of these is the most valuable? Which is the ones they suffer the most from that is most valuable to them. That's category number one. Then next to those, which of these would cost us virtually nothing to, to build or implement after we have a first time experience, right? So it's like if you have to build out like a grocery calculator, it's going to take you time, one time, but then every time after that it's done right? What's the incremental cost of each of these, of each of these solutions? And so then you order those in terms of I just would go low, medium high. It's very simple. And so then for me, what we do with the companies we have is we look at the things that are high value and cost us very little to provide on increment and we cut everything else out and then we have something that's extremely valuable and costs us very little. And that's how you have a very high value, very high margin product or service that you sell. That is ultimately how we recreate value in a business. And we like to think about it as like, what are all the capacities of the business, what are all the problems they could potentially solve? And then which ones will we choose to solve? And then once we're very ruthlessly clear on the problems that we choose to solve, we cut out everything else and say that's just not a problem we choose to solve. We know we could solve it, but just based on the economics of that solution or that problem, we don't want to be the ones to do it. And then we stay ruthlessly focused on things that we do, we do more of it. Okay? Now most people think that they're selling against their competition. I disagree. What you're really selling against is inaction. You're selling against doubt. You're selling against the biggest obstacle, which is risk. The comfort of not doing the thing or not buying the product is so high we have to help decrease their action threshold. Right? We have to lower that bar just so they can just step right over it. Because up here they don't want to take action because it's too comfortable. We have to lower it so much so there's so little friction for them to take action with us that they buy. I think one of the more compelling things that a business can do is offer guarantees. Alright, guarantees are you assuming a certain percentage of the risk from the buyer. Whenever there's an exchange between two parties, there's a certain amount of risk that both parties incur. And so if you have these two parties and there's a certain amount of risk that's shared, you can shift the risk in your favor because you have more knowledge about the fulfillment than the client does. Why? Because you've done this a hundred times before and this is their first time. And so it would make sense that we shift some of that risk in our favor and we do that in the form of guarantee rather than like insurance. But you can think about guarantees as purchase insurance for the buyer. And so there are four ways that I think through guarantees and creating and structuring creative guarantees. The four types are unconditional guarantees, which means it doesn't matter what you do, if you just want your money back, give it back to you. That is the strongest type of guarantee. Now, it depends on the type of business. If you can offer it. I think you should. Because if you do the math on if I reverse the risk and I get 20% more sales because of this unconditional guarantee And I get 5% more refunds and not even 5% more on an increment, let's just say you get 5. You go from 1% refunds to 5% refunds, which would be a massive increase in refunds. You still added 15% to your sales and it was still worth it mathematically. That is why having the guarantee is just a math equation. It's not like you can't let your emotions be like, well, we got our, we got more refunds now. It's like, yeah, we also got 20% more sales. So you just have to think about it like that. Just be a business person and not emotional about it. Number two is a conditional guarantee which is we will give you X if, if X happens, Y if this happens, this is what we will do, right? If Y the next very simple. If you provide us content for our marketing agency, always by noon on Fridays before the ad campaign start for the first eight weeks. And if you don't make at least twice what you paid us over that first eight week period, we will give you your money back. Right? You can also say we will work with you until you get your money back. The third is an anti guarantee which if you don't have a guarantee, which there are, there are situations where that, that makes sense. You want to lean into the fact that you don't have a guarantee. You don't want to like not talk about it because it's a normal part of the buying process. Like, what are my assurances? Like, how do I know this is going to happen? You're making these promises. How should I believe you? Right? And that's where you lean in and you say, oh no, we don't have guarantees. And if you're the type of person that really needs a guarantee, this is not the program for you because there's too much work that's on your, on your part. We can guide you, but the vast majority of the success is going to be in your hands. We will guide you, but it's going to be on you. And if that doesn't feel good for you, then there's 100 other guys or you have some sort of proprietary thing. It's like once I give you this super secret sauce, you're going to know it forever. And so I can't, I can't give you a refund because the day after you learn a secret, it's not valuable to you, right? And so for that reason we can't, we can't do any kind of guarantees. The fourth is what I call implied guarantees. So anything that's a performance related offer, you know, we'll increase your revenue by X and we get 20% of the increase. That is, that is an implied guarantee to the buyer. Rev shares, profit shares, performance bonuses, kickers, doing things off of a strike price and going up. All of those things are implied guarantees based on performance. Those are the four different things that you can do in terms of guarantees. Now the advanced version of this is that you can stack guarantees. So I can say I will give you a 30 day unconditional guarantee and I will give you a 90 day conditional guarantee. Which means that for whatever reason, you're like, hey, I'm not sure. Then you say, listen, the only way for you to be, for you to be sure is for you to be inside the program. Because I just want you to make an informed decision. You can't make an informed decision until you've actually experienced the product. I'm just going to give you a 30 day unconditional guarantee so you can get in there, experience the benefits and then make the decision for yourself. It makes it a very easy sale because then the sale becomes essentially a trial. Now you're going to close a lot more deals, but you're also going to get more refunds but the net net is you're going to make more sales. And so you do the unconditional guarantee and you say, but on top of that, and this is where you get clever, is you look at the customers who've made the most Money. If you're B2B, if you're B2C, you look at the ones who've gotten the result that you, that you promised the best results. And then you look at the client journey that they had, what are the things they did, who do they talk to, what was their experience? And so then what we do is we reverse engineer their experience, the key milestones of their experience, and we make those part of the guarantee. So for example, if I were selling Internet marketing, whatever, then I would say as long as you get your domain purchased and you set up a website and you spend at least $1 in advertising or $100 in advertising, if you don't get an ROI from this program by day 90, I will give you your money back. And so we make two or three stipulations that seem very straightforward, but the stipulations are the ones that we know are the ones that drive client success. In so doing, we basically guarantee that they will succeed, which is the point of the guarantee. And so we say, listen, if you're trying to lose weight, I will give you two times what you paid me by the end of this 90 days. If you show up to every one of the workouts and you send me a picture of all your meals, that's it. You do that at the end of the 90 days, I guarantee that you're going to lose, you lose the weight that I promise you're going to lose. And so you just look at what are the things in common that the people who had the biggest successes did, and you just look at the fewest common variables because the more stipulations you add, the weaker the guarantee is going to be. I'll tell you a fun one. If you just want to get weird, if for some reason you have any kind of like coaching or any kind of business that's like that, the compliance of opening a Google Doc and writing what you're going to do that day. And at the end of the day just saying what you did over, I think it's, it's like six weeks is like 1% or 2% compliance. Like people just can't do it. It's so simple. If you want, you could just say, hey, here's my guarantee. If you just say what you're going to do, and at the end of the day, you say what you did for six weeks and you don't get the results, then I'll give you the money back. And you automatically know that 99% of people are not going to do that anyways. So anyways, fun one for you guys. One of the things that people suck at with guarantees is that they say they make the guarantee amorphous. They say, results guaranteed. What you don't want to do is say that because it's like banner blindness. Everyone's heard that before, and it means something different to everybody. What we want to do is spell out exactly what our guarantee is. And we don't even need to use the word guarantee. We can just say if you don't get very specific outcome, if you don't lose six inches from your waist by this time period and you X'd, I will write you a check for the difference between what you gave me and what you think it was worth. You want to spell it out in common language so they understand what you're actually saying, rather than saying results guarantee.