Podcast Summary: The Game with Alex Hormozi Episode: Throwback: Billionaire Recession Advice: Sell to the Rich | Ep 852
Release Date: March 14, 2025

Introduction

In this throwback episode of "The Game with Alex Hormozi," host Alex Hormozi delves into the strategic advantages of pricing and targeting affluent customers to build a sustainable, high-value business. The episode, featuring insights from Layla Hormozi, explores how pricing decisions influence customer quality, team composition, and long-term competitive advantage.

Selling to the Rich vs. the Poor

Layla Hormozi begins by emphasizing the critical role of pricing in shaping the downstream effects of a business. She discusses how the clientele you attract based on your pricing strategy can determine the sustainability and competitive edge of your business.

Alex Hormozi highlights the fundamental difference in mindset between wealthy and less affluent customers. He explains:

“When people are poor, they tend to sell out of their own wallet. They sell using their perception of what money is... But the other person might have all the money in the world and just want to solve a specific problem.”
[01:00]

This perspective underscores the importance of empathizing with affluent customers to understand their willingness to invest significantly in solutions.

Five Benefits of Charging More to Customers

Alex outlines five key benefits that come from increasing your prices, all of which enhance the value provided to customers:

1. Increased Emotional Investment

   • Alex: “If you raise the price, you raise their emotional investment... they actually increase the likelihood that they get results.”
     [02:00]

2. Increased Perceived Value

   • Alex: “When you raise your prices, you actually make something that's more valuable... a more expensive thing is perceived in real terms as more valuable.”
     [03:00]

   He shares an experiment where consumers rated identical wines differently based on price, demonstrating how pricing can inherently boost perceived quality.

3. Better Customer Results

   • Alex: “If you increase their emotional investment, you increase their perceived value, what ends up happening, they actually do get better results.”
     [04:00]

4. Attracting Less Demanding Customers

   • Alex: “The higher the price tag, the more expensive the contract... the more the customer is to deal with is less demanding.”
     [05:00]

5. More Resources to Deliver Promises

   • Alex: “If you charge $50 for that same $5 thing, you have $45 of additional gross profit... you can blow the other competitors' experience out of the water.”
     [06:00]

These benefits collectively ensure that higher pricing attracts better customers who value the offerings more deeply and are easier to serve.

Five Benefits of Raising Prices for the Business

Transitioning to the business advantages, Alex identifies five significant changes that occur when a business adopts a premium pricing model:

1. Enhanced Profit Margins and Flexibility

   • Alex: “With a higher price, you have way more room to make mistakes... businesses that don't have that padding are the ones that go under.”
     [07:00]

2. Increased Perceived Value of the Business

   • Alex: “Having a higher perceived value allows you to reinvest in yourself and your employees... if you never have any money left over, you can never reinvest.”
     [08:00]

3. Capacity to Reinvest in Products and Services

   • Alex: “When you have extra cash left over, you can reinvest in your product... attract higher level talent to your business.”
     [09:00]

4. Attraction of High-Quality Talent

   • Alex: “The best people aren't gonna work for you if you don't have margin. They go to those who understand how margin needs to work.”
     [10:00]

5. Strengthened Sales Team Conviction

   • Alex: “The more profit you have, the more conviction your sales team has when they sell... they can say, 'Here’s why you should choose us over the cheaper alternative.'”
     [11:00]

These business benefits create a robust foundation that supports growth, innovation, and the ability to withstand market fluctuations.

Case Study: Bernard Arnault and Luxury Branding

Alex cites Bernard Arnault, the richest man in the world, as a prime example of successfully selling to the affluent. Arnault’s strategy in luxury branding—where high prices confer status rather than detract—demonstrates the power of premium pricing.

Alex: “Luxury brands like Prada or Louis Vuitton charge exorbitant prices because they confer status... Bernard Arnault capitalized on this.”
[13:00]

He explains the concept of Veblen goods, where higher prices actually drive higher demand, reversing the typical supply-demand relationship. This approach has propelled Arnault to the pinnacle of wealth, contrasting with big tech or pharma often highlighted in the media.

Sales Tactics and Strategies for Affluent Customers

Alex shares practical strategies for effectively selling to wealthy clients:

• Empathy and the Platinum Rule: Treat customers the way they want to be treated, not just how you would like to treat them. This requires deep empathy and understanding of their unique needs and preferences.
  [24:00]

• Focus on Experience: Enhance the customer experience beyond the product. For example, luxury stores offer bottled water or champagne to create a high-end shopping environment.
  [27:00]

• Seamless and Effortless Service: Rich customers prioritize speed and convenience. Providing turnkey solutions that require minimal effort on their part can significantly enhance appeal.
  [20:00]

• Avoiding Price Justification: Unlike sellers targeting less affluent customers who may hesitate due to price, affluent customers view high prices as a marker of quality and are less likely to negotiate or question value.
  [31:00]

Pricing Models: Free vs. Full Price

Alex introduces the Chick Fil's Pricing Model, advocating for offering services either for free or at full price, with no discounts in between. This approach helps businesses avoid the pitfalls of undervaluing their offerings and maintains the perceived value.

Alex: “It's either free or it's full price. There are no discounts.”
[37:00]

He suggests that especially in the early stages, offering services for free can help garner experience, reviews, and testimonials without negatively impacting the business's perceived value.

Final Thoughts and Strategic Recommendations

Wrapping up, Alex reinforces the importance of:

• Targeting Affluent Customers: Focus on solving the problems of the wealthy to leverage their willingness to invest and the cascading benefits it brings to the business.

• Maintaining High Pricing: Avoid the trap of competing on low prices or best value, which can dilute the business’s value proposition and attract less desirable customers.

• Investing in Quality and Talent: Use the increased margins from higher pricing to reinvest in the business, enhancing product quality, customer experience, and attracting top-tier talent.

Alex: “If you want to make more money, you have to empathize first with how did this person get there, what is their worldview and how do they see things.”
[28:00]

By adopting a premium pricing strategy, businesses can create a virtuous cycle of attracting quality customers, delivering superior value, and fostering sustainable growth.

Key Quotes

• Alex Hormozi: “When you raise your price, you raise their emotional investment.”
  [02:00]

• Alex Hormozi: “A more expensive thing is perceived in real terms as more valuable.”
  [03:00]

• Alex Hormozi: “With a higher price, you have way more room to make mistakes.”
  [07:00]

• Alex Hormozi: “Luxury brands charge exorbitant prices because they confer status.”
  [13:00]

• Alex Hormozi: “It's either free or it's full price. There are no discounts.”
  [37:00]

Conclusion

This episode provides a comprehensive exploration of how strategic pricing, particularly targeting affluent customers, can transform a business's trajectory. By understanding and implementing the principles discussed by Alex and Layla Hormozi, entrepreneurs can enhance their value proposition, attract higher-quality customers, and build resilient, profitable businesses poised for long-term success.