Throwback: Billionaire Recession Advice: Sell to the Rich | Ep 852

Summary

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.

Transcript

[Alex Hormozi]

Hey, guys, welcome back to the game.

[Layla Hormozi]

Today's a throwback episode where I go over a handful of things specifically around pricing and the downstream effects it has on the business in terms of the customers that you bring in and what kind of team you can attract as a result, which can spin the long term wheel for a sustainable competitive advantage. And I think that there's a little bit of nuance that I dive into.

[Alex Hormozi]

In more detail here around the different.

[Layla Hormozi]

Viewpoints between rich and poor people and how that can have huge cascading effects in the business. Enjoy.

[Alex Hormozi]

When people are poor, they tend to sell out of their own wallet. They sell using their perception of what money is. And so they think something's expensive and therefore they don't want to be offensive to whoever they're selling to. But what that is is fundamentally a selfish viewpoint because you're never putting yourself in the other person's shoes. And the other person might have all the money in the world and just want to solve a specific problem. And so what I want to walk through today is why charging more has five significant benefits to your customers that, that actually make you a better service provider by charging more money. And it'll give you five specific benefits around your actual business itself that'll make your business more successful. And if you don't know who I am, my name's Alex shmozi. I own acquisition.com we run a portfolio company that does over $200 million a year. And I make these. Cause I want you to make lots and lots of money and then hopefully someday partner with us. Beyond that, it's just to make you more money. All right, so have you ever seen this meme that's like the customer says, well, what exactly am I going to be getting for $50? And then it has the rich customer who's like wire sent. Let me know what next steps are.

[Unknown]

Right.

[Alex Hormozi]

It's this wildly different viewpoint that poor people have versus rich people. And at the same time, I made three tweets in a row that each one of them massively outperformed. And it was so weird to me that this was like a novel concept. And I said, solve rich people problems, they pay better. And if you solve rich people problems, they will make you one of them. And when you solve rich people problems, you get to charge rich people prices. And so it's this interesting concept that a lot of people miss out on. And part of the reason that a $50 person is saying, well, what exactly am I be getting? If somebody's got $100 in their bank account, you're asking for 50% of their net worth, right? And so for them, it's a very important decision, but it's also completely ridiculous. And unfortunately, this still might be half the population doesn't mean necessarily you should sell to them, right? And to the same degree that $50,000 might have been less than 1% of that other person's net worth, so they just didn't even care. It would have been the equivalent of trying to sell a dollar to that person who's $100 in their bank account, right? And the thing is, is that you can only go to zero, right? Like you can only be so poor, right? But you can be infinitely rich. And so your upside is uncapped, but your downside is zero. And so when you deal with rich people, you have unlimited upside, which is why they are better customers. Now, like I said, there's five things I want to talk about from the customer's perspective. And my whole goal of this is to actually sell you on one, increasing your prices, but two, increasing the quality of your customers. Because if you increase the quality of your customers, you increase the quality of your business. And in a very real way, the smarter the people you sell to, the actually better the client. Results are. All right, so let's dive into the five. So number one, when you charge more money for your products or services, you get an increased emotional investment, right? Because on the flip side, if you decrease your price, people care less about your products and services. So if you ever have anything that you have, you require something on behalf of the other person, which almost all products and services do, even physical products and services, people have to open up a box, they have to set it up, et cetera. And so if you have a very low cost item, people won't even give it the time of day. They won't even try enough that even if your product or service is good, they never even gave it a shot. And so when you raise the price, you raise their emotional investment. And in a real way, you actually increase the likelihood that they get results. So the second way is that it increases their perceived value. So I tell this story a lot, but I'll tell it to you right now. So there was a research study where they had three bottles of wine, all right, they had a cheap wine, they had a mid price wine, and they had an expensive wine, and they had people try them out and they had them rank them based on what they thought. And so people said, I think the most expensive wine is the best, the middle price is the middle and the cheapest wine was the worst. And that's not that surprising, except when the researchers explained that all three wines were the same. And so, in a very real way, when you raise your prices, you do actually make something that's more valuable. Because if that's what we're trying to get at, which is value, price confers value to your product. A more expensive thing is perceived in real terms as more valuable. Even if the actual core product is the same, why would you not want to make your thing more valuable? The third is results for your customers. If you increase their emotional investment, you increase their perceived value, what ends up happening, they actually do get better results. They do have a better wine experience. They do. When they sign up for the gym for personal training, versus a $10 a month thing, they get better results. And so if you want to get people the results that you promise or you claim that you're going to get them, then you should stack every single chip in your favor that's going to get them the result that you're promising. And the price is one of those things. And so some people want to lower the price because, like, I want to help everybody. But you're actually not. You're not helping everybody because most of those people aren't going to be emotionally invested. They're not going to perceive as valuable. They're not going to get the results that you so promised, which means that you have to draw a line in the sand and say, I can only help the people who are swimming towards me. So the fourth thing is that when you raise your prices, you actually attract less demanding customers. And so anybody who's ever been in client services can attest to this. But the higher the price tag, the more expensive the contract. The more upfront someone pays their bills, the fewer payment plans you have to set up, the easier the customer is to deal with. And if you've ever had this, like the paid in full upfront, hey, can I save a little bit if I pay in all cash today? That customer, that one is the easiest one to deal with. The one that you have to arm wrestle for an hour to get $50 on a payment plan over 24 months. This investment is so important to them, they're going to milk the life out of you to get every penny's worth out of you. And it's like, sometimes it's not worth it because just like price is what you pay, value is what you get. On the flip side, just because someone pays you money, you may be underwater in what you have to deliver. So just because someone's willing to pay you doesn't mean that you should take it. The fifth benefit that your customers will get as a result of raising your prices is that you actually have more money that you can deliver on your promises for. So imagine you've got a hard cost thing that costs five bucks, all right? And you can add and subtract zeros here. I'm just using simple numbers. So if you have five bucks to do the thing, right, and you charge eight bucks, well, you only have $3 left to run the rest of your business, provide service, etc.

[Unknown]

Right?

[Alex Hormozi]

Like you don't have a lot of room there. Now imagine you charge $50 for that same $5 thing. You have $45 of additional gross profit that or additional would be $42 of additional gross profit that you can now use to blow the other competitors experience out of the water. Like you can in a very real way delivery 2, 3, 4 times the value. And in many times, if you do deliver two, three, four times the value, the customer gets a better experience. And so if our whole business here is actually trying to provide value, then we want to increase the emotional investment of the customer. We want to increase the perceived value. We want to have the less the least demanding person possible, have the most possible revenue we can have to deliver the results that the person actually wants. And so if we make these promises, we should stack as many of the chips as we can in our favor. And one of the biggest ones is the price. Now let's talk about the business side, because there's five significant things that will change when you start raising your prices in the business. Number one is that like the example I gave, if you had an $8 thing that cost you five bucks, you have $3 in gross profit. And you've got to run everything else off of those $3. So if you were just the most efficient person in the world, right? Let's maybe just run on half of that, which is $15 or so, $1.50 left, right? We're already paper thin here, right? On the flip side, when you have a significantly higher price, you have way more room to make mistakes. And I say that because no one's perfect. We all make mistakes in business. And what you don't want is mistakes that you can't recover from. And having a premium priced product or a luxury product that has a lot of margin there allows you to make mistakes. And as businesses are seasonal and you have macroeconomic environments, the people who don't have that Padding are the ones that go under. And so having that padding in a real way can increase the likelihood that you can play the game in the long run. The second thing is that as a business, it actually increases your perceived value of self. Like what do you think about when you think about, you know, a Walmart versus a Saks Fifth Avenue or a Neiman Marcus.

[Unknown]

Right.

[Alex Hormozi]

They occupy different spaces in your mind. And if you were the business owner of that business, then than having a higher perceived value of software, which a lot of times when people are starting out, they don't think they're worth very much and sometimes they're right. But the thing is, is that you still need to charge a certain amount so that you can have the excess resources to get better. If you never have any money left over, you can never reinvest in yourself. You can't reinvest in your employees. I'm getting a little bit ahead of myself in terms of things that you can do. But well, screw it. This leads naturally to the next one which is when you have extra cash left over, you can reinvest in your product, right? You can actually research and you can test out new things, you can make prototypes, you can test out new divisions of service. You can attract higher level talent to your business. If you have no margin, the best people aren't gonna work for you.

[Unknown]

Why?

[Alex Hormozi]

Because they're gonna go to the real business owner who understands how margin needs to work. So they can attract the best talent. And then now you're not only being out competed by that person in terms of profits, but they also can scale way better than you because they have decentralized decision making. Cause they have lots of of smart people all working together because they priced the product right and they're dealing with the right types of customers. Whereas you're sitting here dealing with fires all day because of people haggling over $50 with employees who can't string sentences together because you can't pay anybody who's worth a shit to actually work for you. It's a terrible life, I know cause I lived it. So just don't make that mistake. Like start off high and allow the extra profits to increase your perceived value of self help. You attract the better customers, have the profits to reinvest in the business itself, attract better quality employees, increase the conviction of your sales team if you do sell ever. Because think about it, if they're selling the shit product and they see the other guy on the market who's more expensive, the only thing they're going to have is, well, we're a lot cheaper. They know you're not better. But if you're the salesperson, you can approach and say, well, yeah, I mean, if you want, you can try that one first and then come back to us, because that's what everyone else does, right? Or you can not make the mistake and actually save yourself a little bit of money. And instead of buying twice, just buy nice once and solve the problem for good. And so the salespeople can enter these, these phone calls or these conversations with the conviction that they're actually going to help this person. And that is the best way to sell, is having the full conviction that your product is, is the best. And you can't say your product's the best if you're trying to do it on margin. And you don't have the money to reinvest in good people reinvesting, keeping it innovative at the front of the market, you can't do it.

[Unknown]

Right.

[Alex Hormozi]

And so I'm a big believer in just making big promises and then delivering on big promises. Like that is the types of businesses that I like to build. And when you have all of these higher paying, lower demanding, happier customers, your perception of the real impact you're actually making goes up. And so your conviction over the entire business and your mission of like, I actually came here to help people starts to become reinforced and it becomes this snowball that starts rolling and you have these testimonials and these reviews that start rolling in and the momentum builds. On the flip side, if you don't have that, you have less margin. It becomes this vicious cycle in the other direction where you're not getting these testimonials. All you're getting is chargebacks and refunds from these demanding customers that had unrealistic expectations because it was such a high percentage of their net worth. There was nothing that was going to save them from themselves.

[Unknown]

Right?

[Alex Hormozi]

And so you have two stories that you can play out. And solving rich people problems allow you to charge rich people prices. They pay better, they're easier to work with, and ultimately they allow you to build a business that can withstand different seasons and be in a position to succeed long run. This is very fortuitous, timing wise, but at the time of this being made the richest man in the world, everyone's like, what about big tech?

[Unknown]

What about AI?

[Alex Hormozi]

And I believe me, I think it's scary shit. So the richest man in the world right now is not big tech, it's not big pharma. All the things that the news wants to talk about, it's a man selling $10,000 purses. All right? If you don't know who he is, his name is Bernard Arnault. He owns most of the major luxury brands that you've heard of. So if you've ever been to a luxury mall, and if you haven't, I really strongly recommend that you go to one, because it might not be in your neighborhood, it might not even be close to your city, but you should go. Because what will happen is it will stretch your mind in terms of what you believe is possible. If you don't make lot of money and you see a purse for $10,000 and you see a jacket for $50,000, it changes something about how you see reality. You're like, and I. And I would urge you to not say those people are ridiculous. I can't believe someone would spend money on that. What I want you to do is actually empathize with the buyer. What kind of person would spend $50,000 on a jacket? Well, what conditions would have to be true in order for that to make sense? Because think about this. A lot of people are like, rich people are crazy, but rich people are the ones with all the money, so they must have done something differently than poor people. So try and think about, why would it make sense to this person? Well, if I can pick from all jackets and I have so much money that the difference between $100 jacket and a $50,000 jacket in relative terms is a $10 difference to me and my wealth, then I just want the best jacket. And so I'm willing to just pay whatever it is, because if you had a significantly better jacket for $10 more in your own net worth, you probably would be willing to pay for it. And so do they. It's just that they have more zeros. And so Bernard Arnault capitalized on this. And so there's four distinct positions you can have in any marketplace. You can have bargain, which is the absolute cheapest one, which typically is poor quality in general, poor experience. But barely. Barely gets the job done. But it gets the job done, but barely. The next is best value. All right, so this is the difference between, like a Walmart and a Target.

[Unknown]

Right?

[Alex Hormozi]

Target is better value. It's got brighter lights, it's cleaner in theory.

[Unknown]

Right.

[Alex Hormozi]

And it's just a little bit better.

[Unknown]

Right?

[Alex Hormozi]

It's the best value for the buck. The third position in the marketplace is premium, so it's the best version. That's the high end Lexus, right? That's the BMW. These are Premium products, they're above average based on price. It's not the best value, but is better than the best value. And then the fourth position in the marketplace is luxury, where the price has no cap and part of the value of the product itself is the cost that people know you paid to get it. So Bernard Arnault lives in this luxury bubble. It's where people associate their status with the purchase they made. And what an amazing position to be in. He's like, so I just raised my prices even more and people want to buy more. And so there's called Veblen goods. In economics, they actually defy the supply demand curve rules, because typically when you raise prices, you decrease volume. But in luxury goods, when you raise prices, you increase how many you sell. And that creates this unbelievable amount of profit, which is what has now propelled him to be the single richest man in the world. Something to learn from this guy. And so the number one question that I got from all the tweet responses I had from those three or four tweets in a row I made about, about solving rich people problems is, well, what are rich people problems? It's a great question. So rich people have the same problems that poor people do. They just want them solved differently. And if we go back to our trusted value equation, the big thing we want is we want to deliver a big dream outcome, right? We want to deliver an outcome that they want, number one. Number two, we want them to believe with very high confidence that if they work with us, they're going to get what we promised. On the bottom side, they want it to be incredibly fast. So as soon as they pay, they want to get, and then they want to have as little effort and sacrifice as humanly possible. And with the rich, speed and convenience are paramount because the money is never an issue. It's how much are you going to ask of my time and how painful are you going to make this for me? And so if you think about the white collar echelon, you've got investment bankers, you've got management consultants, all right, at the highest level, in my opinion, of this kind of white collar world, who deal with rich clients, the banking world fundamentally goes to rich people and says, I'm going to allow you to give me $1 billion and I'm going to take that billion dollars and I'm going to give you back $5 billion in 10 years or five years or whatever. And they're like, okay, well what do I have to do? And they're like, nothing. You just write me the Check like, okay, so I write you the check and then there's nothing else I have to do, Correct? Well, what's my perceived likelihood of achievement? How do I know this is going to happen? Well, here are the other three funds I've done, and I've averaged X over five years in each of these ones. Okay, so you've done this three times over 15 years and you've had that each time. It's pretty high perceived likelihood of achievement. The dream outcome is, I want to make way more money and I'm going to do it without any time or effort on my part. Here you go. That is how billions of dollars are made. Because they find what problem does a rich person have? What can they do with their money, right? Which is why investment vehicles and investment opportunities appeal to the wealthy. And the more passive you can make it, the less time involvement they have, the more turnkey it is, the higher the likelihood that you have a track record that they're going to get what you have promised. They'll write you an unlimited check. If you can get 20% returns like clockwork, with virtually no risk, you can tap into literally unlimited money, anyone, massive amounts. And a key point here was risk, right? If you find a way that there basically is no risk and you can get 20% returns, twice the stock market, you can have as much money as you want. Now here's where the little wrinkle comes in for those types of solutions. Many times you can find those things, but the opportunity can't take unlimited money. So a buddy of mine had figured out a short term revolving credit line thing for specific businesses that can't get credit lines, but they had assets in excess of the credit line, meaning if they defaulted for whatever reason, they could claim assets that were worth more. So it was asset backed loans. And so he was able to get 50% annual returns, but he maxed out that entire market with like $20 million of liquidity, that little niche that he had found in business. But $20 million may be more than what you currently are working with. And he structured his fund so that he would get 20% of the upside. And so if he takes $20 million and he does 50% growth every year, right, he's able to grow it to whatever it is, I don't know, 100 million bucks at the end of this, and he gets 20%, so he makes $20 million. And so for many of you watching this, you'll be like, I'd be happy with $20 million. And so all you have to do is Find ways to solve rich people problems. And that's a big investment bubble. But let's go down to like day to day types of businesses. Rich people will want often the same services as poor people because they are humans. But the way they want it delivered is going to be focusing on the bottom two variables of value, effort and sacrifice and time. Rich people will always pay for speed. And so if you don't have a fast option or if you look at a marketplace and there's lots of slow stuff, the easiest way to appeal to the rich is just do the same thing in half the time. Whatever the services, if it's dry cleaning and they can do it in a day, return it by end of day, right in the effort and sacrifice. If you're in any kind of home services type business, a lot of the issues there is English speaking people, right? A lot of people don't speak very good English. They would pay the premium to just know that one, their stuff's not going to get stolen to, the stuff's going to be done consistently every time and three, they're going to be speaking to somebody who understands them immediately and they don't have to repeat themselves and then say an entire sentence in English and say comprende or C, right? They don't want that. And this, mind you, this is in America. So whatever your native tongue of your country is, apply that thinking to whatever the service is. You just want to make sure that whatever the rich person's native tongue is, you're making it as easy and effortless as possible for them to communicate with you in whatever way they want. And so if you only have a phone number, well be the person that can accept anything so that if they email you, if they shoot you a text, if they WhatsApp you, if they phone call, you can accept anything because you've made it more easy and convenient and effortless for them to communicate with you. And so I want you to think through these value equation variables because that is fundamentally how you deal with rich people is that they just want it to be effortless, they don't want to think about it and they will pay you through the nose to do it. Because for them it's not through the nose because you need to make sure you're selling out of their wallet, not yours.

[Layla Hormozi]

Hey guys, real quick. If you're new to the podcast, I have a book on Amazon, it's called $100 million offers that over 8,000 five star reviews. It has almost a perfect score.

[Alex Hormozi]

You can get it for 99 cents on Kindle.

[Layla Hormozi]

The reason I bring it up is that I put over a thousand hours into writing that book, and it's my.

[Alex Hormozi]

Biggest gift to our community.

[Layla Hormozi]

So it's my very shameless way of.

[Alex Hormozi]

Trying to get you to like me.

[Layla Hormozi]

More and ultimately make more dollars so that later on in your business career.

[Alex Hormozi]

I can potentially partner with you.

[Layla Hormozi]

So that's my give. Go check it out. Amazon.

[Alex Hormozi]

And back to the show. One of the main things I want to hit here is how you sell to rich people, okay? The big thing that poor people do when they're trying to sell in general is, again, they sell out of their own wallet. When I say that, it's like, if you're poor, you think this means a lot, and so you feel like you have to justify your price all the time. If I hear that, I automatically know that this person is A, probably poor, B doesn't deal with many rich people, and so they will weed you out knowing that you don't know how to deal with people like them. Real talk. When you sell to rich people, the benefits for them are always around, it being the best, not it being the best value. It's not I want to get the most bang for my buck. It's I just want the most bang, period. And I want it to be as easy and effortless as humanly possible. So I went to a fur coat store when I was in Park City, and I actually met one of the best salespeople I've ever met. I got a really good overcome from him that I'll tell you right now, because I think it's awesome. Layla was trying on these fur coats because I think they're ridiculous, and I love that stuff. And we at the time lived in Austin, Texas, so it's hot all the time. There's literally never a point where you could wear a fur coat in Austin. And she said, you know, it's not about the money. She's like, I just don't think I'm ever going to wear this thing. And he said, well, if they were free, would you take one? And she was like, well, good point. He's like, well, then it's not not about the money. And he just redirected it back to the price. Now, what's interesting is that not once during the entire conversation that we had there, did he ever mention that the fur coat was going to be waterproof. Not ever did he mention that it was going to be the warmest jacket.

[Unknown]

Right.

[Alex Hormozi]

Because it's not going to beat the Gore Tech, you know, Arc'teryx spider, you know, whatever. You know, double, triple, platinum, whatever. Right. Fake down that can't be destroyed in flames. Right. It's never that.

[Unknown]

Right.

[Alex Hormozi]

All he was talking about was how we were going to look and feel with this jacket, or how Layla was going to look and feel at events and basically getting her to imagine what the experience would look like after experiencing the product.

[Unknown]

Right.

[Alex Hormozi]

And so if you're dealing with rich people on a regular basis, you have to think about the things that they're going to do and how they're going to experience the product, not the way you think you would experience it. And so this is where there's the golden rule, which is treat other people the way you want to be treated. But that's not actually the best rule for selling. You want to treat people the way they want to be treated, which is the platinum rule, which, if you've ever heard of that stuff. And so it's really coming from a place of empathy. And if right now you don't have a lot of money and you have a little bit of distaste for rich people, I like from the bottom of my heart, you have to get rid of that, because you cannot become something you hate. And so 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? Because it's the first step to being able to walk around in their shoes and make products and services that are actually going to serve them because they ultimately, if you think about the biggest companies in the world, although many people who are poor use Facebook, where does Facebook make its money? Advertisers, big businesses. And those people act like rich people. They want it to be as seamless as possible. And they will write an unlimited check. They'll say, hey, you know what? Facebook, we need to drop 300 million in Q4 because we have to get it off our balance sheet. Buddy of mine deals with Fortune 100 companies, and here's what's crazy. His advertising agency actually has to front the ad spend. And so he if they say, hey, I need your to for this month in December, I need you to drop 300 million on Facebook ads. He has to front the 300 million for the ads. All right? But the thing is, is that he has to do it that way because he needs it to be as easy as humanly possible. But remember, they're good for it, right? And so he actually has to have a revolving credit line in the billions with a bank and so what's crazy is that he charges 6% of all advertising dollars as his fee on top of whatever his normal fee is. And so when they drop 300 million, he gets 6%. Not bad. He gets 18 million bucks just for fronting the cash. And so all he has to do is constantly look at credit lines that are less than 6, so you can arbitrage on the money. And so my point here is that rich people have different problems. The best thing to do is study luxury brands. If you aren't in an area or you're born in an area that doesn't have a lot of nice stuff, I would highly encourage you to a, at least make a day trip out to like the really nice part of town, the nice mall, and walk around the stores there. And, and this is unfortunate, but you will get treated differently how you dress in those places. Like, I walk in like this and they always treat me like shit, but I kind of like like it. So I'm, I'm like twisted in my own way. Like I like, you know, the surprise, of course, I'm the, the main shopper that they have there. But going there, dress like you're not a weirdo and like, look around, like, look at the service. Like when you shop at a high end store, they'll bring you bottled water that's fizzy and they'll have different selections of waters. They'll offer you champagne while you shop, they'll offer you scotch while you shop. It's a different experience. You're like, well, why don't they do that at, why don't they do that at Tilly's? You know, why don't they do that at fucking Aeropostale, right? I don't know. Is that a kid's store? It was probably not. Whatever. Hollister. That's probably a kid's store. I don't even know what are cheap. Store. American Eagle. All right. American Eagle. Yeah. H and m. Yeah. Forever 21. There you go. Do they offer that there? Of course not.

[Unknown]

Right.

[Alex Hormozi]

And so if you're thinking about this, like, who's going to get a better experience? Like the clothing at the nice stores is way better quality, right? There's no one going to argue that the experience at the way better stores is significantly nicer. Guess what? You don't try and do like you're going to have somebody who's assigned to you from the moment you walk in the door. What can I get for you?

[Unknown]

Right?

[Alex Hormozi]

And they become your, basically your concierge for the entire experience. You have there and they can have and deliver that better experience because of the premium and luxury prices they charge. And so if I had the choice of two businesses where I've got a super messy rack, right, that's sitting there and people just have to clamor and fight over it versus the white glove champagne, you know, how can I help you experience? I tend to want to serve those types of customers, charge those types of prices, make those types of profits profits and make those types of promises and deliver on them and work with my employees and team, really smart people who also want to deal with those types of people. And so in a real way, like it is an in crowd and an outcrowd. People who are in that world recognize other people who understand that world. And if I can get you to think like they think, then you will be able to sell to them. Rich people have all the money. And so if you want to go get the money, go to where the money's at. There's only one way to win in a low price business. You have to build your entire business from the ground up, day one, based on having a significant operational advantage. You have to build your core strategic advantage as we will be the lowest priced person. Do not compete on best value. You either got to go premium or you got to go luxury. All right, Luxury is your price is so high it confers status to the buyer because your brand is strong. Premium, which is where most people is, where I recommend you go, is actually just deliver significantly better in a real way service. All right, now here the point is that your price, like if you're an amazing marketing agency, you're not conferring status to the business by being expensive. You're not luxury.

[Unknown]

Right?

[Alex Hormozi]

Luxury often is in consumer goods. So if you're in a business services type business, you're not really going to be there. It's much more about I want the best, I want the most bang, not for the dollar, I just want the most bang. All right, the most bang for the dollar is best value. And this is where the graveyard of most businesses sit. They try and offer a little bit more for a little bit less. And they look at the next guy comes in, he tries to offer a little bit more for a little bit less. And then eventually you can't offer any more for any less. And you just stay in what I consider a capitalist nonprofit. You just don't make any money. And you do it for years and it crushes your soul because you kept trying to do a little bit more for a little bit Less because you were selling to the wrong person. And so if you're going to get into the price game, you got to go for the absolute bottom and build your business from the ground up, only off of remote workers. Automate as much as humanly possible. You come into it like the first answer is always, how can I automate it? Not who do I hire or how do I outsource it. It's always, how do I automate it?

[Unknown]

Right.

[Alex Hormozi]

And then the second is, if I absolutely can't automate it, I'll have to bring someone offshore. That's a different business model than you probably have. It might not even be a business you're interested in. And the problem is there can only be one low price leader, the cheapest person. There's no advantage, and this is from Dan Kennedy, there's no advantage to being the second cheapest person in the marketplace, but there is an advantage to being the most expensive. And so when you sell to rich people, you get to charge rich people prices. They pay better. And if you solve their problems, they will make you one of them. So when you deal with better customers because you've raised your prices, you're going to attract better people. Because the rich people are attracted to higher prices. They seek them out like bloodhounds. I actually want to know what the most expensive thing is because I know that the business owner who set it up that way understands how I want to be treated. Might not have thought about it like that. I literally look for the most expensive thing because I just assume it's going to be the best. And most times I'm right. Because that's how most businesses that cater to wealthy people operate. They know what the rich person is looking for. They want speed, convenience, and they want it to just deliver exactly how it is and not think about it again.

[Unknown]

All right?

[Alex Hormozi]

They don't want to haggle, they just want, here, get the extra 20%. I don't care. Like, I just want to be in and out and I'm done.

[Unknown]

Right?

[Alex Hormozi]

And so what happens is when you deal with richer people, you have way less demanding clients. The nice thing is that when they spend money, they're actually emotionally invested. So when you raise the price, people get more emotionally invested. On top of that, they perceive the value as higher just from the price alone. All right, There was a, there's a big experiment they ran where they had three bottles of wine, cheap, middle priced, expensive. They had people try them out and they had them rank them and people ranked them as best. Was the most expensive Middle was middle, and the cheapest one was the worst. Here's what's crazy. The researchers pulled off the covers of the wines and showed them that all three wines were the same. And so in a very real way, the price actually increased the value of the wine itself. And so when you raise the price, you actually increase the quality of your product. On top of that, if you ever have a product or service where you have to get the person to do something which is most products or services, then the higher quality customer you attract in a real way, the better the likelihood that they will achieve the result because more able people can afford more. And so you will increase the percentage of people who are happy and can follow through because they are more able. And so you have higher success rates because you attracted better quality customers. And so if we want to stack the chips in our favor to make big promises, deliver on big promises, have clients that aren't a pain in the ass, right, deliver results as we said we were going to, and make more profit along the way, the pathway is up, not down. Now, from a business perspective, when you have more profit in the core thing that you have, you can reinvest in staying innovative. You can do research and development, you can have beta runs and beta products and prototypes. You can do that because you have excess profit. On top of that, you can invest in having a superior experience because you have the excess cash to give them white glove service.

[Unknown]

Right?

[Alex Hormozi]

On top of that, your conviction in what you sell, that when you say, I'm going to deliver this thing and you can, is strengthened because conviction is where all sales comes from, right? You have to believe what you're saying. Most people don't actually believe. And so the thing is, poor people think if when you close a sale, you think, gotcha, you're fucked up because you actually think that you are ripping off your customers. And so if you. So you need to change that. Like, if you don't, if you feel that way, you need to change it. Because there's two emotions that you should feel. One is, oh, fuck, now the work starts. And the second is, I'm really glad I can help this person. Like, I get it because I've sold when I was poor. Like, I understand when you're like, I fucking need to pay bills, I get it. But the thing is, you have to pull yourself out of that to get out of that. Because again, wealthy people can smell that. Like, I love this term commission breath, right? Is that they can smell that the only reason you're trying to sell them is for you, not for them. And so when you have the most profit, you can reinvest in the experience, you can reinvest in the product, and most importantly, you can reinvest in attracting the best talent. Because how do you scale a business? It's not going to be you. You're going to have to have a team. And would you rather have a team of people who don't value themselves and don't want to make a lot of money, or do you want to have a team of people who are ambitious, who have big dreams for themselves, who want to learn, and they want to learn from somebody who's making money and they will ask for more than people who don't value themselves. But here's what's crazy. The biggest cost cutting tactic Henry Ford said he did was that he doubled his minimum wage compared to everybody else who he competed against. What happened? He was able to take all the top talent from everyone else to work for him. And here's one of the secrets that you probably don't know, and I'm going to tell you right now, is that A level talent costs twice as much as B level talent, but produces 5 times the output, 10 times, 100 times the output, so much more. And A level talent comes with batteries included. They come with a map installed like a Tesla. They know where they're going, they know the route, and they already have the motivation to get there. And you just need to get out of their way. You need to empower them to do what they need to do. But you can't attract those people if you don't have the profits. And so keep trying to lower your price, keep trying to do best value, do a little bit more for a little bit less. You ward off the best customers, you ward off the best talent, because they all know each other. Because oftentimes the best talent are people who value premium products and services and they want to work for a company that they would buy from. And the last one is a lot of people's prices are a reflection of their value of themselves. And I think there's a big thing that we have to separate here is that you can value yourself and understand that you are not as good yet. I'm a big believer in what I consider the Chick Fil, a model of pricing, which is it's either free or it's full price. There are no discounts. And that's why when people are starting out, I encourage them to do as many free services as they can. There's a lot of value to that one is you get a lot of experience. Two, there's lower stakes. Three, you can ask for things in return that are tangential value. You can get reviews, you can get testimonials, you can get feedback. All of these things help make you better. And everyone's so, they're so short sighted. Because what happens is if you're in the beginning and you suck, if your first five people you basically rip off because you're sucking at it and you're trying to learn with them, like your first five customers all don't like you, like that's a tough way to start. And you're perception of business will be shifted by that. And so if you have a very different dynamic where you're just giving and you're giving away stuff for free, you're giving away services for free, right? You have a very different dynamic and you will learn how to provide value in a different way. And then what happens is once you get to a point where people are like, I want more of this and you can't even satisfy the demand, then you go full price. Because now you've, you've gotten the reps in, you know how to over deliver. You know what an actually good relationship with a customer feels like because it should feel like a partnership. It should feel like we're working together on this. And it shouldn't feel like master slave, right? It shouldn't feel like you're pulling the cash out of their, ripping the cash out of their wallet. Shouldn't feel that way. It should be like, hey, we're both aligned here. We're really partners in this, in this work together. And when you have that vibe and you have the track record, you will be able to say no to bad customers and ultimately save your mindset and all of your employees from dealing with them too. Because one of the easiest ways to lose good talent is, is sell bad customers real quick.

[Layla Hormozi]

Guys, I have a special, special gift for you for being loyal listeners of the podcast. Layla and I spent probably an entire quarter putting together our scaling roadmap. It's breaking, scaling and into 10 stages and across all eight functions of the business. So you've got marketing, you've got sales, you've got product, you've got customer success, you've got it. You've got recruiting, hr, you've got finance. And we show the problems that emerge at every level of scale and how to graduate to the next level. It's all free and you can get it personalized to you.

[Alex Hormozi]

So it's about 30ish. Pages for each of the stages.

[Layla Hormozi]

Once you enter the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com roadmap R O A D map roadmap.