Why People Don’t Buy Your Offer | Ep 897
In this episode of The Game, Alex Hormozi addresses how business owners can make their offers more appealing to potential customers. He explains why trying to help everyone can actually harm business growth, using the example of an attorney who diluted his core services by creating unprofitable courses and software. The discussion covers the benefits of maintaining a singular focus on one product, customer type, and marketing channel until reaching significant revenue milestones.
Hormozi outlines practical strategies for improving business operations, including methods to optimize lead generation and conversion rates. He details how to transition from hourly billing to value-based pricing models, and explains the importance of developing a structured, repeatable sales process. The episode includes specific frameworks for identifying qualified leads and creating effective value propositions that showcase both the benefits of taking action and the consequences of inaction.
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1-Page Summary
Overcoming the "Help Everyone" Mindset and Focusing Business
Alex Hormozi discusses how attempting to help everyone can harm business growth and financial stability. He shares the story of an attorney who developed unprofitable courses and software while neglecting his core legal services. Hormozi advises eliminating these resource-draining ventures and suggests transforming educational content into free lead generation tools. He emphasizes the importance of focusing on a single product, target customer, and marketing channel until reaching $1 million in annual revenue.
Optimizing Customer Acquisition and Lead Generation
Hormozi identifies key strategies for improving lead conversion, including implementing clear calls to action in videos and proactively engaging with social media followers. He recommends creating sales videos that both pre-qualify and educate prospects, while using the BANT framework (Budget, Authority, Need, Timing) to identify qualified leads more effectively.
Transitioning To Value-Based Pricing
Moving away from hourly billing, Hormozi advocates for a fixed, value-based pricing model. He suggests introducing a premium package as a price anchor and incorporating commissions to align service provider incentives with client success. This approach, he explains, better reflects the true value of services and can make clients worth three to five times more.
Implementing a Structured Sales Process
To ensure consistency and scalability, Hormozi recommends developing a repeatable sales process. This includes creating a video sales letter that outlines key information and frequently asked questions. He introduces the "plus-plus, minus-minus" structure for value propositions, demonstrating both the benefits of choosing his solution and the drawbacks of inaction. Regular analysis and refinement of sales conversations ensure continuous improvement and enable successful scaling of the sales team.
1-Page Summary
Additional Materials
Counterarguments
- The "Help Everyone" mindset can sometimes lead to a diversified portfolio, which can mitigate risk and tap into multiple revenue streams.
- Focusing on a single product and customer segment might limit a business's ability to adapt to market changes and could miss out on opportunities in other segments.
- Free lead generation tools can potentially devalue the perceived worth of the educational content and may not always convert into paying customers.
- Clear calls to action are important, but they must be balanced with content value to avoid appearing too sales-focused, which can turn off some prospects.
- Sales videos that pre-qualify prospects might inadvertently exclude potential customers who do not fit the preconceived profile but could still benefit from the product or service.
- The BANT framework may not be suitable for all businesses, especially those in emerging markets or with innovative products where budget and authority may not be clearly defined.
- Value-based pricing can be difficult to implement and justify to customers, especially if the perceived value is subjective or the outcomes are not easily quantifiable.
- Premium pricing as a price anchor could potentially alienate price-sensitive customers or those who are unable to discern the additional value.
- Commissions can sometimes lead to a conflict of interest, where the service provider might prioritize their own earnings over the client's best interest.
- A structured sales process is important, but it must remain flexible to adapt to individual customer needs and market changes.
- Regular analysis and refinement of sales conversations are essential, but overemphasis on process can lead to a rigid sales approach that lacks personalization.
Actionables
- You can refine your business focus by creating a "One-Page Business Plan" that outlines your single product, target customer, and marketing channel. Start by writing down your core product or service, describe your ideal customer in detail, and choose one marketing channel you're most comfortable with or have seen the most engagement in. This exercise forces you to distill your business strategy to its essence and can be revisited monthly to ensure alignment with your goals.
- Develop a habit of asking for feedback after every sales interaction to improve your sales process. After each sales call or meeting, send a short follow-up survey to the prospect asking for their thoughts on what was clear, what could be improved, and how they felt about the sales experience. This direct feedback will help you identify patterns and areas for refinement in your sales approach.
- Experiment with a "Value-First" pricing strategy on a small scale before overhauling your pricing model. Choose a service or product you offer and set a fixed price based on the value it provides to the customer, rather than the time it takes to deliver. Offer this pricing to a limited number of new clients and monitor their satisfaction and your profit margins to gauge the effectiveness of value-based pricing for your business.
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Overcoming the "Help Everyone" Mindset and Focusing Business
Helping All Leads To Financial Issues and Limited Scalability
Hormozi cautions that a mindset geared towards helping everyone can hinder a business's scalability and financial stability. He highlights the story of an attorney who developed courses and software to give back, without assessing demand, ultimately resulting in financial losses.
Side Projects Divert Resources From Core Business
According to Hormozi, many service businesses fall short by pursuing side projects, like courses and agencies, without first perfecting their core services. He illustrates how the attorney directed most of his time towards unprofitable courses and software, consequently neglecting the very service offerings that were the backbone of his cash flow.
He emphasizes that each hour invested into unprofitable initiatives is an hour lost from scaling profitable services. He uses the example of a client whose software development project was depleting cash flow and hampering scalability due to a misbelief that merely coding software would ensure a substantial return on investment without the necessary dedication and resources.
Refocus: Cut Unprofitable Ventures, Double Down on Core Services
Hormozi recommends eliminating unprofitable business segments, which he refers to as "killing the vampire." These segments act as resource drains and impede business scalability. In the case of the attorney, Hormozi advises him to cancel the software venture, as it did not deliver enough value and distracted employees from their core responsibilities.
Use Education As a Free Lead Generation Tool For Service Business Growth
Additionally, Hormozi suggests transforming the education sector of the business from inexpensive offers to complimentary services, leveraging them to draw more clientele towards the core business offerings. By offering free educational content, businesses can generate word-of-mouth ...
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Overcoming the "Help Everyone" Mindset and Focusing Business
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Counterarguments
- While focusing on a singular product and customer segment can be effective, diversification can also mitigate risk and open up additional revenue streams.
- Helping a wide range of customers can build a broad base of support and referrals, potentially leading to organic growth.
- Side projects can sometimes lead to innovation and uncover new profitable avenues that the core business would not have otherwise discovered.
- Not all unprofitable ventures are a drain; some may require a longer-term perspective to realize their potential.
- Offering free educational content can dilute the perceived value of a service, making it harder to charge premium prices later on.
- Underpricing services can sometimes be a strategic move to enter a market or disrupt competitors, leading to long-term gains.
- Aiming ...
Actionables
- You can streamline your focus by creating a "business essentials" checklist that includes only the most profitable and scalable aspects of your operation. Start by listing all your current business activities and then rate them based on profitability and scalability. Anything that scores low on both counts should be a candidate for elimination. For example, if you run a small bakery and find that custom cakes are far more profitable than bread sales, you might consider phasing out bread to focus on custom cakes.
- Develop a simple feedback form to gauge the true value of your services from your customers' perspective. Ask questions that help you understand what they value most about your service and what they would be willing to pay for an enhanced experience. For instance, if you offer online tutoring, you could ask students to rate the importance of personalized lesson plans and their willingness to pay a premium for such customization.
- Identify one marketing channel ...
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Optimizing the Customer Acquisition and Lead Generation Process
Alex Hormozi underscores the importance of addressing inefficiencies in the customer acquisition funnel and structuring marketing for intentionality to improve lead qualification and conversion rates.
Address Leaks in Customer Acquisition Funnel
Hormozi identifies leaks in the customer acquisition funnel and offers strategies to plug these gaps.
Use Ctas in Videos to Drive Prospects To a Point of Contact
One significant leak Hormozi points out is when Instagram profiles miss the opportunity to proactively engage with new followers. Without clear calls to action (CTAs) that prompt new followers to send direct messages (DMs), businesses fail to convert these potential leads.
Engage New Social Media Followers to Qualify and Convert
Taking a proactive approach with new social media followers has proven successful. New followers on Instagram can be DMed proactively to distinguish between those who want free content and those who need legal help. By engaging followers directly, businesses can qualify the followers as leads more efficiently, guiding them towards conversion.
Structure Marketing and Lead Generation For Intentionality and Repeatability
Strategically-designed marketing efforts lay the groundwork for a systematic lead generation approach that brings consistent results.
Create a Sales Video To Pre-qualify and Educate Prospects
Businesses can create a sales video to serve a dual purpose: pre-qualifying prospects and educating them about the service or product. The video acts as an initial f ...
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Optimizing the Customer Acquisition and Lead Generation Process
Additional Materials
Counterarguments
- While using CTAs in videos can be effective, not all audiences may respond well to direct prompts to send messages, which could be perceived as too aggressive or spammy.
- Proactively DMing new followers to qualify them might not scale well for larger businesses or could come off as intrusive, potentially damaging the brand's reputation.
- A sales video might not be the best medium for all products or services, especially complex solutions that require personalized consultation.
- The BANT framework, while useful, may not capture the full complexity of a customer's situation and could lead to the exclusion of potential leads who might become qualified over time.
- Structuring marketing for intentionality and repeatability is important, but it's also crucial to maintain flexibility to adapt to changing market conditions and ...
Actionables
- You can map your customer journey by hand to spot potential inefficiencies. Draw out each step a customer takes from discovering your brand to making a purchase, using sticky notes or a whiteboard. This visual approach allows you to physically move pieces around and identify where customers might be dropping off or where the process could be streamlined.
- Experiment with personalized follow-up messages to engage new social media followers. After someone follows you, send a tailored message or email thanking them for the follow and asking a question related to their interests. This can help you understand their needs better and potentially convert them into a lead or customer.
- Develop a simple scori ...
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Transitioning To Value-Based Pricing From Hourly Billing
Alex Hormozi shares perspectives on the limitations of hourly billing, advocating for a fixed, value-based pricing model as a means of better aligning with client success.
Recognize the Limitations of an Hourly Billing Model
Hourly Billing Undervalues Service and Hinders Scaling
Hormozi, while not completely against hourly billing, expresses that for core business services, it's not the optimal strategy. He illustrates with an example where a business bills $250 per hour and has an average client value of $1,500, suggesting that this approach undervalues the specific results that clients are seeking. He argues that hourly billing commoditizes services and fails to represent the true value of the outcome provided.
Move To a Fixed, Value-Based Pricing Model
To solve the problem of hourly billing undervaluing services, Hormozi recommends moving to a value-based pricing model.
Introduce a "Premium" Package to Enhance Perceived Value and Establish a Price Anchor
Hormozi advises service providers to abandon hourly billing in favor of a fixed price and suggests introducing a premium package priced at $25,000 with zero commission. This acts as a price anchor, making the actual service offer seem more attractive and reasonable in comparison. He emphasizes that premium pricing will make customers perceive increased value, signifying a higher quality of service which can result in clien ...
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Transitioning To Value-Based Pricing From Hourly Billing
Additional Materials
Clarifications
- Value-based pricing is a strategy where prices are set based on the perceived value to the customer, rather than the cost of production or time spent. It focuses on the benefits received by the customer and aligns pricing with the value they gain from the product or service. This approach often involves understanding the customer's needs, the competitive landscape, and the unique value proposition of the offering. By implementing value-based pricing, businesses can capture more value from customers who are willing to pay based on the outcomes or results they receive.
- A "premium" package in pricing is a high-priced offering designed to make other options seem more reasonable by comparison. It serves as a reference point, anchoring the perceived value of the other services. This strategy can influence customers to see the lower-priced services as a better deal, leading to increased perceived value and potentially higher sales.
- In a fixed pricing model, commissions can be added as a performance-based incentive. T ...
Counterarguments
- Hourly billing can be more transparent and easier for clients to understand, which can build trust.
- Value-based pricing may be difficult to implement for services where the value is not easily quantifiable or agreed upon by both parties.
- Premium pricing could potentially alienate clients with smaller budgets who may feel that the services are no longer accessible to them.
- A fixed pricing model may not account for the variability in the amount of work required for different clients, potentially leading to losses for the service provider.
- Commission-based incentives might lead to a focus on short-term gains rather than long-term client success and satisfaction.
- The introduction of a premium package could create a perception of inequality or lesser service among clients who choose more affordable options.
- Value-based pricing requires a deep understanding of the client's business and goals, which may not always be feasible or accurate.
- Some clients may prefer the flexibility of hourly billing, as it allows ...
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Implementing a Structured, Scalable Sales Process
Alex Hormozi emphasizes the importance of a repeatable and structured sales process for ensuring consistency and scalability in any business.
Create a Repeatable Sales Script and Flow
Hormozi describes the risks of operating without a structured sales process, resulting in erratic lead conversions and a lack of clarity in pitches.
Identify Prospect's Problems, Solution, and Consequences of Inaction
He recommends against charging for sales calls like legal consultations. Instead, he suggests qualifying prospects upfront and providing them with a video sales letter (VSL) that outlines who, what, where, when, and why, along with answers to frequently asked questions. This method accomplishes two primary goals: it qualifies customers and establishes an intentional flow for sales conversations.
During sales calls, it's essential to label the prospects' issues clearly, grasp the gap between their present situation and their desired outcomes, and outline the consequences of inaction. Hormozi stresses that by having predictable systems, the business can spend time on viable prospects who have the means and authority to decide quickly and are ready to do so.
Use "Plus-Plus, Minus-Minus" to Structure the Value Proposition
Hormozi introduces the "plus-plus, minus-minus" structure for value propositions. This method aims to demonstrate to prospects the benefits of choosing his solution (more good, less bad) and the drawbacks of not doing so (more bad, less good). Adopting this structure provides four persuasive angles during a sales consultation and helps to build a strong case for the product or service offered.
Optimize the Sales Process for Continuous Improvement
Hormozi underscores the need for continuous analysis and refinement of sales conversations. By reviewing call recordings, evaluating the VSL's ...
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Implementing a Structured, Scalable Sales Process
Additional Materials
Counterarguments
- While a structured sales process is beneficial, it may not be suitable for all types of businesses or industries where a more personalized approach is necessary.
- A repeatable sales script risks sounding robotic or impersonal, which could turn off some prospects who prefer a more authentic interaction.
- Over-reliance on a video sales letter (VSL) might not be effective for all target demographics, especially if they prefer direct interaction or have specific questions that a VSL cannot address.
- The "plus-plus, minus-minus" structure could be perceived as manipulative if not used carefully, as it might push prospects into a decision by overemphasizing negative consequences.
- Continuous optimization of the sales process is important, but there is a risk of over-optimization, which can lead to diminishing returns and potentially alienate customers if the sales approach becomes too aggressive or invasive.
- Adding sales team members to scale the process assumes that all salespeople can adhere to the script effectively ...
Actionables
- You can create a personal decision-making framework by mapping out your typical choices and identifying patterns that lead to successful outcomes. For instance, if you notice that researching before making purchases often leads to satisfaction, make it a standard step in your buying process. This mirrors the structured sales process businesses use for consistency and can be applied to various decisions in your life.
- Develop a habit of self-evaluation by recording important conversations or decisions and reviewing them periodically. Similar to how sales teams refine their scripts, you can listen to recordings of discussions you've had or write down the pros and cons post-decision to see where you could improve your communication or decision-making skills.
- You can stream ...
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