6. Discount Promotions | $100M Lost Chapters Audiobook
In this episode of The Game, Alex Hormozi explores different approaches to implementing discount promotions in business. He examines various discount structures—from percentage-based to absolute amounts—and explains how their effectiveness depends on customers' familiarity with standard pricing. The discussion covers why discounts can be more beneficial than free offers, particularly in regulated industries, and how they help offset customer acquisition costs while creating a paying-customer mindset.
Hormozi outlines specific strategies for maintaining product value while using discounts effectively. He explains why businesses should avoid discounting their main offerings and instead focus on related items, detailing how steep discounts can drive behavior change without compromising core product value. The episode also addresses how to convert discount-seeking customers into qualified leads and the importance of understanding customer challenges to create future upsell opportunities.
This is a preview of the Shortform summary of the Nov 14, 2025 episode of the The Game w/ Alex Hormozi
Sign up for Shortform to access the whole episode summary along with additional materials like counterarguments and context.
1-Page Summary
Types of Discounts and how to Structure Them
Businesses can present discounts in several ways: as a percentage off, absolute amount off, relative equivalence off, or as a simple discounted price. The effectiveness of these discounts largely depends on how familiar customers are with the product's typical pricing. For well-understood services like dentistry or haircuts, showing both the original price and discount amount helps customers quickly gauge the value of the offer.
Advantages Of Using Discount Offers vs. Free Offers
Discount offers prove particularly valuable in regulated industries where free offers face restrictions. While the initial revenue from discounts might be modest, they help offset customer acquisition costs and create a mindset where customers expect to pay for services. This psychological investment increases the likelihood of successful upsells to core offerings, as customers have already committed to a smaller purchase and provided their payment information.
The requirement of upfront payment information for discounted offers effectively eliminates no-shows. Additionally, implementing a two-step sales process, where administrative staff handle initial appointments, ensures that only qualified leads reach specialists, improving overall efficiency.
Best Practices For Implementing Discount Offers Effectively
To maintain product value, businesses should avoid discounting their core offerings, as this can lead customers to expect lower prices consistently. Instead, it's recommended to offer steep discounts (50% or more) on related items to drive significant behavior change without affecting the main product's perceived value.
The strategy should focus on converting discount-seeking customers into qualified leads who can be upsold over time. Starting with free or heavily discounted offers helps establish benchmarks and optimize the sales process. Success in this approach relies on understanding customer challenges better than they do themselves, allowing businesses to identify and communicate additional issues that create opportunities for future upsells.
1-Page Summary
Additional Materials
Clarifications
- "Relative equivalence off" refers to a discount expressed by comparing the price reduction to another product or service's value. It shows how much the discount is worth relative to something familiar, helping customers understand the deal's significance. For example, a discount might be described as "equivalent to a free coffee" rather than a specific dollar amount. This method leverages known values to make discounts more relatable and appealing.
- Regulated industries face restrictions on free offers to prevent unethical practices like bait-and-switch or misleading advertising. These rules protect consumers from being lured by free services that lead to costly upsells or hidden fees. Regulations ensure transparency and fair competition within the industry. Examples include healthcare, finance, and legal services where consumer protection is critical.
- Psychological investment refers to the mental commitment a customer makes when they spend money, even a small amount, on a product or service. This commitment increases their likelihood to continue engaging with the business and consider additional purchases. It creates a sense of ownership and value, making customers less likely to abandon the relationship. This effect helps businesses successfully upsell by building on the initial purchase.
- Requiring upfront payment information creates a financial commitment, making customers less likely to cancel or skip appointments. It also filters out those who are not serious about the service. This reduces wasted time and resources for the business. Consequently, it improves scheduling efficiency and revenue predictability.
- A two-step sales process separates initial customer contact from specialized service delivery. Administrative staff handle scheduling and basic qualification to filter out unqualified leads. This ensures specialists focus only on serious, pre-qualified customers, improving efficiency. It also reduces wasted time and resources on no-shows or unsuitable clients.
- Discounting core offerings frequently signals to customers that the product is worth less than its original price. This can lead to a lasting expectation of lower prices, reducing willingness to pay full price later. It also risks eroding brand prestige and perceived quality. Over time, this diminishes overall profitability and market positioning.
- Offering steep discounts on related items attracts price-sensitive customers without lowering the perceived value of the main product. It encourages trial and engagement, building trust and familiarity with the brand. This approach creates a pathway for upselling the full-priced core product later. It prevents customers from expecting discounts on the primary offering, preserving its premium status.
- Converting discount-seeking customers into qualified leads involves identifying those genuinely interested in the product beyond just the discount. Businesses engage these customers through follow-up communication and personalized offers that address their specific needs. This process filters out bargain hunters unlikely to make future purchases. The goal is to build trust and demonstrate value, encouraging long-term commitment.
- Establishing benchmarks means measuring customer response and sales performance using free or heavily discounted offers. This data helps businesses understand what works and identify customer preferences. It provides a baseline to compare future marketing efforts and optimize pricing strategies. Benchmarks guide adjustments to improve conversion rates and maximize revenue.
- Understanding customer challenges "better than they do themselves" means deeply researching and analyzing their needs, pain points, and behaviors beyond their stated problems. This insight allows businesses to identify hidden or future issues customers haven't recognized yet. By addressing these unspoken needs, companies can offer additional products or services that provide real value. This creates natural opportunities to upsell, as customers see the relevance and benefit of the extra offerings.
Counterarguments
- Discounts might condition customers to wait for sales, potentially hurting regular sales periods.
- Frequent discounts can devalue a brand, making it seem less premium or exclusive.
- Some customers might be skeptical of discounts, perceiving them as a marketing trick or questioning the quality of the discounted products or services.
- Not all businesses can afford to offer steep discounts without affecting their bottom line, especially small businesses with tight margins.
- The strategy of avoiding discounts on core offerings might not be feasible for all businesses, particularly if competitors are offering discounts on similar core products or services.
- Requiring upfront payment information could deter some customers from taking advantage of a discount offer, especially if they are concerned about data privacy or potential future charges.
- A two-step sales process could create additional barriers to purchase, potentially leading to a drop in conversion rates.
- Over-reliance on discounts to convert leads might lead to a customer base that is less loyal and only engaged when there is a financial incentive.
- Understanding customer challenges better than they do themselves is a strong statement and might not always hold true; customers can be very knowledgeable and discerning.
- Upselling can sometimes be perceived as pushy or aggressive, potentially alienating customers if not done tactfully.
Related Shortform Content
Get access to the context and additional materials
Types of Discounts and how to Structure Them
Effective discount strategies can attract customers, but the success of these offers often depends on the familiarity of the product and the way the discount is presented.
Ways to Display a Discount Offer
There are several methods to display a discount: percentage off, absolute amount off, relative equivalence off, and simply showing the discounted price. Testing these varying presentations helps businesses determine what resonates best with their audience.
Testing Different Discount Presentations Determines the Best Resonance With the Target Audience
By cycling through different methods of presenting discounts, companies can test which method their audience prefers. This trial-and-error approach allows businesses to optimize their offers for maximum customer appeal.
Discounts Are Most Effective on Familiar Products With Known Pricing
Discounts work better when applied to well-understood services like dentistry, chiropractic care, gyms, and haircuts because people usually have a prior understanding of expected price ranges. Hence, they can perceive the value of the discount more clearly.
State Original Price and Discount Amount For Context
When using a simple discounted price for somethi ...
Here’s what you’ll find in our full summary
Types of Discounts and how to Structure Them
Additional Materials
Clarifications
- "Relative equivalence off" means showing a discount by comparing the price reduction to something familiar or equivalent, like "Save the cost of a coffee." It helps customers understand the value by relating the discount to everyday expenses. This method can make the discount feel more tangible and relatable. It differs from just stating a percentage or absolute amount off.
- Familiarity with a product means customers have a mental benchmark for its usual price. This benchmark helps them quickly recognize the value of a discount. Without this reference, customers may struggle to see if a discount is truly beneficial. Thus, discounts feel more meaningful when customers understand the product’s typical cost.
- An absolute amount off discount reduces the price by a fixed sum, like $10 off. A percentage off discount reduces the price by a portion of the original price, such as 20% off. Absolute discounts are straightforward and easy to understand, especially for familiar prices. Percentage discounts can seem larger or smaller depending on the original price, affecting perceived value.
- Testing different discount presentation methods involves showing various discount formats (like percentage off, dollar amount off, or just the final price) to different customer groups. Businesses track which format leads to more sales or engagement using tools like A/B testing or customer surveys. This data helps identify the most effective way to communicate discounts for that specific audience. The goal is to maximize customer response by tailoring the discount display to their preferences.
- Stating the original price and discount amount helps customers understand the actual savings. It provides a clear reference point, making the discount more tangible. Without this, customers may not realize how much they are saving. This transparency builds trust and encourages purchase decisions.
- Absolute prices are preferred for familiar products because customers already know typical costs, so they can easily see the discount's value. For unfamiliar products, customers lack a price reference, making absolute prices less meaningful. Instead, showing both the original price and the discount helps establish a clear value comparison. This context builds trust and clarifies the offer's benefit.
- "Relative equivalence off" means showing a discount by comparing the price to something else of known value, like saying "save the cost of a coffee." It differs from ...
Counterarguments
- While effective discount strategies can attract customers, they can also potentially devalue a brand or product if used excessively or perceived as a gimmick.
- The success of discount offers may not only depend on product familiarity but also on the timing of the offer, the competitive landscape, and the overall economic climate.
- Some consumers may be skeptical of discounts, viewing them as a sign that a product is overpriced to begin with or that the quality may be inferior.
- Displaying discounts in various ways might confuse customers if not done clearly and consistently, potentially leading to a negative shopping experience.
- Testing different discount presentations can be resource-intensive and may not yield conclusive results if not designed or executed properly.
- Discounts on familiar products with known pricing can lead to price anchoring, where customers become accustomed to discounted prices and are reluctant to pay full price in the future.
- In some cases, discounts on well-understood services might not be as effective if the market is already saturated with similar offers, reducing the perceived value of the discount.
- Stating the original price and discount amount is not always necessary or effective; some customers may respond better to a straightforward low price without the context of a discount.
- Using absolute prices fo ...
Related Shortform Content
Get access to the context and additional materials
Advantages Of Using Discount Offers vs. Free Offers
Discount offers possess unique advantages in the marketplace over free offers, especially in regulated industries and when driving lead generation that culminates in higher sales rates and customer investment.
Discounts Enable Lead Generation in Regulated Industries With Free Offer Limits
In certain states or countries that impose restrictions on free offers, discount offers emerge as a compliant alternative for advertising, still enabling substantial lead volume. These discount strategies are especially beneficial in regulated industries where direct advertising of free offers is limited.
Collecting Upfront Revenue Can Offset Customer Acquisition Costs
Initially, the revenue collected from discount offers might not be substantial, but it has the potential to offset the costs of customer acquisition. However, it's important not to over-rely on this as the main method to liquidate costs. It serves more as a preliminary step to attract and engage customers.
Discounts Foster Investment Psychology, Boosting Close Rates
Customers drawn in by a discount offer naturally expect some level of expenditure, which aligns their mindset with paying for services or products, thus enhancing the likelihood of high close rates for the initial offer.
"Foot in the Door" Eases Upsells To Core Offering
The real profit often comes from the “second sale” or the upsell to the core offering. The "foot in the door" technique is exemplified here—once a customer has made an initial discounted purchase and their payment information is on file, it becomes easier to introduce and close an upsell. This psychological principle indicates that securing a small commitment paves the way for larger commitments.
Disco ...
Here’s what you’ll find in our full summary
Advantages Of Using Discount Offers vs. Free Offers
Additional Materials
Clarifications
- Regulated industries are sectors controlled by government rules to ensure safety, fairness, or ethical standards. Free offers are often restricted to prevent deceptive marketing or exploitation of consumers. These rules help maintain trust and compliance with legal standards. Examples include healthcare, finance, and pharmaceuticals.
- Lead generation is the process of attracting and capturing potential customers' interest in a product or service. Lead volume refers to the number of these potential customers generated within a specific period. High lead volume increases the chances of converting prospects into paying customers. Effective lead generation is crucial for business growth and sales success.
- Customer acquisition costs (CAC) are the expenses a business incurs to attract and convert a new customer, including marketing and sales efforts. Discount offers generate immediate revenue from customers, which helps recover part of these upfront expenses. This reduces the net cost of acquiring each customer, improving overall profitability. However, discounts typically cover only a portion of CAC, not the entire cost.
- Investment psychology refers to the mental commitment customers make when they spend money, even a small amount, which increases their likelihood to continue investing. This commitment creates a sense of value and ownership, making them more inclined to complete the purchase process. It leverages the "sunk cost" effect, where people want to justify their initial expenditure by following through. As a result, close rates improve because customers are psychologically motivated to avoid wasting their initial investment.
- The "foot in the door" technique is a psychological strategy where securing a small initial commitment increases the likelihood of agreement to a larger request later. It works because people strive for consistency in their actions and self-image. In sales, this means a customer who makes a small purchase is more open to buying ...
Counterarguments
- Discounts may devalue a product or service in the eyes of the consumer, leading to a perception of lower quality.
- Overuse of discount offers can lead to a customer base that only engages when discounts are available, potentially harming long-term profitability.
- Discount offers might attract price-sensitive customers who may not be as loyal or valuable in the long term compared to customers attracted by other value propositions.
- The initial revenue from discount offers might not be sufficient to offset customer acquisition costs, especially if the discounts are steep or if the customer lifetime value is not adequately projected.
- The "foot in the door" technique could be seen as manipulative by some customers, potentially damaging trust and long-term customer relationships.
- Requiring payment information upfront could deter some customers from taking advantage of the offer, especially those wary of providing financial information due to privacy concerns or fear of hidden charges.
- A two-step sales process might create additional barriers to purchase, potentially frustrating customers who prefer a more direct and s ...
Related Shortform Content
Get access to the context and additional materials
Best Practices For Implementing Discount Offers Effectively
Businesses keen on utilizing discount strategies must maneuver tactfully to avoid pitfalls that can undervalue their products and services.
Avoid Using Discounts For Core Products to Prevent Customer Price Expectations
Experts advise that indiscriminately discounting core offerings can lead consumers to expect reduced prices as a norm, potentially undermining the perceived value of the products or services. Instead, it’s smarter to splinter the offer and provide a core component at a discount rather than the entire package. This approach mitigates the risk of customers becoming trained to wait for discounted times since only a part of the offering is reduced in price, not the whole.
Offer Related Items at a Steep Discount to Drive Leads and Transactions
Discounts, when included, should form only a component of the overall offering. It’s suggested to utilize substantial discounts, perhaps 50% or more, to drive significant behavior change, rather than marginal discounts that might merely dent the margins without incentivizing sufficient transactions. By offering related items at a steep discount, businesses can drive leads and transactions without affecting the pricing structure of their core products.
Structure Discounts to Deter Unqualified "Bargain Hoppers"
The lure of discounts can attract bargain hoppers—customers interested only in the lowest prices. It’s crucial to design offers intelligently to turn discount buyers into qualified leads who can be upsold to higher-value purchases over time. Advanced offer stacking techniques can guide this strategy.
Design & Upsell Strategies Convert Discount Buyers To Long-Term Value
Hormozi highlights the importance of using discounts to initially convert prospects into customers, noting that it is a significant shift from simply gathering leads. Once someone has made a purchase at a discount, they are more likely to make future purchases, and upselling becomes easier with a card on file and a baseline of trust established. The goal is to capture a sliver of value upfront to facilitate later upsells, rather than constructing the entire business model around discounts.
Use Discounts/Free Offers Initially, Then Add Friction as the Sales Funnel Is Optimized
The speaker recommends starting with free or massive ...
Here’s what you’ll find in our full summary
Best Practices For Implementing Discount Offers Effectively
Additional Materials
Counterarguments
- Offering discounts on core products can be a viable strategy if done strategically during off-peak seasons or to clear inventory, which can actually increase the perceived value by creating a sense of urgency and exclusivity.
- Some customers may value straightforward pricing over complex discount structures, which can sometimes create confusion and diminish the customer experience.
- Steep discounts on related items might cannibalize the sales of full-priced core products if customers perceive the related items as sufficient substitutes.
- Attracting bargain hoppers isn't inherently negative; they can be a valuable market segment if the business model accommodates high volume, low margin sales.
- Offer stacking techniques may increase complexity and could potentially alienate customers who prefer a simpler buying process.
- Over-reliance on upselling can lead to customer fatigue or resentment if customers feel pressured to make additional purchases.
- Initial discounts or free offers might attract customers who are only interested in the deal, leading to a low conversion rate to full-priced purchases.
- Adding f ...
Actionables
- You can create a customer loyalty program that rewards full-price purchases with points redeemable for exclusive services or products, encouraging customers to buy at full price while still feeling they're getting a deal. For example, after purchasing a certain number of items at full price, customers could unlock a free consultation or a custom product that isn't available to the general public, thus maintaining the value of your core offerings.
- Develop a limited-time bundled offer where customers can get a core product along with an ancillary service or item at a reduced rate, but only if they sign up for a subscription or membership. This way, you're not just discounting; you're also building a longer-term customer relationship. For instance, if you sell fitness equipment, offer a discounted rate on personal training sessions with the purchase of a premium treadmill, but only for those who join your annual VIP fitness community.
- Implement a referral program where existing customers can offer a one-time discount to new customers, and in return, they receive a non-monetary perk, li ...
Related Shortform Content
Get access to the context and additional materials
Create Summaries for anything on the web
Download the Shortform Chrome extension for your browser
