$100M Offers Audiobook Part 2 Ep 580



In a special collaboration between the game podcast and 100 Million Dollar Offers, the discussion delves into pivotal business challenges and solutions. The conversation, featuring insights from Alex Hermosi and other speakers, addresses the pervasive issue of businesses struggling with profitability due to poor pricing strategies, targeting customers with insufficient pain points, and operating in stagnant markets. They emphasize the importance of charging what your product is worth, growing beyond market averages, and leveraging three growth levers: acquiring more customers, increasing average purchase value, and frequency of purchases. They also discuss the detrimental impact of commoditization and the transformative potential of a 'Grand Slam Offer'—an unparalleled offer that positions a business in a category of one, enabling premium pricing and market dominance. The speakers underscore the significance of selecting the right market, one that is growing and has customers with both the pain point your product addresses and the financial means to purchase your solution.

Summary Notes

Pricing and Commodity Problem

  • Most businesses struggle with making enough profit due to the pricing and commodity problem.
  • Businesses often sell to a "starving crowd" who don't have enough pain, are hard to find, or are in markets that are not growing.
  • The solution to this problem involves a process that can be easily fixed.

"Today we're going to break down the pricing and commodity problem. This is the number one issue that most businesses have and why they can't make enough profit." "The starving crowd problem, which is that they're, they're selling to people who don't have enough pain, who are hard to find, who are in markets that are not growing."

The quote emphasizes the significance of the pricing and commodity problem in hindering business profit and the existence of a "starving crowd" issue. It suggests the need for a solution to these challenges.

Growth Philosophy: Grow or Die

  • Every person, company, or organism is either growing or dying with maintenance being a myth.
  • If a company isn't growing at least at the same rate as the market, it's falling behind.
  • The stock market's average growth rate is used as a benchmark for company growth.

"Grow or die is a core tenet at our companies. We believe every person, every company and every organism is either growing or dying. Maintenance is a myth." "The market is continuously growing. The stock market grows at 9% per year." "If we aren't growing at 9% per year, we are falling behind."

These quotes outline the "grow or die" philosophy, stressing the importance of growth over maintenance, and set a benchmark for growth based on the stock market's average performance.

Three Simple Ways to Grow a Business

  • To grow a business, one needs to get more customers, increase the average purchase value, and get them to buy more times.
  • These three methods are the only ways to grow a business.

"So then, what does it take to grow? Thankfully, just three simple things. One, get more customers. Two, increase their average purchase value. Three, get them to buy more times."

This quote simplifies business growth into three fundamental strategies, emphasizing their importance in the growth process.

Simplifying Growth Strategies

  • There are essentially two ways to grow: get more customers and increase each customer's value.
  • Increasing each customer's value can be achieved by increasing profit per purchase or the number of times they buy.

"Author Note only two ways to grow to simplify this concept even more, there are really only two ways to grow. Get more customers and increase each customer's value."

The quote further simplifies the growth strategies into two main categories, highlighting the importance of customer acquisition and customer value enhancement.

Key Business Terms Defined

  • Gross profit is revenue minus the direct cost of servicing an additional customer.
  • Lifetime value is the gross profit accrued over the entire lifetime of a customer.
  • Value-driven purchases focus on the value provided, while price-driven purchases focus on the cost.

"Gross profit, the revenue minus the direct cost of servicing an additional customer." "Lifetime value the gross profit accrued over the entire lifetime of a customer."

These quotes define crucial business terms that are important for understanding profitability and customer value.

The Grand Slam Offer

  • A grand slam offer is an incomparable offer that cannot be matched by any other product or service in the market.
  • It includes an attractive promotion, an unmatchable value proposition, a premium price, and an unbeatable guarantee.
  • A grand slam offer allows a business to sell in a category of one, removing competition and allowing for premium pricing.

"A grand slam offer solves this problem." "It's an offer you present to the marketplace that cannot be compared to any other product or service available."

The quotes describe a grand slam offer as a unique solution that differentiates a product or service from competitors, allowing for growth and premium pricing.

Impact of a Grand Slam Offer on Business Growth

  • A grand slam offer increases response rates to advertisements, conversions, and allows for premium pricing.
  • It simplifies the sales process by making the product appear as a unique category, leading to value-driven purchases.

"Having a grand slam offer increases your response rates to advertisements." "Your grand slam offer, however, forces a prospect to stop and think differently."

These quotes highlight the benefits of a grand slam offer in marketing and sales, showing how it can lead to increased interest and conversions by positioning the product as unique.

Contrast Between Commoditized and Grand Slam Offers

  • Commoditized offers lead to a price-driven race to the bottom, while grand slam offers lead to value-driven differentiation.
  • The grand slam offer approach results in higher response rates, closing percentages, and prices compared to commoditized offers.

"Commoditized equals price driven purchases, aka a race to the bottom." "Differentiated equals a value driven purchase, aka selling a category of one with no comparison."

The quotes contrast commoditized offers with grand slam offers, explaining how the latter leads to differentiation and value-based sales rather than competing on price.

Financial Model of Customer Acquisition

  • Discusses the financial benefits of a compelling offer in customer acquisition.
  • Emphasizes the exponential increase in cash collected upfront when a compelling offer is made.
  • Illustrates the concept with a mathematical example of increased profitability.

"Then you get two and a half times more people to respond to your advertisement because it's a more compelling offer. From there, you close 2.5 times as many people because the offer is so much more compelling. From there, you're able to charge four times higher prices up front. The end result is 2.5 times 2.5 times four equals 22.4 times more cash collected upfront."

This quote explains how a more compelling offer can significantly improve the response rate, closure rate, and the price you can charge, leading to a substantial increase in upfront cash collection.

Impact of a Grand Slam Offer

  • Describes the transformative effect of a grand slam offer on business profitability and growth.
  • Highlights the contrast between traditional and innovative customer acquisition strategies.
  • Uses a software business case to demonstrate the potential for rapid growth.

"This is the exact grand slam offer we used with our software business that serves agencies. The numbers can become wild fast."

The quote indicates that the speaker has successfully applied the grand slam offer to their own business, leading to rapid and substantial growth, suggesting that such an approach can yield exceptional results.

The Problem with Commoditization

  • Explains how commoditization can be detrimental to businesses.
  • Introduces the concept of a grand slam offer as a solution to escape the pricing war.
  • Sets the stage for the next chapter, which will delve into market selection.

"This chapter illustrated the basic problem with commoditization and how grand slam offers solve that."

The quote summarizes the chapter's focus on the issue of commoditization and introduces the grand slam offer as a strategy to overcome this challenge.

Importance of Market Selection

  • Emphasizes the critical role of choosing the right market for applying pricing strategies.
  • Discusses the potential failure of even the best offer if presented to the wrong audience.
  • Mentions a detour from pricing to understand market selection before proceeding.

"A grand slam offer given to the wrong audience will fall on deaf ears. We want to avoid that at all costs."

This quote stresses the importance of market selection by pointing out that a strong offer is ineffective if not targeted at the right audience.

The Concept of a Starving Crowd

  • Introduces the concept of a starving crowd in the context of market demand.
  • Uses the example of a hot dog stand to illustrate the importance of market demand over product quality or location.
  • Relates the concept to the unprecedented demand for toilet paper during the Covid-19 pandemic.

"The room finally fell quiet. Their professor smiled and replied, a starving crowd."

The quote captures the professor's revelation that the most significant advantage in business is having a starving crowd, which means a high demand for your product or service.

The Story of Lloyd

  • Presents a case study of Lloyd, who experienced both failure and success due to market conditions.
  • Demonstrates the impact of market choice on the success or failure of a business.
  • Highlights the importance of market growth and the dangers of a shrinking market.

"He was selling to newspapers. His market was shrinking by 25% every single year."

The quote identifies the core problem of Lloyd's initial business venture: he was targeting a declining market, which ultimately led to his business's downfall.

Criteria for Choosing the Right Market

  • Outlines the four key indicators for selecting a profitable market: pain, purchasing power, ease of targeting, and growth.
  • Describes each indicator in detail and explains its significance in market selection.
  • Advises on being pragmatic and strategic when choosing a market to serve.

"When picking markets, I look for four indicators. One, pain. Two, purchasing power. Three, easy to target. Four, growing."

This quote lists the essential criteria for choosing a market, which are crucial for ensuring that the business can effectively reach and serve its customers.

The Three Evergreen Markets

  • Identifies health, wealth, and relationships as the three evergreen markets with constant demand.
  • Suggests focusing on subgroups within these markets that meet the four key indicators.
  • Provides guidance on aligning one's skills with market needs for optimal success.

"There are three main markets that will always exist, health, wealth and relationships."

The quote points out the three perennial markets that are always in demand due to their fundamental importance to human well-being.

Market Importance in Business Success

  • Discusses the relative importance of market choice compared to offer strength and persuasion skills.
  • Uses a scale of 'great,' 'normal,' and 'bad' to rate these elements and their impact on success.
  • Provides examples to illustrate how a great market can compensate for weaker offers or persuasion skills.

"Starving crowd is more important than your offer strength, which is more important than your persuasion skills."

This quote ranks the elements of business success, emphasizing that a starving crowd (market demand) is the most critical factor, followed by the strength of the offer and then persuasion skills.

Grand Slam Offer

  • A grand slam offer in a normal market can lead to significant financial success.
  • Even with poor persuasion skills, a grand slam offer can be lucrative.
  • The focus is on building a compelling offer to maximize success.

Tons of money even if you're bad at persuasion. This is most people reading this book. That's why I wrote it, to help. Really build a grand slam offer.

The quotes emphasize the importance of creating a strong offer that resonates with the market, which can yield high profits even without advanced persuasion techniques.

Persuasion and Success

  • Exceptional persuasion skills can lead to success with a normal offer in a normal market.
  • Many successful empires have been built by exceptional persuaders.
  • However, relying solely on persuasion is the most challenging path and requires significant effort and learning.

Would have to be exceptionally good at persuasion. Then and only then, would you succeed, with your persuasive skills serving as the fulcrum for your success. Heck, many empires have been built by exceptional persuaders.

These quotes highlight that while it's possible to succeed with average offers through exceptional persuasion, it's a difficult route that demands a lot of skill and dedication.

Commitment to Niche

  • Entrepreneurs should commit to their chosen target market or niche.
  • Frequently changing niches can lead to failure and restarting from scratch.
  • Success often requires sticking with one market long enough to learn through trial and error.

Don't make me niche. Slap you too often. You must stick with whatever you pick. Riches in the niches.

The quotes stress the importance of dedication to a chosen niche, indicating that perseverance and focus are key to achieving success in business.

Niching Down and Financial Success

  • Niching down can significantly increase profitability, especially for businesses making under $10 million per year.
  • A narrow focus allows for premium pricing and better service to a specific clientele.
  • Expansion beyond a certain point may require broadening the market.

Niching down will make you far more money. A business can only grow to meet the total addressable market.

These quotes explain the financial benefits of specializing in a niche and the limitations of market size on business growth.

Pricing Strategy

  • Specificity in product offerings allows for higher pricing.
  • Niching down can result in charging significantly more for essentially the same product.
  • The value perceived by the customer justifies the higher price.

You can literally charge a hundred times more for the exact same product. Niching product pricing example product and then price.

These quotes illustrate how targeting a specific niche can command higher prices for the same product, leveraging the perceived value to the customer.

Market Selection and Commitment

  • Choosing the right market is crucial; normal markets are acceptable, while great markets are preferable.
  • Commitment to the chosen market is essential for success.
  • Persistence and resilience are key traits for entrepreneurs.

Normal markets are fine. Great markets are great. You only suck if you stop trying.

The quotes encourage entrepreneurs to persist in their chosen markets and to continue trying despite failures, emphasizing the importance of resilience.

Pricing and Value

  • Charging premium prices is a step towards significant earnings.
  • The price should reflect the value delivered to the customer.
  • A high price must be justified by the results the product or service delivers.

Charge what it's worth. If I made you $239,000 extra this year, would you pay me $42,000?

These quotes suggest that the price of a product or service should be proportional to the value it provides, and customers are willing to pay high prices if the return on investment is clear.

Price to Value Discrepancy

  • Customers continuously assess the value they receive compared to the price they pay.
  • A discrepancy where the price exceeds perceived value leads to customers ceasing their purchases.
  • Businesses should aim to avoid this price to value discrepancy.
  • Warren Buffett's quote emphasizes the importance of understanding the difference between price and value.
  • Lowering prices is a common but often detrimental strategy for businesses.
  • Competing on price can lead to destructive price wars and is not the ultimate objective of a business.
  • Increasing value is preferable to lowering prices when trying to make a product more attractive to customers.

"Price. The moment the value they receive dips below what they are paying, they stop buying from you." "This price to value discrepancy is what you need to avoid at all costs." "The simplest way to increase the gap between price to value is by lowering the price." "And lowering price is a one way road to destruction."

The quotes illustrate the critical nature of the price to value ratio in customer decision-making and the dangers of competing solely on price.

Competing on Price vs. Value

  • Competing on price often leads to a race to the bottom, which can be harmful to businesses.
  • Dan Kennedy suggests that being the second cheapest offers no strategic benefit, while being the most expensive can.
  • The goal is to create an offer that is so valuable that people are willing to pay a higher price.
  • Increasing value allows for raising prices without sacrificing customer perception of a good deal.
  • Competing on anything other than price or value is not truly competing.

"Don't compete on price." "Making money is." "There's no strategic benefit to being the second cheapest in the marketplace, but there is for being the most expensive."

These quotes emphasize the lack of advantage in being the second-lowest price and the potential benefits of positioning as the highest-priced option in the market.

The Virtuous Cycle of Price

  • Lowering prices can diminish client investment and perceived value, leading to poorer results and attracting less desirable clients.
  • Increasing prices can enhance client investment, perceived value, and results, attracting better clients and improving profit margins.
  • Higher prices can lead to better customer experiences, employee satisfaction, and business growth.
  • Charging premium prices is both a smart business decision and a moral one, as it allows for the provision of maximum value.
  • The virtuous cycle of price is a framework that reinforces the importance of premium pricing in the face of market pressures.

"When you decrease your price, you decrease your client's emotional investment." "When you raise your prices, you increase your client's emotional investment." "The more invested they are, the more likely they are to achieve the positive result."

These quotes explain the direct relationship between price and client investment, and how raising prices can lead to better outcomes for both clients and businesses.

Premium Pricing and Value Perception

  • Higher prices can increase the perceived value of a product or service, even without changes to the product itself.
  • Consumers often associate higher prices with higher quality, as demonstrated in studies.
  • Premium pricing can create a unique market position and lead to monopoly-like profits.
  • Ensuring customers are invested is crucial, as higher investment leads to better adherence and results.
  • Charging prices that are noticeably higher than the market can create a perception of unique value.

"Yes, higher price means higher value, literally." "There must be something entirely different going on here." "Those who pay the most, pay the most attention."

These quotes discuss the psychological effect of higher pricing on value perception and customer investment in a product or service.

Real-World Application and Conviction in Pricing

  • Conviction in the value of one's product or service is essential for charging premium prices.
  • Experience and proven results provide the confidence needed to request significant payment.
  • Premium pricing allowed the speaker's business, Gym Launch, to deliver exceptional value and results.
  • The business model focused on providing more value than competitors and charging a fraction of the additional revenue generated for clients.
  • The success of the Gym Launch case exemplifies the benefits of premium pricing and the importance of creating immense value.

"Experience is what gives you the conviction to ask for someone's entire year's salary as payment." "We charged the most money, we provided the most value." "Profit is oxygen. It fuels the fire of growth."

These quotes highlight the necessity of belief in one's product, the correlation between high prices and high value, and the role of profit in business growth.

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