In this podcast, Alex Hormozi shares valuable business lessons from his first job at a multimillion-dollar fur coat operation, revealing strategies for customer service, product innovation, and sales. He explains the "angry boat" technique for addressing customer complaints by validating their emotions to de-escalate situations. Alex also discusses creating off-season revenue through coat storage and conditioning services, likening it to an insurance model. He introduces no-based selling to increase upsells by leveraging customers' tendency to say no, and highlights the importance of creating scarcity and perceived value through limited offers and exclusivity. Alex emphasizes the significance of continuity products for customer retention and the power of doing the basics consistently over time to build a successful business.
If I say, would you like this thing? And the other person says yes, and they give me money and I give them the thing, no harm was done.
This quote emphasizes that a transaction where both parties agree and exchange value (money for a product or service) is not harmful and should not be viewed negatively.
The wealthiest people in the world see business as a game.
This quote suggests that successful businesspeople approach business with a strategic mindset, likening it to a game where skill and strategy are key to winning.
Imagine five generations of fathers teaching their sons the same exact tips and tricks of running one very successful business.
This quote indicates the depth of knowledge and tradition in the business from which the speaker learned, suggesting the lessons are time-tested and proven.
One day I was going from the warehouse to the retail store, so I didn't go in the retail store that much because I looked like an 18 year old and I wasn't going to be selling any $25,000 coats.
This quote sets the scene for the lesson learned, indicating the speaker's position and lack of direct customer interaction due to age and experience.
There could only be one person in the angry boat, he said, so whenever someone comes in the angry boat, what most people try and do is they try and downplay them.
This quote introduces the 'angry boat' concept, explaining that only one person should be in that emotional state during a customer service interaction to effectively manage and resolve the conflict.
"And in a real way, if something was messed up and you have very high standards for your business, the moment you say it's not a big deal, it means you're not actually taking responsibility."
The quote highlights the necessity for businesses to take complaints seriously and not trivialize them, as doing so would imply a lack of accountability and a disregard for high standards.
"And so even if their complaint is ridiculous and it's something that would be no way under your control, it still is your responsibility."
This quote underscores the idea that all customer complaints, regardless of their nature, should be treated as the company's responsibility, fostering a culture of ownership and continuous improvement.
"So one of the things that had happened in the five generations of fur coat fathers passing on to fur coat sons was that they realized that in the summer, they never had any demand, because people aren't trying to buy fur coats in the summer."
This quote explains the background and rationale for the business's decision to create a service that caters to the off-season, ensuring year-round customer engagement and revenue.
"So he created this analogy that compared fur coats, which people didn't understand as well, to a car, which was something they did."
The quote demonstrates the power of analogies in making complex or unfamiliar services relatable to customers by comparing them to something they already understand.
"Now, insurance products don't actually have to be insurance. If you do anything guaranteeing your work, either through labor or just decreasing the risk that it happens, you can charge people for the safety, that whatever they just bought will continue to provide value for a longer period of time."
This quote clarifies the broader definition of insurance products, extending beyond traditional policies to any service that guarantees the durability or effectiveness of a product.
"The cost to store a coat, I think, was like $200, right? For the whole summer. Now, think about the cost of goods on storing a coat."
The quote provides insight into the profitability of the storage service by outlining the operational costs and the price charged to customers.
"So when they would call up customers and they'd say, hey, do you want to turn in your coat for the summer? What they did was say, hey, we're going to store and condition the coat. You don't want anything else, do you?"
The quote illustrates the no-based selling technique, where the phrasing of the offer leads customers to accept the primary service and an additional service by rejecting any further add-ons.
"And to make sure that people actually turned in the code, they added something else, which is an incentive to get people to respond."
This quote emphasizes the strategic use of incentives to ensure customer engagement with the service, thereby solidifying the business-customer relationship.
"Which is why I think most people, when they're younger, need to prioritize learning rather than earning."
The quote stresses the long-term benefits of prioritizing knowledge acquisition over short-term earnings, suggesting that a solid foundation of learning can lead to guaranteed success.
"Sawdust is anything in a business that is excess, that has created an excess that you normally throw out."
This quote explains the concept of sawdust in a business context, referring to byproducts or excess materials that are usually considered waste.
"So if you've ever seen those ikea pieces of furniture, they just glued together all the sawdust from lumber mills because it was literally thrown aside."
This quote provides a real-world example of how a business repurposed its sawdust—excess material—into a new, valuable product, demonstrating innovation in utilizing waste.
"And so what he did was he took the scraps from all the coats that they would make in the back and all the repairs that they had, and they would have all these odd shaped pieces of fur."
This quote describes how the fur coat dealer used leftover materials (fur scraps) to create new, smaller products, adding value to what would otherwise be waste.
"And so what they did was they gave away something that costs them nothing, that people still perceive value as bait to get people to come in and actually take the upsell."
This quote highlights the strategy of using perceived value to incentivize customers to make additional purchases or agree to an upsell.
"Even though they got the product for free, the storage didn't come free."
This quote emphasizes the business's tactic of offering something for free while monetizing an associated service, enhancing profitability.
"Capitalism is the only system where both people say thank you after an exchange."
This quote underscores the mutual satisfaction inherent in capitalist transactions, where both buyer and seller benefit.
"You're literally preventing people from having a benefit by not making the offer."
The speaker points out that not offering a product or service can deprive consumers of potential benefits, arguing for the positive aspects of making offers in a capitalist system.
"What they do has not changed fundamentally in years. All they did was get better and better and better at it."
This quote illustrates the importance of consistency and continuous improvement in business practices for long-term success.
"The difference between the small business owners and the big business owners is that the big business owners do the same thing for a very long period of time."
The speaker emphasizes that the key to becoming a big business owner is the commitment to persistently doing the basics over an extended period, suggesting that longevity and consistency are critical for growth.
Yeah, there's all the things that you probably know you should do, and they take time, which is why building a business that's big takes big time.
The quote emphasizes the importance of time commitment in growing a successful business. It suggests that the well-known strategies for business growth are time-consuming but necessary for significant results.
The 6th lesson I learned was how he was able to double the amount of coats people would buy.
This quote introduces the sales strategy that effectively doubled coat sales by manipulating customer perception and buying behavior.
So a few times per year, he would run these seasonal, like, unclaimed fur sales.
The quote describes the periodic sales events that were used to implement the scarcity strategy.
The first was he said, no dealers. And so what that meant is everyone who's a consumer thinks, oh, these must be great deals.
The "no dealers" policy is highlighted as a psychological tactic to make consumers believe they are getting exclusive deals.
And he had two big caveats that I thought were brilliant.
This quote introduces the two key restrictions the business owner used to increase sales: the "no dealers" policy and the purchase limit.
Now, once they got in, there was a sign on the door that said, limit two quotes per customer.
The quote specifies the second restriction, which is the limit on the number of coats a customer can purchase, creating a sense of urgency and scarcity.
And so what happens is when you limit the codes per customer, then it means every single person buys more than one because they're, oh, there's a limit.
The explanation here is that by setting a purchase limit, customers are psychologically driven to buy up to that limit, increasing sales volume.
The 7th lesson I learned was that by creating this continuity product where people would come every year to get their fur coat insured and fixed, is that you become top of mind.
This quote explains how a continuity product, such as annual insurance and repairs, keeps the business at the forefront of customers' minds for related needs.
And so you become the dealer for life.
The quote implies that by offering continuous value, a business can secure a customer's loyalty for life.
So in your business, if you have a one time product especially, that's a little bit bigger in purchase, having little things that you can do even if you didn't make money on them, but you just broke even on them.
This quote suggests that even if additional services don't generate profit, they are worth offering as they lead to increased customer retention and future sales.
And the beautiful thing about this is that no one's going to do it. And the reason is because everyone's lazy.
The quote suggests that despite knowing effective strategies, most businesses won't implement them due to laziness, offering an advantage to those who do take action.
And the cost to deliver on this was so low because we had 118 year olds, two air conditioning, three storage facility.
This quote outlines the low-cost structure of the business, highlighting how it was possible to maintain profitability with minimal expenses.
I think the reason no base selling is more effective, or often more effective, especially in upsell situations, is that people want to just get the default option.
This quote introduces the concept of "no base selling" and its effectiveness in leveraging customers' preference for default options.
And so what you do is you flip the script and you align it so that them saying no actually gets them to say yes for you.
The quote explains the strategy of "no base selling," where the sales approach is designed so that a customer's negative response actually leads to a positive outcome for the seller.