Billionaire Recession Advice Sell to the Rich Ep 490

Alex Hormozi, founder of acquisition.com, shares insights on targeting affluent customers to build a resilient and profitable business. He emphasizes that rich clients pay better and are less demanding, which allows businesses to offer superior services and charge premium prices. Hormozi argues that higher prices lead to increased emotional investment and perceived value from customers, resulting in better outcomes and customer satisfaction. He also discusses the advantages of premium pricing for businesses, including higher profit margins, the ability to reinvest in product and service improvement, and the attraction of top talent. Hormozi advises entrepreneurs to empathize with wealthy clients, understand their problems, and offer fast, convenient solutions. He stresses that selling to the affluent is key to becoming one of them and building a successful, enduring enterprise.

• Alex Hormozi discusses the benefits of targeting affluent customers who can pay more for solutions to their problems.
• Charging higher prices can lead to a more resilient business that can withstand different economic seasons.
• Wealthy individuals view business as a game and are generally easier to work with.

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.

The quote emphasizes the strategic advantage of solving problems for wealthy clients, as it leads to higher prices and a more durable business model.

• People often sell based on their own financial perceptions, which can limit their market.
• Selling to the wealthy requires understanding their perspective and recognizing that they may be willing to pay more to solve their specific problems.
• Alex Hormozi encourages listeners to shift their mindset to target customers who are able to pay higher prices for solutions.

One of the biggest secrets that people who make a lot of money have is that they know which type of customer they're trying to sell to. And when people are poor, they tend to sell out of their own wallet. They sell using their perception of what money is.

The quote highlights the importance of understanding and targeting the right customer base, especially those who are not limited by the same financial constraints as the seller.

• Higher prices lead to increased emotional investment from customers.
• Raising prices can enhance the perceived value of a product or service.
• Higher emotional investment and perceived value can improve customer results.
• Higher prices often attract less demanding customers.
• More revenue from higher prices allows businesses to deliver better experiences and fulfill promises.

And so what I want to walk through today is why charging more has five significant benefits to your customers that actually make you a better service provider by charging more money.

Alex Hormozi outlines the five key benefits that come from charging more, which not only benefit the business but also improve the customer experience.

• Emotional investment increases with price, leading to greater customer engagement with the product or service.
• Higher prices can lead to a perception of higher quality, even if the product is the same.

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.

The quote explains how pricing strategies affect customer behavior, with higher prices driving greater emotional investment and care for the product or service.

• Higher prices can lead to better customer outcomes and satisfaction.
• Lowering prices to help everyone can backfire, as it may reduce emotional investment and perceived value, leading to poorer results.

If you increase their emotional investment, you increase their perceived value. What ends up happening? They actually do get better results.

Alex Hormozi argues that higher prices can lead to better results for customers, as they are more likely to value and engage with the product or service.

• Higher prices tend to attract customers who are easier to work with and less demanding.
• Customers who pay in full upfront are generally less demanding than those who require extensive payment plans.

When you raise your prices, you actually attract less demanding customers.

The quote suggests that setting higher prices can filter out overly demanding customers, leading to a more manageable and pleasant business experience.

• Higher prices provide more financial room to deliver on promises and enhance the customer experience.
• Charging more allows businesses to invest in delivering higher value, which benefits the customer.

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.

Alex Hormozi emphasizes that higher prices give businesses the financial capability to fulfill their promises and provide exceptional value to customers.

• Higher prices provide a financial buffer for the business to operate and recover from mistakes.
• A higher price point increases the perceived value of the business itself.
• Charging more can help businesses survive economic downturns and seasonal fluctuations.

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.

The quote introduces the discussion on how raising prices can positively impact the business itself, beyond just the customer benefits.

• Raising prices can improve the business owner's self-perception and the business's market position.
• Businesses with higher prices are often seen as more valuable and prestigious compared to discount or low-cost alternatives.

It actually increases your perceived value of self. Like, what do you think about when you think about a Walmart versus a Sakswith avenue or a Neiman Marcus, right?

Alex Hormozi discusses how pricing affects the perceived value of a business and its owner, drawing comparisons between high-end and low-cost retail brands.

• Margin is essential for reinvesting in the business, employees, and self-improvement.
• Without margin, businesses cannot attract high-level talent.
• Higher margins allow for decentralized decision-making and scalability.
• Low margins lead to constant firefighting and poor-quality employees.

"If you never have any money left over, you can never reinvest in yourself. You can't reinvest in your employees."

This quote emphasizes the necessity of having financial resources beyond operational costs to invest in personal and employee growth, which is crucial for business development.

"If you have no margin, the best people aren't going to work for you."

This quote highlights that top talent seeks employment with businesses that have the financial stability and growth potential provided by healthy margins.

• Extra cash flow allows for product research, prototypes, and new service divisions.
• Attracting better employees leads to better competition and business scaling.
• High margins increase the sales team's conviction and the product's market position.

"When you have extra cash left over, you can reinvest in your product, right?"

The quote explains that financial surplus is critical for funding innovation and product development, which is vital for staying competitive.

"You can attract higher level talent to your business."

This quote underscores the direct relationship between financial health and the ability to hire more skilled and effective employees.

• High margins boost sales team confidence and customer perception of value.
• Conviction in the product's superiority aids in effective selling.
• Targeting wealthier customers with fewer demands increases business resilience.

"Increase the conviction of your sales team if you do sell, ever, because think about it, if they're selling the ship 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."

This quote points out that sales teams need to believe in the product's value to sell effectively, and high margins can provide this belief.

"Solving rich people problems allow you to charge rich people prices."

Alex Hormozi argues that by addressing the needs of wealthier clients, businesses can justify higher prices, leading to better margins and a more sustainable business model.

• Bernard Arnault, the owner of luxury brands, exemplifies success in the luxury market.
• Visiting luxury malls can expand one's perception of market possibilities.
• Luxury items, known as Veblen goods, can defy traditional supply-demand economics.

"It's a man selling $10,000 purses."

This quote introduces Bernard Arnault as an example of someone who has capitalized on the luxury market, illustrating the potential of targeting high-end consumers.

"There's four distinct positions you can have in any marketplace."

Alex Hormozi breaks down the market into four segments: bargain, best value, premium, and luxury, each with its own pricing strategy and customer experience.

• Wealthy individuals have similar problems to others but seek different solutions.
• Speed, convenience, and minimal personal effort are valued highly by the wealthy.
• Investment opportunities that offer passive, high returns are attractive to rich clients.

"Rich people have the same problems that poor people do. They just want them solved differently."

This quote conveys that while the nature of problems may be universal, the approach and solutions desired by wealthy clients differ from those of less affluent individuals.

"If you can get 20% returns like clockwork, with virtually no risk, you can tap into literally unlimited money."

Alex Hormozi discusses the appeal of low-risk, high-return investment opportunities to the wealthy, highlighting the potential for significant capital if one can provide such solutions.

• Financial margins are critical for business growth and attracting talent.
• Reinvesting in product development and employee quality leads to competitive advantages.
• Sales conviction is bolstered by higher margins and superior product offerings.
• The luxury market operates on unique principles, offering significant profit potential.
• Understanding and solving the problems of the wealthy can lead to lucrative business opportunities.

• Alex Hormozi discusses a niche investment strategy involving asset-backed loans.
• He mentions a specific example where someone achieved a 50% annual return by maxing out a market with $20 million of liquidity.
• The structure of the fund allowed the individual to get 20% of the upside, leading to significant personal earnings.
• Hormozi highlights the importance of solving "rich people problems" to achieve such investment success.

"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."

The quote explains how the individual made high returns by focusing on a specific niche within the asset-backed loan market, emphasizing the potential of targeted investment strategies.

• Hormozi explains that affluent clients often desire the same services as others but prioritize value differently, particularly in terms of effort, sacrifice, and time.
• He advises businesses to offer faster services and to reduce effort and sacrifice by ensuring easy communication and consistent service quality.
• Hormozi suggests that businesses should adapt to the preferred communication methods of wealthy clients and sell out of the client's wallet, not their own.

"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 service is."

This quote emphasizes the importance of speed in services for affluent clients, suggesting that businesses can differentiate themselves by offering faster options.

• Hormozi stresses the importance of understanding the mindset of wealthy clients when selling to them.
• He points out that affluent clients are not looking for the best value but for the best quality and ease of experience.
• Hormozi shares a personal story from a fur coat store to illustrate the effectiveness of focusing on the client's experience and desires rather than the product's practical features.
• He introduces the "platinum rule" of treating people the way they want to be treated, which requires empathy and understanding of the client's perspective.

"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. I just want the most bang, period."

The quote highlights the difference in selling to affluent clients, who prioritize the best experience over the best value.

• Hormozi advises studying luxury brands and their approach to customer service to better cater to affluent clients.
• He notes the different treatment customers receive based on their appearance in luxury stores and the importance of presentation.
• Hormozi describes the high-quality experience provided by luxury brands, including personalized service and complimentary amenities.
• He contrasts this with the experience at lower-end stores and explains that the premium pricing of luxury brands enables them to offer superior service.

"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 the really nice part of town, the nice mall, and walk around the stores there."

This quote suggests that understanding the customer service and experience offered by luxury brands can provide insights into serving affluent clients effectively.

• Hormozi argues that targeting affluent clients can lead to higher profits and a more enjoyable business experience.
• He explains that serving wealthy clients allows for better employee experiences and the ability to make and deliver on more significant promises.
• Hormozi encourages entrepreneurs to think like their affluent clientele to recognize and meet their needs effectively.

"And so if I had the choice of two businesses where I've got a super messy rack that's sitting there and people just have to clamor and fight over it. Versus the white glove champagne. 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 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."

The quote underscores the benefits of targeting affluent customers, such as providing a high-quality service experience, which can lead to a more profitable and satisfying business.

• Wealthy individuals have the financial resources, making them ideal customers.
• Selling to affluent clients allows for charging higher prices, leading to better profit margins.
• Rich customers are less demanding and more emotionally invested in their purchases.
• Higher prices can attract better quality customers, increasing the likelihood of customer satisfaction and success rates.
• Catering to the wealthy can create a perception of higher value for the products or services offered.

"Rich people have all the money, and so if you want to go get the money, go to where the money is at."

"And so when you sell to rich people, you get to charge rich people prices. They pay better."

"And so what happens is when you deal with richer people, you have way less demanding clients."

These quotes emphasize the strategic advantage of targeting rich customers, as they have the financial capacity to pay for higher-priced offerings and tend to be less demanding, making the business operation smoother and potentially more profitable.

• Businesses must choose between competing on price or value.
• Competing on price requires operational advantages to sustain the lowest price strategy.
• Premium positioning involves offering significantly better service or product quality.
• Luxury brands command high prices that confer status to the buyer.
• Competing on best value often leads to a "graveyard" of businesses as it's unsustainable.

"You either got to go premium or you got to go luxury."

"Luxury is your price is so high, it confers status to the buyer because your brand is strong."

"The most bang for the dollar is best value. And this is where the graveyard of most businesses sit."

Alex Hormozi outlines the importance of choosing the right pricing strategy, highlighting the pitfalls of competing on best value and the benefits of aiming for premium or luxury market segments.

• To win in a low-price business, significant operational advantages are necessary.
• Automation should be the first consideration in business processes to reduce costs.
• Offshore workers can be considered if automation is not possible.
• There can only be one low-price leader, so competing on being the second cheapest is not advantageous.

"You have to build your entire business from the ground up, day one, based on having a significant operational advantage."

"The first answer is always, how do I automate it? Not who do I hire or how do I outsource it?"

"There's no advantage to being the second cheapest person in the marketplace, but there is an advantage to being the most expensive."

Alex Hormozi emphasizes the importance of building a business with operational efficiency and prioritizing automation to maintain a competitive edge in low-price markets.

• Raising prices can lead to an increased perception of value among customers.
• Higher prices can result in customers being more emotionally invested in their purchase.
• A pricing experiment with wine demonstrated that perceived value is influenced by price.

"When you raise the price, you actually increase the quality of your product."

"The researchers pulled off the covers of the wines and showed them that all three wines were the same."

The quotes discuss how pricing can affect customers' perception of value, with the wine experiment serving as evidence that higher prices can lead to a perception of higher quality, even when the products are identical.

• Higher profits allow for reinvestment into innovation, product development, and customer experience.
• Conviction in the value of what is sold is crucial for effective sales.
• Attracting top talent requires offering competitive compensation, which is enabled by higher profit margins.
• A-level talent is more expensive but significantly more productive than B-level talent.

"You can reinvest in having a superior experience because you have the excess cash to give them white glove service."

"The biggest cost cutting tactic Henry Ford said he did was that he doubled his minimum wage compared to everybody else."

"A level talent costs twice as much as b level talent, but produces five times the output, ten times, 100 times the output."

Alex Hormozi stresses the importance of reinvesting profits into the business to enhance the product, customer experience, and attract A-level talent, which is more productive and contributes to the business's success.

• Pricing should reflect the value provided rather than personal self-worth.
• Offering free services initially can build experience and gather valuable feedback.
• Transitioning to full-price should occur when demand exceeds the ability to provide free services.
• Good customer relationships feel like partnerships rather than transactions.

"A lot of people's prices are a reflection of their value, of themselves."

"It's either free or it's full price. There are no discounts."

"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."

These quotes highlight the approach of separating personal self-worth from pricing strategies, advocating for initially offering free services to gain experience and then switching to full pricing once a solid reputation and demand are established.