High Ticket Gym Ascension Ep 2

Summary Notes


In this episode of Gym Secrets, host Alex Hormozi discusses strategies for gym owners to increase revenue after reaching full capacity. Hormozi advocates for a value ladder approach, emphasizing the importance of ascending clients from low to high ticket offers. He shares insights on the benefits of high ticket programs, noting they require fewer clients to match revenue generated from lower-priced memberships and create better client relationships. Hormozi also touches on pricing psychology and the effectiveness of different program durations for converting clients to higher ticket memberships. He advises against rapid expansion in favor of developing additional service levels within the existing facility, thereby boosting revenue and offering clients a clear progression path. Hormozi's ultimate goal is to help gym owners maximize their revenue per square foot and strengthen their market position.

Summary Notes

Introduction to Gym Ownership Strategies

  • Alex Tremozi introduces the podcast "Gym Secrets" and positions it as a guide for gym owners.
  • He references the previous episode, which discussed gym numbers and acquisition processes.
  • Alex suggests listening to the previous episode before this one for context.

Welcome to the Gym Secrets podcast. My name is Alex Tremozi, and I will be your host on this magical carpet ride that we call owning a gym.

This quote sets the stage for the podcast, introducing the host and the theme of gym ownership.

Importance of a Value Ladder

  • Alex advocates for gym owners to have a value ladder in their business model.
  • A value ladder helps naturally ascend clients from one service level to the next.
  • It is implied that a value ladder is essential for sustainable growth and customer retention.

I'm a big advocate of having a value ladder, which I would say that if you don't have one, you should, but not having one core, I mean, you should have core services, but they should be able to naturally ascend people from one level to the next.

Alex emphasizes the importance of a value ladder for gym owners, suggesting it is crucial for guiding clients through progressively higher levels of service.

Gym Membership Pricing

  • Alex discusses the common pricing for boot camp services at gyms, which is typically around $150 a month.
  • He notes that many gyms have legacy pricing for long-term members, which reduces the average membership fee to around $110.
  • Pricing strategy is presented as a key factor in the financial health of a gym.

Now they say a buck 50, but then they have all these people who are grandfathered in, and their blended average is like $110.

Alex points out the discrepancy between advertised gym prices and the actual average revenue per user due to legacy discounts.

The Significance of Volume

  • High volume of gym memberships is considered important for financial stability.
  • Volume allows for the effective sale of one-off programs, referred to as "cash plays."
  • Volume creates a "buzz" in the gym, facilitating the sale of supplements and apparel.

The volume is important because then it allows you to do a lot of cool stuff, allows you to sell one off programs very effectively, which are what I call cash plays.

Alex highlights the benefits of having a high volume of members, including the ability to generate additional revenue through one-off programs.

Supplement and Apparel Sales

  • Alex shares that there are specific, effective methods to sell supplements and apparel in a gym setting.
  • He mentions that these methods were discovered through trial and error.
  • Successful sales strategies can feel effortless once the right approach is found.

And as soon as you do that, if you have the right information, it feels really easy because you're like, you just try this thing or you just do an email blast and all of a sudden all these people come back and they give you money because you did the right sequence.

This quote reveals that the right sales strategy can significantly boost revenue from supplemental products and apparel, emphasizing the importance of finding the right approach.

Scaling Gym Operations

  • Alex reflects on his experience of owning six gyms and suggests growing more slowly if he could start over.
  • He mentions that ego played a role in his rapid expansion.
  • Alex advocates for focusing on increasing the average membership fee (EFT) through high-ticket offerings rather than opening more locations.

If I could do it all differently and do it all again, I would have grown more slowly.

Alex expresses a preference for slower, more deliberate growth in hindsight, suggesting that rapid expansion may not be the most sustainable approach.

High Ticket Offerings

  • High ticket offerings are described as life-changing and game-changing for gym owners.
  • Alex believes that experiencing low ticket offers first provides an appreciation for high ticket clients.
  • High ticket clients are valued for their longevity, loyalty, and the ease of servicing them.

Now I'm telling you, the high ticket game is life changing. It's game changing. It's amazing. It's awesome.

Alex conveys his enthusiasm for high ticket offerings in gyms, portraying them as a transformative element for the business.

Acquiring High Ticket Clients

  • The process of finding high ticket clients is likened to discovering "mythical unicorns."
  • Alex suggests that a busy low-end offer justifies the introduction of high ticket services.
  • He implies that a sequential approach to client acquisition is necessary for success.

But the question is, where do you find these mythical unicorns?

Alex poses a rhetorical question about the challenge of finding high ticket clients, indicating that it is a non-trivial task that requires strategy and effort.

Introduction of Higher Ticket Offer

  • Alex Tremozi discusses the benefits of introducing a higher-priced offer in a business model.
  • He suggests that if you have a service that is in high demand, you can charge more.
  • Recommends owner-operators to start the program themselves to leverage their popularity.
  • For businesses with multiple locations, hiring a high-quality manager or trainer is advised.
  • Higher ticket offers can match revenue with fewer customers due to the increased price point.

"Because if you have something that's 300, 400, $500 a month, then it makes sense because you can then say, hey, I have such high demand on my time. If you want a piece of the special cheese, then you need to pay more."

This quote emphasizes the rationale behind introducing a higher ticket offer: high demand on time and the need for customers to pay more for exclusive access or premium service.

Financial Impact of Higher Ticket Offers

  • Alex Tremozi uses an example to illustrate the financial benefits of higher ticket offers.
  • He compares the revenue from a large number of customers at a lower price point to fewer customers at a higher price.
  • The example provided shows that a significantly smaller group of customers paying more can nearly match the revenue of a much larger customer base at a lower price.
  • This demonstrates the efficiency and potential profitability of higher ticket offers.

"But if you had another membership that was $400 a month and you had 60 people in it, right, you're making another $24,000 a month. So almost the same amount that you're making, what is that? Three quarters? Right. 75% of the amount of money that you're making right now from servicing 250 customers, you're making from servicing only 60 at $400 a month."

This quote directly illustrates the financial impact of higher ticket offers by showing how servicing fewer customers at a higher price can result in substantial revenue, highlighting the power of premium pricing strategies.

Pricing Decisions and Differentiation

  • Alex Tremozi discusses the importance of having clear differentiation in pricing tiers.
  • He believes that customers make pricing decisions in larger increments, not small differences.
  • Suggests that there is more flexibility in pricing when the ticket price is higher.
  • Introduces the concept of the "contrast principle" in pricing, where larger sums can seem less significant in comparison to smaller, more frequent payments.

"I think that people make decisions in pricing decisions in bigger jumps than that. So I think that 135 and 150 and 120 and 160 are all more or less the same pricing decision. Once you break into the 300 and 5400 category, it's the same deal."

This quote explains Alex Tremozi's view on pricing decisions, suggesting that customers perceive larger price increments as more significant and are more likely to differentiate between services at these levels, which can lead to clearer tiered offerings and potentially higher profits.

The Contrast Principle in Pricing

  • Alex Tremozi introduces the contrast principle, which affects how customers perceive the value of a service.
  • He explains that customers may not see a significant difference between a $2,000 and a $2,500 service, although the actual difference is substantial.
  • This principle can be leveraged to increase prices without significantly impacting the customer's perception of value.

"Now, $2,500 is $500 more for the same service. It doesn't sound like much, right when we're talking about it. But that would be five months of someone buying your $100 a month boot camp. It is significant. Right. But it doesn't seem that way because it's a contrast principle."

This quote demonstrates the contrast principle in action, showing how a larger price point can mask the significance of the actual cost difference, which can be used strategically in pricing higher ticket offers.

Perception of Price Differences

  • Small numerical differences in price can have significant perceived value based on the context of the overall cost.
  • The relativity of price changes is important in sales and negotiation, especially with high-ticket items.
  • A smaller price increase can seem insignificant when considered in the context of a larger sum, such as in real estate pricing.

"It doesn't seem like that big of a difference, but it's ten grand. Right? But it's just relative scale."

This quote emphasizes the concept of relative scale, where a price increase of $10,000 is seen as minor in the context of a $250,000 house purchase, despite being a substantial amount of money.

High Ticket Sales and Profit Margins

  • High-value offerings can lead to greater profit margins due to the elasticity in decision-making at higher price points.
  • Once customers are engaged in the decision-making process, price becomes a more flexible factor.
  • The key is to understand how to reach customers willing to consider high-ticket items.

"So the higher the ticket, the more margin you can actually induce."

This quote suggests that as the price of an item increases, there is more room to create a higher profit margin because customers' price sensitivity may decrease.

Strategy for Selling High-Value Offers

  • Introducing a middle ticket offer can lead to a successful transition into a high-value monthly membership.
  • The initial higher cost can help recover the acquisition expenses and condition customers for future spending.
  • Downselling after an expensive front-end offer can make subsequent offers seem more appealing and affordable.

"Having a middle ticket offer, a 500 $600 offer I think works very well into a $200 a month membership. 150 to 200."

Alex Tremozi outlines a strategy where an initial middle ticket offer can smoothly lead into a more expensive monthly membership, showing the importance of structuring pricing tiers.

Marketing and Customer Acquisition Costs

  • The initial price for a product or service should cover the costs of customer acquisition.
  • Charging more upfront can help quickly recoup marketing expenses.
  • Offering a more expensive front-end product can condition customers for the value they receive, easing them into recurring payments.

"I charge them their membership fee plus a little bit extra for the hassle you cost me in having to pay for marketing money just to get you in the door to solve your problem, right?"

Alex Tremozi explains the rationale behind charging more upfront: to offset marketing costs and to ensure the business recovers the investment made in acquiring the customer.

Value Perception and Pricing Strategy

  • Presenting a high-value front-end product followed by a lower-cost subscription can create a perception of a deal for the customer.
  • This pricing strategy can be more effective than offering a low-cost product initially and then increasing the price for ongoing services.
  • Proper pricing can help liquidate acquisition costs and establish a sustainable customer-business relationship.

"But if off the back end of that you downsell them into 499 a month or 450 a month or 399 a month, then it seems like they're getting a deal, right?"

The quote by Alex Tremozi highlights the psychological impact of downselling after an initial high-cost offer, making the ongoing cost seem more reasonable and attractive to the customer.

Pricing Strategies for Offers

  • Alex Tremozi discusses the psychology of pricing and the importance of not discounting services.
  • He emphasizes that customers may feel they are not getting a deal if they see a discounted price as the new norm.
  • Alex suggests maintaining consistent pricing to avoid this issue.

"They don't feel like they're getting a deal. They feel like, oh, now I have to pay the full price."

The quote captures the customer's perception when they encounter a price that is not discounted. Alex is explaining the potential downside of customers becoming accustomed to discounted prices, which can lead to dissatisfaction when asked to pay the full amount.

Offer Durations and Their Impact

  • Offer durations play a significant role in the conversion of higher ticket recurring services.
  • Alex shares from his experience that six weeks work best for middle to low ticket offers, while 28 days and twelve weeks are effective for higher ticket offers.
  • The duration is linked to the psychological impact on customers and their commitment levels.

"Six weeks tends to work best for the middle ticket guys, sorry, middle ticket into low ticket and then 28 days and twelve weeks tends to work best going into a higher ticket recurring offer."

This quote details Alex's observations on the effectiveness of different offer durations based on the ticket size. It suggests that the duration of an offer should be tailored to the pricing tier of the service.

Pricing High-Ticket Offers

  • Alex advises on the pricing strategies for longer duration packages, where the initial price can be set higher than the normal rate.
  • He mentions the advantage of such pricing, which includes the ability to cover advertising costs.
  • The strategy involves positioning the initial offer to appear distinct from a regular Electronic Funds Transfer (EFT) subscription, even though it effectively serves that purpose.

"If you do like a longer duration package, then you should really be able to jack the price over and above what the normal eft is."

Alex is explaining the strategy behind pricing longer duration packages. By setting a higher initial price, businesses can increase their upfront revenue, which can help offset marketing expenses.

Market Saturation and Offer Rotation

  • To avoid market saturation, Alex recommends rotating offers.
  • He believes in the importance of having a clear ascension plan for clients to move up to higher levels of service.
  • This strategy helps in maximizing revenue and making the most out of the available space in a facility.

"I think it's just important to rotate the offers in the marketplace. You don't oversaturate, but this is the next natural step."

Alex is emphasizing the need to keep the market engaged with fresh offers to prevent saturation and maintain customer interest. Rotating offers is a strategy to keep the business dynamic and appealing.

Ascension in Service Levels

  • Alex suggests adding another level of service rather than expanding the physical space once a base level facility is filled.
  • He argues that most clients are capable of higher levels of service, which can be more profitable.
  • By training clients closer to the way fitness professionals train themselves, clients see the value and are willing to pay more.

"I think that you should put another level of service in and then further boost your revenue and have an ascension that shows people where they should going because most people can do a higher level of service."

The quote highlights the strategy of enhancing the service offered to clients as a way to increase revenue. Alex suggests that adding more advanced service levels can guide clients towards higher commitment and spending.

Importance of a High Ticket Offer

  • Alex emphasizes the need for a high ticket offer to ensure a robust ascension plan.
  • He believes that using different vehicles to bring clients in and ascend them to higher programs maximizes facility usage and revenue per square foot.
  • A high ticket offer makes a business a stronger competitor in the marketplace.

"I would definitely not just stay with a low ticket. You should have an ascension plan."

Alex is advising against relying solely on low ticket offers and stresses the importance of having a plan for clients to ascend to higher-priced programs. This approach is crucial for maximizing earnings and enhancing the business's competitive edge in the market.

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