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.
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.
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.
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 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.
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.
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.
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.
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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.