Scariest Decision I Have Made Ep 343

Alex Ramosi, host of the game and owner of Acquisition.com, reflects on pricing strategies in business based on his experiences with his gym and a later venture. He recounts how tripling his gym's membership fee from $99 to $299 per month, by adding value and believing in the service, led to doubling his business's revenue despite losing one-third of his customers. Conversely, he warns against lowering prices to attract more customers, sharing a costly mistake that led to a $5 million annual loss when he reduced his program's price from $800 to $600 weekly. He emphasizes that in most cases, lowering prices results in decreased profits, and he outlines six ways to increase lifetime value (LTV): raising prices, reducing costs, reselling, upselling, cross-selling, and down-selling. Alex's key message is that providing more value and charging higher prices typically yield better financial outcomes than the reverse.

• Believing in what you sell significantly boosts your ability to make money.
• Conviction in the value of your product or service is key to successful sales.
• Speaker A emphasizes the relationship between personal belief in a product and financial success.

"If you can sell something that you truly believe in, you'll make a lot more money."

This quote highlights the direct correlation the speaker sees between belief in a product and the potential for increased revenue. The speaker suggests that genuine belief in what one is selling can lead to greater financial success.

• Speaker A transitioned from a lower-priced boot camp to a higher-priced semi-private program.
• The change was driven by a belief in the superior transformative power of the semi-private program.
• Pricing was tripled from $99 to $299 per month to reflect the added value.

"I was so convicted about our semi private program because clients were getting way better results there that I wanted to switch all my clients over that."

This quote explains the speaker's decision to shift clients from a boot camp to a semi-private program, motivated by the superior results observed in the latter. It underscores the speaker's belief in the effectiveness of the semi-private program as a transformative experience for clients.

• Speaker A faced a challenge with customer retention, or "churn," in their business.
• The team suggested lowering prices to reduce churn, but Speaker A was resistant to this idea.
• Instead of lowering prices, Speaker A chose to add more value and reduce the weekly price from $800 to $600.

"I hate lowering prices. I don't like lowering prices. It just generally doesn't mean you make more money."

The speaker expresses a dislike for reducing prices as a strategy, implying that it often does not lead to increased profitability. This quote conveys the speaker's philosophy on pricing and the belief that adding value is preferable to simply lowering costs.

• Speaker A builds anticipation by promising to reveal the outcome of the pricing change at the end of the video.
• The discussion of pricing strategies is used as a lead-in to a story about a similar situation later in their business career.

"And at the end of this video, I'll tell you what happened when I sent that email out."

This quote serves as a teaser, creating suspense about the results of the speaker's decision to increase prices. It is a storytelling technique used to keep the audience engaged and looking forward to the outcome of the narrative.

• The speaker introduced a new additional services program with a significant presentation and pitch.
• The program was announced with a promise of discounts for everyone, which was met with enthusiasm but also some criticism.
• Despite offering a lower price, the speaker faced a complaint about not providing discounts earlier, highlighting that customer satisfaction can be challenging to achieve.

"I said, we're going to roll out this new additional services program. And I did this huge presentation and this huge pitch, and then I stacked it and stacked it and stacked it, and then I was like, and you're going to get all this stuff, and you're all going to get a discount."

This quote explains the speaker's effort to introduce a new program and the strategy of adding value to the service by stacking benefits and offering discounts.

"I actually did have one person complain to me. They said, why are you doing this now? You should have been discounting us before."

This quote illustrates the challenges of customer satisfaction, where despite a favorable change, the speaker still faced criticism for past pricing strategies.

• The speaker's decision to reduce prices resulted in a substantial loss of profit, with no change in customer churn.
• Despite decreasing the price by 25%, the overhead costs increased, which led to a negative financial impact on the business.
• The speaker's expectation of reducing churn and doubling the lifetime value (LTV) of customers was not met, resulting in a significant loss of income.

"And so anyways, I decreased the price. And though this is what ended up happening, my churn remained completely unchanged, and I lost $5 million per year in profit."

The speaker's decision to lower prices did not have the intended effect on customer retention and led to a considerable loss in profit, which is a cautionary tale about the risks of price reductions.

"So I increased my cost by $1 million, and I decreased my top line by $400,000 per month at the time for that business, all right?"

This quote provides specific figures on how the speaker's costs increased while revenue decreased, leading to a negative financial outcome.

"I actually cut my income by a third, which sucked for that business. It was not fun. I highly recommend not doing it."

The speaker's reflection on the outcome of the pricing decision serves as advice against similar strategies due to the negative impact it had on the business's income.

• The speaker's business was operating with a high profit margin, and the price reduction strategy significantly undercut profitability.
• The expectation of price reduction leading to an increase in LTV was based on the assumption that churn would decrease, which did not occur.
• The speaker's experience emphasizes the importance of considering the full financial implications of pricing changes, especially in high-margin businesses.

"If I could cut my churn in half, let's say, from 10% to 5%, I would still two x ltv, right? So I'd rather decrease by 25%. Right? But then two x ltv, I'll take that trade every time, right? Aha. But that's not what happened."

The speaker's strategy was to trade a price decrease for a potential increase in customer LTV by reducing churn, but the plan failed, leading to a significant financial loss.

"I just lost half my profit, which we weren't. We were actually running a 70% margin business at the time, right?"

This quote reveals the high profitability of the business before the pricing change and how the decision to reduce prices drastically affected the profit margin.

• The speaker shares a personal anecdote about changing pricing strategy for a service-based business.
• They offered an initial two weeks of free service to clients before automatic enrollment at a new rate.
• The decision led to a significant change in customer base and revenue.

"I'm going to give you two weeks for free. So I did have to front this labor two weeks free of this new service. It's much better. You're going to get way more personalized attention, you're going to be lifting weights, you're going to learn form all this type of stuff."

The quote explains the initial offer made to clients, highlighting the improved quality of the service which included personalized attention and training on weightlifting and form. The offer was a strategic move to introduce clients to the enhanced service.

• One-third of the speaker's clients left due to the price increase.
• Two-thirds stayed, resulting in the speaker doubling the business revenue.
• The reduction in customer base decreased the cost of fulfillment while revenue increased, leading to a significant increase in profit.

"One third of my customers left. They said, alex, you suck. I can't believe you're raising prices on us. Blah, blah, blah, blah, blah. Two thirds of them stayed at three times the price."

This quote captures the customers' reactions to the price increase—some were dissatisfied and left, while a majority stayed despite the higher cost. This outcome demonstrates the risk and potential reward associated with adjusting prices.

• The speaker shares two contrasting outcomes from different pricing strategies.
• Increasing value and price can lead to higher profits by servicing fewer clients at higher rates.
• Conversely, servicing more clients at lower prices and providing more services can result in lower profits, especially in service-based businesses.

"In most cases, providing more value and charging a higher price in order to provide the higher value will make you more money because you will service fewer people at higher prices."

The quote summarizes the speaker's key lesson that providing higher value at a higher price tends to be more profitable, as it allows for servicing a smaller, more premium client base.

• The speaker suggests increasing Lifetime Value (LTV) can be achieved through six methods.
• They only mention two methods: increasing prices and decreasing costs.

"The LTV can be increased in six ways. All right. Number one, you increase your price. Number two, you decrease your costs."

This quote introduces the concept of LTV and two methods to increase it, which are to increase prices or decrease costs. It implies there are more strategies, but only these two are mentioned in the transcript.

• Resells encourage customers to purchase more frequently.
• Upsells persuade customers to buy a higher quantity of the current product.
• Cross-sells introduce customers to additional products.
• Downsells convert hesitant buyers by offering a lower-priced alternative.

then number 3456, are resells get people to buy more times. Upsells get them to buy more of the stuff they are currently buying. Cross sells get them to buy different things. Downsells get people who are not going to buy to buy something.

This quote outlines the four sales strategies aimed at increasing a customer's lifetime value (LTV) by altering their purchasing behavior: resells (frequency), upsells (quantity), cross-sells (variety), and downsells (alternative options for hesitant buyers).

• Lowering prices generally leads to less profit, as it requires doubling sales to maintain the same profit margin.
• Increasing prices can significantly boost profit margins without necessarily causing a proportionate decrease in sales volume.

And most times, I would say 99 times out of 100, when you lower the price, you make less money. Sometimes you make more, but the vast majority of the time you make less.

This quote emphasizes that decreasing prices is often not a profitable strategy since it usually results in reduced overall earnings.

All right, so let's say you've got $100 thing here, and let's say your profit is $40. If you decrease your price to $80 on this product, you would have to sell two times as many people at this lower price because you have half the profit.

This quote provides a simple mathematical explanation of why lowering prices is often detrimental to profit margins, as it requires a doubling of sales to compensate for the reduced profit per unit.

if you were to take this and go to $150 right now, you're making, let's say we're now making $90. So we more than two xed our profit, you probably won't sell half as many customers. You might just sell three quarters as many customers and make two times the money, which means more than what you're making now.

This quote suggests that increasing prices can be a more effective strategy for boosting profits, as the increase in profit per unit may outweigh the potential reduction in sales volume.

• Small tweaks in pricing or sales strategy can lead to significant impacts on revenue and profit.
• It is crucial to carefully consider the consequences of any changes to pricing or sales approaches.

Small tweaks, big changes, lots of impact. Think through these decisions.

This quote advises that even minor adjustments in business strategy can have substantial effects, highlighting the importance of thoughtful decision-making.

• Alex Ramosi introduces himself as the owner of acquisition.com.
• He mentions that his portfolio company generates $85 million in annual revenue.
• His goal is to prevent his audience from experiencing financial failure.

My name is Alex Ramosi, ownacquisition.com. We have a portfolio company of $85 million in revenue yearly.

This quote serves to establish Alex Ramosi's credibility and the successful scale of his business operations.

There's a lot of people who are broken. I don't want you to be one of them.

This quote reveals Alex Ramosi's mission to help his audience avoid financial hardships by sharing his knowledge and experience.

• Alex encourages viewers to subscribe for more valuable content.
• He expresses appreciation for his audience regardless of their subscription decision.
• He signs off with a positive and encouraging message.

If you enjoyed this or you found value in this in your own business, hit the subscribe button so we can give you more vids like this. And if you did not, I love you. Either way. Keep being awesome, and I'll catch you guys next big bye.

This quote is Alex Ramosi's call to action for viewers to subscribe for more content, while also showing affection for his audience and ending on an upbeat note.