Why Your Market Shouldn't Matter If Your Model Is Designed Properly... How My Two Best Locations Were In Polar Opposite Markets. Ep 71

Summary Notes


In a tactical discussion about business models in local markets, the speaker, presumably a successful gym owner or business consultant, argues that a well-designed model should be adaptable to any market conditions. They illustrate this with their own experience of running profitable gym locations in vastly different socioeconomic areas of Southern California. By implementing a bifurcated, or hybrid, model offering large group training at lower prices and semi-private training at higher rates, the speaker's gyms catered effectively to both low and high-income clients. They emphasize that market demographics should not hinder a business model's success, highlighting the benefits of both poor and wealthy markets in terms of customer acquisition and retention. The speaker concludes by stressing the importance of a solid acquisition strategy and excellent service quality over market characteristics.

Summary Notes

Introduction to Business Model Flexibility

  • Speaker A discusses the importance of having a business model that can adapt to any local market.
  • Emphasizes that the success of a business should not be hindered by the market if the model is designed properly.
  • Uses their own experience with locations in different socioeconomic areas to illustrate the point.

"So why your market shouldn't matter if your model is designed properly is the title of this and how my two best locations were in polar opposite markets."

The quote highlights the core message that a well-designed business model should be successful regardless of market differences. The speaker is setting the stage to explain how their own business succeeded in diverse markets.

Market Variability and Business Success

  • Speaker A provides concrete examples of how their business thrived in markets with vastly different median incomes and demographics.
  • The Lahabra location had a median income of $31,000 and was in a poorer area with high gang activity.
  • The Lake Forest location was in a wealthier area with a median income of $120,000.
  • Speaker A also mentions a middle-tier location in Huntington Beach with a median income of $90,000.

"So my Lahabra location was in my, probably what you could argue, my poorest market. And so the poorest market. And so this is in Southern California, median income was 31,000."

This quote provides specifics about one of the locations, Lahabra, highlighting its economic status and challenges, which contrasts with the other locations mentioned.

"And the second best location I had that was in Lake Forest, California."

This quote introduces the Lake Forest location as one of the best performing, indicating a contrast with the Lahabra location and setting up a discussion on how both succeeded despite their differences.

The Bifurcated (Hybrid) Business Model

  • Speaker A attributes the success across varied markets to having a bifurcated, or hybrid, business model.
  • The model's flexibility allows it to adjust to different markets, regardless of socioeconomic status or median income.
  • The concept of a "bifurcated model" is introduced, which suggests a split or two-pronged approach to business strategy.

"But the point is this, is that the reason that they were able to do so well is that we had a bifurcated model, which is a hybrid model."

This quote explains the reason behind the success in different markets: the use of a bifurcated model that can cater to various demographics and income levels.

Importance of Flexibility in Pricing

  • Speaker A touches on the importance of not having a "super high ticket" pricing model to maintain flexibility.
  • Suggests that a business model should be able to accommodate various income levels in different markets.

"And so the reason that a flexible model can be flexible is that independent of the market that you are in, provided you are not super high ticket."

The quote implies that part of the model's success is due to its pricing strategy, which is not overly expensive and therefore can be adapted to different market conditions.

Definition of Super High Ticket

  • Super high ticket refers to services priced at a premium, often over $1,000 a month.
  • This pricing model is more suitable for a wealthy market.

"I would define super high ticket as is if you're doing $2,000 a month, probably. Yeah. I mean, if your minimum ticket is $1,000 a month, that's going to be very high ticket."

This quote establishes the baseline for what is considered super high ticket pricing in the context of the discussion, indicating that services above $1,000 a month fall into this category.

Hybrid Model in Gym Services

  • The hybrid model combines large group and semi-private training services.
  • Large group services range between $150 and $225 a month.
  • Semi-private services, which is one on four, range between $500 and $700 a month.

"The hybrid model that we espouse, which is what all the gyms that we have and go into gym legacy end up adopting, is the hybrid model, which means that their first level of service is going to be large group, which is between $150 and $225 a month. And then their second level of service is going to be semi private, which is one on four. And then the ticket price there is going be $500 to $700 a month."

The quote explains the structure of the hybrid model adopted by gym legacy, detailing the two levels of service and their respective pricing.

Market Demographics and Service Demand

  • Poorer markets have a higher population density and thus more potential customers.
  • Ads in poorer markets yield more leads at a lower cost.
  • Lifetime value of customers in poorer markets may be lower.
  • There is a higher demand for large group services in poorer markets.

"And broker markets tend to have more people. It's just denser. There are more poor people than there are middle income and wealthy people. And so when you are in a poor market, the advantage that you have is that your ads will go further, you will get more leads, they will be cheaper."

The quote highlights the characteristics of poorer markets in terms of advertising efficiency and customer demographics.

Customer Prioritization and Spending

  • Customers who prioritize the service are willing to pay for semi-private training despite financial constraints.
  • Such customers often take additional work to afford the service.

"I can't tell you the amount of times I have people who had the HUD cap missing on their car and had, like, their doors a different color, paying 400, $500 a month for semi private training because it was a priority for them."

This quote illustrates the commitment of certain customers who, despite their financial situation, prioritize and invest in semi-private training because it is important to them.

Service Demand Variation by Location

  • Different locations have varying demands for large group versus semi-private training.
  • In Lahabra, there is a higher demand for large group services.
  • In Lake Forest and Huntington Beach, there is a higher demand for semi-private training.

"So in Lahabra, that was the way it broke down. In Lake Forest, it's the totally opposite, right? It's going to be majority semi private training clients, but we still obviously had people who were staying at the lesser price."

The quote compares the demand for different service levels in Lahabra and Lake Forest, indicating a preference for large group services in Lahabra and semi-private training in Lake Forest.

Business Growth Invitation

  • An invitation is extended to business owners with substantial businesses aiming for significant growth.

"If you are a business owner that has a big old business and wants to get to a much bigger business, going to 5100 million dollars plus, we."

This incomplete quote suggests an opportunity for business owners with large businesses who are looking to scale up significantly, but the sentence is cut off and not fully elaborated upon.

Flexible Business Models

  • A flexible business model is essential for adapting to various market conditions.
  • The ability to ascend customers (upsell) is crucial in different socioeconomic areas.
  • In cheaper markets, ads will be more responsive due to higher population density per demographic.
  • A business model must be able to extract more value from each customer in wealthier areas.
  • Inflexible models are less likely to succeed in competitive environments.

"And so if you have a flexible model that is designed well, it can adapt to the market because you have more people who will ascend but less of them, or you have more people who will not ascend but more of them."

This quote emphasizes the importance of a well-designed business model that can adapt to the market by accommodating different customer behaviors, such as the varying likelihood of customers to make additional purchases (ascend).

"More people per capita, period. It is what it is. So your seven mile radius is going to get you further."

Speaker A points out that in areas with lower socioeconomic status, a business can reach more people within the same geographic area, which can influence advertising and customer acquisition strategies.

"If your model does not do that, then you have a less flexible model, which makes you not optimized, which means you are less likely to win in a competitive environment, which this is."

This quote explains that a less flexible business model that cannot maximize customer value is at a disadvantage in a competitive market.

Market Optimization

  • Market conditions should not dictate the success of a business model; it should work across diverse markets.
  • Testimonials from various markets demonstrate the adaptability of a business model.
  • Businesses should provide opportunities for customers to ascend, especially in wealthier markets, to maximize revenue.
  • Markets with lower income levels can be advantageous for growth and easier market entry.

"And so your market should not matter for your model. It shouldn't."

Speaker A argues that a robust business model should be successful regardless of the market it operates in, indicating that the model's flexibility is key to its success.

"No matter which you do, there are going to be people who respond to either level of service that you're marketing, period."

This quote suggests that within any market, there will be segments of customers who are interested in different levels of service, and a business should cater to these varying needs.

"If you are in a wealthy or middle high income market, then you are leaving money on the table and you are not utilizing your marketplace for the optimal outcome that that marketplace can provide."

Speaker A emphasizes that not upselling or providing opportunities for customers to spend more in wealthier markets results in missed revenue opportunities.

"I love broke markets. Broke markets are the fastest to grow. They're the easiest to get in because most people don't even have a second level service."

Speaker A expresses a preference for lower-income markets, citing their potential for rapid growth and lower barriers to entry due to a lack of competition in offering upscale services.

Marketing Strategies in Different Demographics

  • Different business models attract varying demographic densities which affect lead costs and volume.
  • Larger groups tend to generate cheaper lead costs and higher volume.
  • Semi-private models may not attract as many customers initially but can leverage a large existing client base.
  • A percentage of clients from a larger base can be converted to higher-paying programs.

"because they're afraid to do it. And so most people, because most models are just large group, when they start with us, those ones tend to be more demographically dense, right? And so those ones get cheaper lead costs and they get more of them."

This quote explains that businesses often hesitate to adopt certain models, but those that start with large group models benefit from higher demographic density, which leads to more cost-effective lead generation.

"But when they try and do semi privates, they're not going to get as big of a bite."

The speaker points out that transitioning to a semi-private model may result in a lower customer acquisition rate compared to large group models.

"But they also have a huge client base that they can pull from."

Despite the lower acquisition rate for semi-private models, there is an opportunity to upsell to the existing client base.

Market Dynamics and Customer Acquisition

  • The size of the market should not hinder a business if the model is defined properly.
  • Poor markets and rich markets have their own advantages, but with the right strategy, these differences are negligible.
  • Marketing and acquisition strategies are essential regardless of the market type.
  • The goal is profitable acquisition, ensuring that the cost of acquiring a customer is less than the customer's lifetime value.

"But I hope that makes sense for everyone why your market really shouldn't matter for you."

The speaker emphasizes that the market size or wealth should not be a barrier to success if the business model is well-defined.

"It's just profitable acquisition. We just market the best promotions that are out there and we just know that we're making money on the acquisition, which means that everything after that is lifetime value is all profit."

This quote outlines the core of the strategy: focusing on profitable customer acquisition and ensuring that the revenue from the customer over time exceeds the cost of acquisition.

Utilizing Testimonials and Theoretical Understanding

  • Testimonials can serve as a motivational tool and proof of concept for business strategies.
  • Understanding the theoretical aspects of business and marketing strategies is crucial.
  • The effectiveness of a business model should be clear both in theory and in practice.
  • The quality of service is a significant factor in the success of a business.

"And if you want, you can lean on the bazillion testimonials."

The speaker suggests using the abundance of positive testimonials as evidence and encouragement for the effectiveness of their strategies.

"You should understand that. Yeah. Hope that helped anyone who is not sure or like, man, my market is XYZ. It doesn't matter."

The speaker reinforces that market type is irrelevant to the success of a business model, provided there is a strong theoretical understanding of the model.

Importance of Service Quality

  • The real differentiator in business success is the quality of the service provided.
  • Many businesses overestimate their service quality.
  • Continuous improvement and assessment of service quality are implied as necessary for growth and customer satisfaction.

"And the thing that really does matter is how good your people are. It's how good your service is."

This quote stresses that the key to a successful business is the quality of the people and the service they provide, rather than the market conditions or demographics.

"Everyone thinks that they're good, but they're really not."

The speaker hints at a common misconception among businesses regarding the quality of their service, suggesting that many businesses may not be as good as they believe.

Personal Acknowledgment and Conclusion

  • The speaker expresses gratitude towards an individual for consistent support.
  • The video ends with a closing remark and a farewell, indicating the end of the discussion.

"Guys, have amazing Tuesday. And Brian Stevens. Always appreciate you, brother. Thanks for always tagging."

The speaker concludes the video with well-wishes for the audience and a personal shoutout to Brian Stevens, showing appreciation for his regular engagement.

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