23. Continuity Offer. Discount + One Time Fee. | $100M Lost Chapters Audiobook

Welcome to The Game w/ Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned and will learn on his path from $100M to $1B in net worth. Wanna scale your business? Click here. Follow Alex Hormozi’s Socials: LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Hormozi?

  Continuity offer, discount plus one-time fee.

• 0:05Alex Hormozi?

  Spring 2015, I was walking out the front door of my La Haber location. The sun baked the black asphalt of the empty parking lot. It was midday before the afternoon rush would begin in a few hours. Before I could take a step towards my car, a man quickly approached me, almost out of nowhere. "Hey, you the owner?" I was a bit startled, I said, "Uh, yeah." Before I could ask what he wanted, he plowed right into his pitch. "My name's Owen, I'm a personal training manager of a gym that just went under across town. I've got a group of trainers that just want to sell personal training packages. We do about a hundred thousand dollars a month in personal training sales. We just need a facility to work out of." "We don't really offer personal training here," I said, half lying because I didn't like the guy's vibe. He just didn't seem trustworthy. I started to turn my side towards him to show I wasn't interested and began to make my way towards my car. He realized he needed to change his approach.

• 0:50Alex Hormozi?

  "I promise, we're a self-sufficient team. I can see through the window, you guys have a lot of dead space. Even when your sessions are going on, we can just help you monetize that area. It'll cost you nothing, it's just upside." "It'll cost me time and attention," I countered, "and most importantly, it'll cost me the goodwill I've accrued with my customer base." "No, no, no, no, we won't even talk to your customers if you don't want us to. We'll just go get our own leads and sell them. We just ask that you give them a discounted month upfront, and we'll charge an enrollment fee, which I just give to my guys as commission for the sale. So whatever they can close for the fee is theirs, that's how we do it, it'll cost you nothing." "Hmm, I'll think it over." After thinking it over, I decided I didn't want a foreign group of trainers and salespeople that I had embedded walking around my gym representing my company. But I did notice the offer structure he presented, a discount plus a fee. He clearly seen success with that, that much I believed.

• 1:35Alex Hormozi?

  And this was the first I'd heard of this monetization structure. It both attracted customers with a discount and liquidated commissions and acquisition costs through a fee. Here's how it works. Description: You charge a discounted rate for your first term or period of service. Then you charge one or more additional fees that you just made up. Just like the free with fee structure. If you can waive some and charge others, waive them all or charge them all. It gives you a lot of offer flexibility depending on the strength of the salesperson. This offer will tend to surprise fewer people since they already came expecting to pay something, which is one of the key benefits of using discounts over free for this particular structure. Examples: Any recurring service. Offer 95% off the first month, $1900 off the first month, first month for $100.

• 2:22Alex Hormozi?

  Monetization, they come in for the first month for a hundred bucks, but they still get charged a $1,900 setup fee. All in all, they get charged $2,000 and go straight into recurring. From a monetization perspective, they just got charged two grand for their first month and each month thereafter. To be clear, you still have to explain this and sell this, but I'm saying that's how the offer works. Any defined end service or program. Offer: 88% off first month, selling a 12-week program for $3,000. Monetization: You'll say it costs a thousand a month for three months, but you get 88% off your first month, which would be 120 bucks in total. But then we have a $1,000 setup fee. They end up paying $1,120 for the first month and then continuing their next two payments at $1,000 each. Same idea, you just separate the recurring from the upfront, and then it allows you to be more flexible with your advertising.

• 3:08Alex Hormozi?

  Details.

• 3:10Alex Hormozi?

  To be clear, always obey the advertising rules within your area and of your time period. Details. The higher the one-time startup fee, the lower the churn. The higher the barrier to entry, so too becomes the higher the barrier to exit. John told me that when his Tanning Vampire had a $100 signup fee for the $10 a month membership, the churn on those clients was next to nothing, whereas the clients who paid $19 down and then $19 a month churned at a higher rate. This means you can use made-up fees we've been talking about to actively decrease your churn and increase the investment of your prospects. This helps them and you in the long run. Everyone wins. When people pay, they pay attention. This is especially important for services where you require something to be done by the customer, getting you information, filling out forms, showing up at certain times, making selections, changing behavior, et cetera.

• 3:54Alex Hormozi?

  If you need someone to do something in order to be successful, then more times than not, it makes sense to charge a one-time setup fee or startup fee to get them invested in the long run. You can even have a massive disparity between setup and recurring. A good friend of mine, who runs a multimillion-dollar online weight loss coaching business, charges $5,000 to start and then only $267 a month thereafter. His average client lifespan is more than two years. Compare that with the normal average fitness client who stays four months. This large upfront sum gets the client invested in the process and makes leaving almost insane. And you guessed it, if they leave and want to come back, then they have to pay it again. So this just keeps people committed, especially when they have to do part of the work to achieve the result that you sold them, whatever that may be.

• 4:35Alex Hormozi?

  Note: Be clear about what the reason for the one-time fee is, even though it might be made up. This should not be a fee taken lightly. It's also something that you should bring up with any and every customer. You're doing the work, so you might as well let them know exactly what you're going to be doing for them. So here are four steps to creating your one-time fee. Number one, pick your fee name. Number two, pick your fee price. Number three, pick your reason why. Number four, start charging it, discounting it, or waiving it. Summary points. This play is incredibly flexible. You can use it on top of any business. The big discount can attract lots of interest. These fees will help you offset the acquisition costs of marketing and sales. It works very well with recurring or defined-end programs. And in general, the larger the one-time fee upfront, the higher the stick rate. Not only does this help you make money in the front end,

• 5:20Alex Hormozi?

  it can dramatically enhance the lifetime value of the customer. These fees are also really good to think through, even if you don't plan on using this monetization structure, as they can provide additional revenue streams for your business. There are lots of things that you're doing as a business owner. You might as well get credit for it. Waiving made-up fees can also help you generate more goodwill than just signing someone up directly. You can also leave these fees to the discretion of the salesperson to help them, quote, "sweeten the deal for someone on the edge." Unlimited use is here.