Throwback: Billionaire Recession Advice: Sell to the Rich | Ep 489

Wanna scale your business? Click here. 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. Follow Alex Hormozi’s Socials: LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

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• 0:00Alex Hormozi?

  Hey guys, welcome back to the game. Today's a throwback episode where I go over a handful of things specifically around pricing and the downstream effects it has on the business in terms of the customers that you bring in and what kind of team you can attract as a result, which can spin the long-term wheel for a sustainable competitive advantage. And I think that there's a little bit of nuance that I dive into in more detail here around the different viewpoints between rich and poor people and how that can have huge cascading effects in the business. Enjoy. When people are poor, they tend to sell out of their own wallet. They sell using their perception of what money is. And so they think something's expensive and therefore they don't want to be offensive to whoever they're selling to.

• 0:44Alex Hormozi?

  But what that is, is fundamentally a selfish viewpoint because you're never putting yourself in the other person's shoes and the other person might have all the money in the world and just want to solve a specific problem. And so what I want to walk through today is why charging more has five significant benefits to your customers that actually make you a better service provider by charging more money. And it'll give you five specific benefits around your actual business itself that'll make your business more successful. And if you don't know who I am, my name's Alex Shmosey, I own acquisition.com. We run a portfolio of companies that does over $200 million a year and I make these because I want you to make lots and lots of money and then hopefully someday partner with us. Beyond that, it's just to make you more money. All right, so have you ever seen this meme that's like, the customer says, well, what

• 1:27Alex Hormozi?

  exactly am I going to be getting for $50? And then it has the rich customer who's like, wire, send, let me know what next steps are. Right? It's this wildly different viewpoint that poor people have versus rich people. And at the same time, I made three tweets in a row that each one of them massively outperformed and it was so weird to me that this was like a novel concept. And I said, solve rich people problems, they pay better. And if you solve rich people problems, they will make you one of them. And when you solve rich people problems, you get to charge rich people prices. And so it's this interesting concept that a lot of people miss out on. And part of the reason that a $50 person is saying, well, what exactly am I be getting? If somebody's got a hundred dollars in their bank account, you're asking for 50% of their net worth.

• 2:10Alex Hormozi?

  Right? And so for them, it's a very important decision, but it's also completely ridiculous. And unfortunately, this still might be half the population. Doesn't mean necessarily you should sell to them. Right? And to the same degree, that $50,000 might have been less than 1% of that other person's net worth. So they just didn't even care. It would have been the equivalent of trying to sell a dollar to that person who's a hundred dollar in their bank account. Right? And the thing is, is that you can only go to zero. Right? Like you'd only be so poor. Right? But you can be infinitely rich. And so your upside is uncapped, but your downside is zero. And so when you deal with rich people, you have unlimited upside, which is why they are better customers. Now, like I said, there's five things I want to talk about from the customer perspective.

• 2:53Alex Hormozi?

  And my whole goal of this is to actually sell you on one, increasing your prices. But two, increasing the quality of your customers. Because if you increase the quality of your customers, you increase the quality of your business. And in a very real way, the smarter the people you sell to, the actually better the client results are. All right. So let's dive into the five. So number one, when you charge more money for your products or services, you get an increased emotional investment. Right? Because on the flip side, if you decrease your price, people care less about your products and services. So if you ever have anything that you have, you require something on behalf of the other person, which almost all products and services do, even physical products and services. People have to open up a box, they have to set it up, et cetera.

• 3:34Alex Hormozi?

  And so if you have a very low cost item, people won't even give it the time of day. They won't even try enough that even if your product or service is good, they never even gave it a shot. And so when you raise the price, you raise their emotional investment. And in a real way, you actually increase the likelihood that they get results. So the second way is that it increases their perceived value. So I tell this story a lot, but I'll tell it to you right now. So there was a research study where they had three bottles of wine. All right. They had a cheap wine, they had a Mid-priced wine and they had an expensive one and they had people try them out and they had them rank them based on what they thought. And so people said, oh, I think the most expensive wine is the best, the middle price is the middle and the cheapest wine was the worst.

• 4:16Alex Hormozi?

  And that's not that surprising, except when the researchers explained that all three wines were the same. And so in a very real way, when you raise your prices, you do actually make something that's more valuable. Because if that's what we're trying to get at, which is value, price confers value to your product. A more expensive thing is perceived in real terms as more valuable, even if the actual core product is the same. Why would you not want to make your thing more valuable? The third is results for your customers. If you increase their emotional investment, you increase their perceived value, what ends up happening? They actually do get better results. They do have a better wine experience. They do, when they sign up for the gym for personal training versus a $10 a month thing, they get better results.

• 5:00Alex Hormozi?

  And so if you want to get people the results that you promise, or you claim that you're going to get them, then you should stack every single chip in your favor that's going to get them the result that you're promising. And the price is one of those things. And so some people want to lower the price because like, I want to help everybody, but you're actually not. You're not helping everybody because most of those people aren't going to be emotionally invested. They're not going to perceive this valuable. They're not going to get the results that you so promised. Which means that you have to draw a line in the sand and say, I can only help the people who are swimming towards me. So the fourth thing is that when you raise your prices, you actually attract less demanding customers. And so anybody who's ever been in client services can attest to this.

• 5:39Alex Hormozi?

  But the higher the price tag, the more expensive the contract, the more upfront someone pays their bills. The fewer payment plans you have to set up, the easier the customer is to deal with. And if you've ever had this, like the paid in full upfront, hey, can I save a little bit if I pay in all cash today? That customer, that one is the easiest one to deal with. The one that you have to arm wrestle for an hour to get $50 on a payment plan over 24 months? This investment is so important that they're going to milk the life out of you to get every, every penny's worth out of you. And it's like, sometimes it's not worth it. Because just like what you, price is what you pay, value is what you get.

• 6:19Alex Hormozi?

  On the flip side, just because someone pays you money, you may be underwater in what you have to deliver. So just because someone's willing to pay you doesn't mean that you should take it. The fifth benefit that your customers will get as a result of raising your prices is that you actually have more money that you can deliver on your promises for. So imagine you've got a hard cost thing that costs five bucks, alright? And, and you can add and subtract zeros here, I'm just using simple numbers. So if you have five bucks to do the thing, right? And you charge eight bucks, well you only have three dollars left to run the rest of your business, provide service, et cetera, right? Like you don't have a lot of room there. Now imagine you charge fifty dollars for that same five dollar thing. You have forty-five dollars of additional gross profit that, or additional would be

• 7:04Alex Hormozi?

  forty-two dollars, of additional gross profit that you can now use to blow the other competitors' experience out of the water. Like you can, in a very real way, deliver two, three, four times the value. And in many times, if you do deliver two, three, four times the value, the customer gets a better experience. And so if our whole business here is actually trying to provide value, then we want to increase the emotional investment of the customer. We want to increase the perceived value. We want to have the less, the least demanding person possible, have the most possible revenue we can have to deliver the results that the person actually wants. And so if we make these promises, we should stack as many of the chips as we can in our

• 7:46Alex Hormozi?

  favor, and one of the biggest ones is the price. Now, let's talk about the business side, because there's five significant things that will change when you start raising your prices in the business. Number one is that, like the example I gave, if you had an eight dollar thing that cost you five bucks, you have three dollars in gross profit, and you've got to run everything else off of those three dollars. So if you were just the most efficient person in the world, right? Let's maybe just run on half of that, which is fifteen dollars, or sorry, one dollar and fifty cents left, right? We're already paper thin here, right? On the flip side, when you have a significantly higher price, you have way more room to make mistakes. And I say that because no one's perfect, we all make mistakes in business, and what you don't want is mistakes that you can't recover from.

• 8:30Alex Hormozi?

  And having a premium priced product, or a luxury product that has a lot of margin there, allows you to make mistakes. And as businesses are seasonal, and you have macroeconomic environments, the people who don't have that padding are the ones that go under. And so having that padding in a real way can increase the likelihood that you can play the game in the long run. The second thing is that as a business, it actually increases your perceived value of self. Like, what do you think about when you think about, you know, a Walmart versus a Saks Fifth Avenue or a Neiman Marcus, right? They occupy different spaces in your mind. And if you're the business owner of that business, then having a higher perceived value of self, which a lot of times when people are starting out, they don't think they're worth very much. And sometimes they're right, but the thing is, is that you still need to charge a certain

• 9:15Alex Hormozi?

  amount so that you can have the excess resources to get better. If you never have any money left over, you can never reinvest in yourself. You can't reinvest in your employees. I'm getting a little bit ahead of myself in terms of things that you can do. But, well, screw it. This leads naturally to the next one, which is when you have extra cash left over, you can reinvest in your product, right? You can actually research and you can test out new things. You can make prototypes. You can test out new divisions of service. You can attract higher level talent to your business. If you have no margin, the best people aren't going to work for you. Why? Because they're going to go to the real business owner who understands how margin needs to work so they can attract the best talent. And then now, you're not only being outcompeted by that person in terms of profits, but they

• 9:58Alex Hormozi?

  also can scale way better than you because they have decentralized decision making, because they have lots of smart people all working together because they priced the product right and they're dealing with the right types of customers. Whereas you're sitting here, dealing with fires all day because of people haggling over $50 with employees who can't string sentences together because you can't pay anybody who's worth a shit to actually work for you. It's a terrible life. I know, because I lived it. So, just don't make that mistake. Like, start off high and allow the extra profits to increase your perceived value of self, help you attract the better customers, have the profits to reinvest in the business itself, attract better quality employees.

• 10:40Alex Hormozi?

  Increase the conviction of your sales team if you do sell ever because think about it. If they're selling the shit product and they see the other guy on the market who's more expensive. The only thing they're going to have is, well, we're a lot cheaper. They know you're not better. But if you're the salesperson, you can approach and say, well, yeah. I mean, if you want, you can try that one first and then come back to us because that's what everyone else does. Right? Or you cannot make the mistake and actually save yourself a little bit of money. And instead of buying twice, just buy nice ones and solve the problem for good. And so the salespeople can enter these, these phone calls or these conversations with the conviction that they're actually going to help this person. And that is the best way to sell is having the full conviction that your product is the best.

• 11:22Alex Hormozi?

  And you can't say your product's the best if you're trying to do it on margin and you don't have the money to reinvest in good people. Reinvest in keeping it innovative at the, at the front of the market. You can't do it. Right? And so I'm a big believer in just making big promises and then delivering on big promises. Like that is the types of businesses that I like to build. And when you have all of these higher paying, lower demanding, happier customers. Your perception of the real impact you're actually making goes up. And so your conviction over the entire business and your mission of like, I actually came here to help people. Starts to become reinforced and it becomes this snowball that starts rolling. And you have these testimonials and these reviews that start rolling in and the momentum builds.

• 12:07Alex Hormozi?

  On the flip side, if you don't have that, you have less margin. It becomes this vicious cycle in the other direction where you're not getting these testimonials. All you're getting is chargebacks and refunds from these demanding customers that had unrealistic expectations. Because it was such a high percentage of their net worth, there was nothing that was going to save them from themselves. Right? And so you have two stories that you can play out. And solving rich people problems allow you to charge rich people prices. They pay better, they're easier to work with, and ultimately they allow you to build a business that can withstand different seasons. And be in a position to succeed long run. This is very fortuitous timing wise, but the time of this being made, the richest man in the world, everyone's like, what about big tech? What about AI? And I believe me, I think it's scary shit.

• 12:50Alex Hormozi?

  So the richest man in the world right now is not big tech. It's not big pharma, all the things that the news wants to talk about. It's a man selling $10,000 purses. All right, if you don't know who he is, his name is Bernard Arnault. He owns most of the major luxury brands that you've heard of. So if you've ever been to a luxury mall, and if you haven't, I really strolling to recommend that you go to one because it might not be in your neighborhood. It might not even be close to your city, but you should go because what will happen is it will stretch your mind in terms of what you believe is possible. If you don't make a lot of money and you see a purse for $10,000, you see a jacket for $50,000, it changes something about how you see reality. You're like, and I, and I would urge you to not say, those people are ridiculous. I can't believe someone would spend money on that.

• 13:33Alex Hormozi?

  What I want you to do is actually empathize with the buyer. What kind of person would spend $50,000 on a jacket? Well, what conditions would have to be true in order for that to make sense? Because think about this, a lot of people are like, rich people are crazy, but rich people are the ones with all the money. So they must have done something differently than poor people. So try and think about, why would it make sense to this person? Well, if I can pick from all jackets and I have so much money that the difference between a hundred dollar jacket and a $50,000 jacket in relative terms is a $10 difference to me and my wealth, then I just want the best jacket. And so I'm willing to just pay whatever it is because if you had a significantly better jacket for $10 more in your own net worth, you probably would be willing to pay for it, and so do they.

• 14:18Alex Hormozi?

  It's just that they have more zeros. And so Bernard Arnault capitalized on this. And so there's four distinct positions you can have in any marketplace. You can have bargain, which is the absolute cheapest one, which typically is poor quality in general, poor experience, but barely, barely gets the job done, but it gets the job done, but barely. The next is best value. All right, so this is the difference between like a Walmart and a Target, right? Target is better value. It's got brighter lights, it's cleaner in theory, right? And it's just a little bit better, right? It's the best value for the buck. The third position in the marketplace is premium. So it's the best first, that's the, that's the high end Lexus, right? That's the BMW. These are premium products.

• 15:02Alex Hormozi?

  They're above average. Based on price, it's not the best value, but is better than the best value. And then the fourth position in the marketplace is luxury, where the price has no cap. And part of the value of the product itself is the cost that people know you paid to get it. So Bernard Arnault lives in this luxury bubble. It's where people associate their status with the purchase they made. And what an amazing position to be in. He's like, so I just raise my prices even more and people want to buy more. And so there's called Veblen goods in economics. They actually defy the supply, demand curve rules. Because typically, when you raise prices, you decrease volume. But in luxury goods, when you raise prices, you increase how many you sell.

• 15:46Alex Hormozi?

  And that creates this unbelievable amount of profit, which is what has now propelled him to be the single richest man in the world. Something to learn from this guy. And so the number one question I got from all the tweet responses I had from those three or four tweets in a row I made about solving rich people problems says, well, what are rich people problems? It's a great question. So rich people have the same problems that poor people do. They just want them solved differently. And if we go back to our trusted value equation, the big thing we want is we want to deliver a big dream outcome, right? We want to deliver an outcome that they want, number one. Number two, we want them to believe with very high confidence that if they work with us, they're going to get what we promised. On the bottom side, they want it to be incredibly fast.

• 16:31Alex Hormozi?

  So as soon as they pay, they want to get. And then they want to have as little effort and sacrifice as humanly possible. And with the rich, speed and convenience are paramount. Because the money is never an issue. It's how much are you going to ask of my time? And how painful are you going to make this for me? And so if you think about the white collar echelon, you've got investment bankers, you've got management consultants, all right? At the highest level, in my opinion, of this kind of white collar world, who deal with rich clients.

• 17:02Alex Hormozi?

  The banking world fundamentally goes to rich people and says, I'm going to allow you to give me a billion dollars and I'm going to take that billion dollars and I'm going to give you back five billion dollars in 10 years or five years or whatever. And they're like, okay, well, what do I have to do? And they're like, nothing. You just write me the check. Like, okay, so I write you the check and then there's nothing else I have to do. Correct. Well, what's my perceived likelihood of achievement? How do I know this is going to happen? Well, here are the other three funds I've done and I've averaged X over five years in each of these ones. Okay, so you've done this three times over 15 years and you've had that each time. It's pretty high perceived likelihood of achievement. The dream outcome is I want to make way more money and I'm going to do it without any

• 17:46Alex Hormozi?

  time or effort on my part. Here you go. That is how billions of dollars are made because they find what it, what problem does a rich person have? What, what can they can do with their money? Right? Which is why investment vehicles and investment opportunities appeal to the wealthy and the more passive you can make it, the less time involvement they have, the more turnkey it is, the higher the likelihood that you have a tracker that they're going to get what you have promised. They'll write you an unlimited check. If you can get 20% returns like clockwork with virtually no risk, you can tap into literally unlimited money. Anyone, massive amounts. And a key point here was risk, right? If you find a way that there basically is no risk and you can get 20% returns, twice the

• 18:28Alex Hormozi?

  stock market, you can have as much money as you want. Now, here's where the little wrinkle comes in for those types of solutions. Many times you can find those things, but the opportunity can't take unlimited money. So a buddy of mine had figured out a short term revolving credit line thing for specific businesses that can't get credit lines, but they had assets in excess of the credit line, meaning if they defaulted for whatever reason, they could claim assets that were worth more. So it's asset backed loans. And so he was able to get 50% annual returns, but he he maxed out that entire market with like $20 million of liquidity, that little niche that he had found in business. But $20 million may be more than what you currently are working with.

• 19:11Alex Hormozi?

  And he structured his his fund so that he would get 20% of the upside. And so if he takes $20 million and he does 50% growth every year, right? He's able to grow to whatever it is, I don't know, 100 million bucks at the end of this. And he gets 20%, so he makes $20 million. And so for many of you watching this, you'd be like, I'd be happy with $20 million. And so all you have to do is find ways to solve rich people problems. And that's a big investment bubble, but let's let's go down to like day to day types of businesses. Rich people will want often the same services as poor people because they are humans. But the way they want it delivered is going to be focusing on the bottom two variables of value, effort and sacrifice and time. Rich people will always pay for speed.

• 19:52Alex Hormozi?

  And so if you don't have a fast option, or if you look at a marketplace and there's lots of slow stuff, the easiest way to appeal to the rich is just do the same thing in half the time. Whatever the services, if it's dry cleaning and they can do it in a day, return it by end of day, right? And the effort and sacrifice, if you're in any kind of home services type business, a lot of the issues there is English speaking people, right? A lot of people don't speak very good English. They would pay the premium to just know that one, their stuff's not going to get stolen. Two, the stuff's going to be done consistently every time. And three, that they're going to be speaking to somebody who understands them immediately. And they don't have to repeat themselves and then say an entire sentence in English and say, comprende or see, right? They don't want that. And this, mind you, this is in America.

• 20:35Alex Hormozi?

  So whatever your whatever your native tongue of your country is, apply that thinking to whatever the service is. You just want to make sure that whatever the rich person's native tongue is, is you're making it as easy and effortless as possible for them to communicate with you in whatever way they want. And so if you only have a phone number, well, be the person that can accept anything. So that if they email you, if they shoot you a text, if they WhatsApp you, if they phone call, you can accept anything because you've made it more easy and convenient and effortless for them to communicate with you. And so I want you to think through these value equation variables because that is that is fundamentally how you deal with rich people is that they just want it to be effortless. They don't want to think about it.

• 21:17Alex Hormozi?

  And they will pay you through the nose to do it because for them, it's not through the nose. Because you need to make sure you're selling out of their wallet, not yours.

• 21:26Alex Hormozi?

  Hey guys, real quick, if you're new to the podcast, I have a book on Amazon. It's called $100 million offers at over 8,000 five-star reviews. It has almost a perfect score. You can get it for 99 cents on Kindle. The reason I bring it up is that I put over 1,000 hours into writing that book. And it's my biggest gift to our community. So it's my very shameless way of trying to get you to like me more and ultimately make more dollars. So that later on in your business career, I can potentially partner with you. So that's my gift. Go check it out, Amazon and back to the show.

• 21:56Alex Hormozi?

  One of the main things I want to hit here is how you sell to rich people. Okay. The big thing that poor people do when they're trying to sell in general is again, they sell out of their own wallet. When I say that, it's like, if you're poor, you think this means a lot. And so you feel like you have to justify your price all the time. If I hear that, I might automatically know that this person is A, probably poor. B, doesn't deal with many rich people. And so they will weed you out, knowing that you don't know how to deal with people like them. Real talk. When you sell to rich people, the benefits for them are always around it being the best, not it being the best value. It's not, I want to get the most bang for my buck. It's, I just want the most bang, period. And I want it to be as easy and effortless as humanly possible.

• 22:41Alex Hormozi?

  So I went to a fur coat store when I was in Park City. And I actually met one of the best salespeople I've ever met. I got a really good overcome from him that I'll tell you right now, because I think it's awesome. Leila was trying on these fur coats because I think they're ridiculous and I love that stuff. And we at the time lived in Austin, Texas. So it's hot all the time. There's literally never a point where you could wear a fur coat in Austin. And she said, you know, it's not about the money. She's like, I just don't think I'm ever going to wear this thing. And he said, well, if they were free, would you take one? And she was like, well, good point. And he's like, well, then it's not not about the money. And he just redirected it back to the price. Now, what's interesting is that not once during the entire conversation that we had there,

• 23:25Alex Hormozi?

  did he ever mention that the fur coat was going to be waterproof. Not, not ever did he mention that it was going to be the warmest jacket, right? Because it's not going to beat the Gore-Tex, you know, Arcteryx Spider, you know, whatever, you know, double, triple platinum, right? Fake down that can't be destroyed in flames, right? It's never that, right? All he was talking about was how we were going to look and feel with this jacket, or how Leila was going to look and feel at events, and basically getting her to imagine what the experience would look like after experiencing the product, right? And so if you're dealing with rich people on a regular basis, you have to think about the things that they're going to do, and how they're going to experience the product, not the way you think you would experience it.

• 24:08Alex Hormozi?

  And so this is where, you know, there's the golden rule, which is treat other people the way you want to be treated. But that's not actually the best rule for selling. You want to treat people the way they want to be treated, right? Which is the platinum rule, which if you've ever heard of that stuff. And so it's really coming from a place of empathy. And if right now you don't have a lot of money and you have like a little bit of distaste for rich people, I like, from the bottom of my heart, you have to get rid of that. Because you cannot become something you hate. And so if you want to make more money, you have to empathize first with how did this person get there? What is their worldview? And how do they see things? Because it's the first step to being able to walk around in their shoes and make products and services that are actually going to serve them. Because they ultimately, if you think about the biggest companies in the world, although many people who are poor use Facebook, where does Facebook make its money?

• 24:54Alex Hormozi?

  Advertisers, big businesses. And those people act like rich people. They want it to be as seamless as possible, and they will write it on an unlimited check. They'll say, hey, you know what? Facebook, we need to drop 300 million in Q4 because we have to get it off our balance sheet. Buddy of mine deals with Fortune 100 companies, and here's what's crazy. His advertising agency actually has to front the ad spend. And so he, if they say, hey, I need you to, for this month in December, I need you to drop 300 million on Facebook ads. He has to front the 300 million for the ads. All right. But the thing is, is that he has to do it that way because he needs it to be as easy as humanly possible.

• 25:35Alex Hormozi?

  But remember, they're good for it. Right? And so he actually has to have a revolving credit line in the billions with a bank. And so what's crazy is that he charges 6% of all advertising dollars as his fee on top of whatever his normal fee is. And so when they drop 300 million, he gets 6%. Not bad. He gets 18 million bucks just for fronting the cash. And so all he has to do is constantly look at credit lines that are less than six so you can arbitrage on the money. And so my point here is that rich people have different problems. The best thing to do is study luxury brands. If you aren't in an area or you're born in an area that doesn't have a lot of nice stuff.

• 26:19Alex Hormozi?

  I would highly encourage you to A, at least make a day trip out to like the really nice part of town, the nice mall, and walk around the stores there. And, and this is unfortunate, but you will get treated differently how you dress in those places. Like I walk in like this and they always treat me like shit, but I kind of like, like it. So I'm like twisted in my own way. Like I like, you know, the surprise. Of course I'm the, the main shopper that they have there. But going there, dress like you're not a weirdo. And like, look around, like look at the service. Like when you shop at a high-end store, they'll bring you bottled water that's fizzy. Then they'll have different selections of waters.

• 27:01Alex Hormozi?

  They'll offer you champagne while you shop. They'll offer you scotch while you shop. It's a different experience. You're like, well, why don't they do that at, why don't they do that at Tilly's? You know, why don't they do that at fuck Aeropostale? Right? I don't know. Is that a kid's store? It was probably not. Whatever. Hollister. That's probably a kid's store. I don't even know what, what are, what are cheap stores? American Eagle? All right. American Eagle. Yeah. H and M. Yeah. Forever 21. There you go. Do they offer that there? Of course not, right? And so if you're thinking about this, like, who's gonna get a better experience? Like, the clothing at the nice stores is way better quality, right? There's no one gonna argue that. The experience at the way better stores is significantly nicer. Guess what you don't try and do? Like, you're gonna have somebody who's assigned to you. From the moment you walk in the door, what can I get for you?

• 27:46Alex Hormozi?

  Right? And they become your, basically, your concierge for the entire experience you have there. And they can have and deliver that better experience because of the premium and luxury prices they charge. And so if I had the choice of two businesses where I've got a super messy rack, right, that's sitting there and people just have to clamor and fight over it, versus the white glove champagne, you know, how can I help you experience? I tend to want to serve those types of customers, charge those types of prices, make those types of profits, profits and make those types of promises and deliver on them. And work with my employees and team, really smart people who also wanna deal with those types of people. And so, in a real way, like, it isn't in crowd and an out crowd. People who are in that world recognize other people who understand that world.

• 28:31Alex Hormozi?

  And if I can get you to think like they think, then you will be able to sell to them. Rich people have all the money. And so if you wanna go get the money, go to where the money's at. There's only one way to win in a low-priced business. You have to build your entire business from the ground up, day one, based on having a significant operational advantage. You have to build your core strategic advantage as we will be the lowest-priced person. Do not compete on best value. You either gotta go premium, or you gotta go luxury. All right? Luxury is, your price is so high, it can first status to the buyer because your brand is strong.

• 29:12Alex Hormozi?

  Premium, which is where most people, is where I recommend you go, is actually just deliver significantly better, in a real way, service. All right? Now, here, the point is that your price, like, if you're an amazing marketing agency, you're not conferring status to the business by being expensive. You're not luxury, right? Luxury often is in consumer goods. So if you're in a business services type business, you're not really gonna be there. It's much more about, I want the best. I want the most bang, not for the dollar, I just want the most bang. All right? The most bang for the dollar is best value. And this is where the graveyard of most businesses sit. They try and offer a little bit more for a little bit less. And they look at every, the next act comes in, he tries to offer a little bit more for a little bit less.

• 29:55Alex Hormozi?

  And then eventually you can't offer anymore for any less. And you just stay in what I consider a capitalist nonprofit. You just don't make any money and you do it for years and it crushes your soul. Because you kept trying to do a little bit more for a little bit less because you were selling to the wrong person. And so if you're gonna get into the price game, you gotta go for the absolute bottom. And build your business from the ground up, only off of remote workers. Automate as much as humanly possible. You come into it like, the first answer is always, how can I automate it? Not, who do I hire or how do I outsource it? It's always, how do I automate it? Right? And then the second is, if I absolutely can't automate it, I'll have to bring someone offshore. That's a different business model than you probably have. It might not even be a business you're interested in.

• 30:37Alex Hormozi?

  And the problem is, there can only be one low-priced leader. The cheapest person. There's no advantage, and this is from Dan Kennedy. There's no advantage to being the second cheapest person in the marketplace. But there is an advantage to being the most expensive. And so, when you sell to rich people, you get to charge rich people prices. They pay better. And if you solve their problems, they will make you one of them. So when you deal with better customers, because you've raised your prices, you're gonna attract better people. Because the rich people are attracted to higher prices. They seek them out like bloodhounds. I actually wanna know what the most expensive thing is. Because I know that the business owner who set it up that way, understands how I wanna be treated. Might not have thought about it like that. I literally look for the most expensive thing, because I just assume it's gonna be the best. And most times, I'm right.

• 31:21Alex Hormozi?

  Because that's how most businesses that cater to wealthy people operate. They know what the rich person is looking for. They want speed, convenience, and they want it to just deliver exactly how it is and not think about it again. All right? They don't wanna haggle, they just want, here, get the extra 20%. I don't care. Like, I just wanna be in and out and I'm done. All right? And so, what happens is, when you deal with richer people, you have way less demanding clients. The nice thing is that when they spend money, they're actually emotionally invested. So when you raise the price, people get more emotionally invested. On top of that, they perceive the value as higher just from the price alone. All right, there's a, there's a big experiment they ran where they had three bottles of wine. Cheap, middle-priced, expensive. They had people try them out and they had them rank them.

• 32:01Alex Hormozi?

  And people ranked them as best was the most expensive, middle was middle, and the cheapest one was the worst. Here's what's crazy. The researchers pulled off the covers of the wines and showed them that all three wines were the same. And so in a very real way, the price actually increased the value of the wine itself. And so when you raise the price, you actually increase the quality of your product. On top of that, if you ever have a product or service where you have to get the person to do something, which is most products or services, then the higher quality customer you attract, in a real way, the better, the likely that they will achieve the result. Because more able people can afford more. And so you will increase the percentage of people who are happy and can follow through because they are more able.

• 32:46Alex Hormozi?

  And so you have higher success rates because you attracted better quality customers. And so if we want to stack the chips in our favor to make big promises, deliver on big promises, have clients that aren't a pain in the ass, right? Deliver results as we said we were going to and make more profit along the way. The pathway is up, not down. Now, from a business perspective, when you have more profit in the core thing that you have, you can reinvest in staying innovative. You can do research and development. You can have beta runs and beta products and prototypes. You can do that because you have excess profit. On top of that, you can invest in having a superior experience because you have the excess cash to give them white glove service, right?

• 33:29Alex Hormozi?

  On top of that, your conviction in what you sell, that when you say, "I'm going to deliver this thing," and you can, is strengthened. Because conviction is where all sales comes from, right? You have to believe what you're saying. Most people don't actually believe. And so the thing is, is poor people think if when you close a sale, you think, "Gotcha," you're fucked up. Because you actually think that you are ripping off your customers. And so if you, so you need to change that. Like if you don't, if you feel that way, you need to change it. Because there's two emotions that you should feel. One is, oh, fuck, now the work starts. And the second is, I'm really glad I can help this person.

• 34:13Alex Hormozi?

  Like, I get it, because I've sold when I was poor. Like, I understand when you're like, I fucking need to pay bills. I get it. But the thing is, is like, you have to pull yourself out of that, to get out of that. Because, again, wealthy people can smell that. Like, I love this term, commission breath, right? Is that they can smell that the only reason you're trying to sell them is for you, not for them. And so when you have the most profit, you can reinvest in the experience. You can reinvest in the product. And most importantly, you can reinvest in attracting the best talent. Because how do you scale a business? It's not going to be you. You're going to have to have a team. And would you rather have a team of people who don't value themselves and don't want to make a lot of money? Or do you want to have a team of people who are ambitious? Who have big dreams for themselves, who want to learn?

• 34:57Alex Hormozi?

  And they want to learn from somebody who's making money? And they will ask for more than people who don't value themselves. But here's what's crazy. The biggest cost-cutting tactic Henry Ford said he did was that he doubled his minimum wage compared to everybody else who he competed against. What happened? He was able to take all the top talent from everyone else to work for him. And here's one of the secrets that you probably don't know, and I'm going to tell you right now. Is that A-level talent costs twice as much as B-level talent, but produces five times the output. Ten times, a hundred times the output. So much more. And A-level talent comes, batteries included. They come with a map installed, like a Tesla.

• 35:39Alex Hormozi?

  They know where they're going, they know the route, and they already have the motivation to get there. And you just need to get out of their way. You need to empower them to do what they need to do. But you can't attract those people if you don't have the profits. And so, keep trying to lower your price, keep trying to do best value, do a little bit more for a little bit less. You wore it off the best customers. You wore it off the best talent, because they all know each other. Because oftentimes, the best talent are people who value premium products and services. And they want to work for a company that they would buy from. And the last one is, a lot of people's prices are a reflection of their value of themselves. And I think there's a, there's a big thing that we have to separate here is that you can value yourself and understand that you are not as good yet.

• 36:21Alex Hormozi?

  I'm a big believer in what I consider the Chick-fil-A model of pricing, which is it's either free or it's full price. There are no discounts. And that's why when people are starting out, I encourage them to do as many free services as they can. There's a lot of value to that. One is you get a lot of experience. Two, there's lower stakes. Three, you can ask for things in return that are tangential value. You can get reviews, you can get testimonials, you can get feedback. All of these things help make you better. And everyone's so, they're so short sighted. Because what happens is if you're in the beginning and you suck, if your first five people you basically rip off because you're sucking at it and you're trying to learn with them, like your first five customers all don't like you. Like, that's a tough way to start. And your perception of business will be shifted by that. And so if you have a very different dynamic where you're just giving,

• 37:06Alex Hormozi?

  and you're giving away stuff for free, you're giving away services for free, right? You will have a very different dynamic and you will learn how to provide value in a different way. And then what happens is, once you get to a point where people are like, "I want more of this", and you can't even satisfy the demand, then you go full price. Because now you've, you've gotten the reps in, you know how to over deliver. You know what an actually good relationship with a customer feels like? Because it should feel like a partnership. It should feel like we're working together on this. And it shouldn't feel like master slave, right? It shouldn't feel like you're pulling the cash out of their, ripping the cash out of their wallet. It shouldn't feel that way. It should feel like, "Hey, we're both aligned here. We're really partners in this, in this work together." And when you have that vibe and you have the track record, you will be able to say no to bad customers

• 37:51Alex Hormozi?

  and ultimately save your mindset and all of your employees from dealing with them too. Because one of the easiest ways to lose good talent is sell bad customers.