20. Upsell Offer. Free With Alternative Revenue Stream. | $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?

  Upsell Offer: Free with Alternative Revenue Stream. Lost Chapter Author Note: I removed this upsell because I didn't think enough businesses would be able to use it. That being said, it does crush. 2019-ish. The following is a rough paraphrasing of a story a gym owner told me who taught me, number one, an excellent down-sell upsell strategy. Number two, a really nice way to graciously exit anyone from a sales conversation who doesn't want to buy your main product. When someone walks in towards the place and says no to joining, which used to kill me, I had this realization. Instead of awkwardly escorting them out of my gym, why not offer them something free instead? Instead, I say, "No worries," and hand them a USB drive. "Here's everything you need to do this program from home, absolutely free." You should see their faces. In this industry, everyone's trying to lock you into contracts.

• 0:45Alex Hormozi?

  They think I'm some kind of saint. But here's the real move. After I give them the USB, I simply add, "To get you a head start, let's book you for a nutrition orientation so you can see the results you want. The orientation's on us. We just want to get this community healthy, and maybe when you can afford it, you'll think of us." Almost 100% of people who said no to my gym membership ended up in these nutrition orientations. And guess what? During these orientations, we sell them supplements instead of workout programs. Here's the crazy part. These people who initially rejected working out spend 50% more on supplements than my regular clients. I've basically created a no-prospect-left-behind approach, and my sales team loves it because they help everyone who walks in. Everyone around here calls it the no-sale sale. Perfect name, right? I'm selling to people who think they aren't buying anything. And once I started doing that, I thought to myself,

• 1:28Alex Hormozi?

  "Why not offer this free USB as my front end and just get people in? Then I can upsell them an in-person version for money, or they can keep buying supplements from us every month and not use up gym space. Win-win." So that's what I did, and it worked. It goes to show that people want the same problem solved in different ways. Offering multiple ways to solve their problem gives you a few more at-bats. What's more, the strategy allowed him and the gyms who subsequently modeled it in our community a way to turn every single prospect into a sale. There are a few ways to use it, so let's dive in. As a down-sell, like in the story, or as a primary offer, which he alludes to at the end. We'll dive into both. Description. This is an offer that depends strongly on the types of monetization/revenue streams available to a business. In the simplest terms, we're providing one type of service or product for free and upselling something else.

• 2:13Alex Hormozi?

  You can upsell something as a one-time service or product to offset advertising costs, or you can make the upsell recurring, or you can plan your entire business around giving one thing away for free and monetizing with another. It works for one-time services or even recurring services, provided the alternate revenue stream has sufficiently high margins to afford both fulfillment types. But most variations chunk up to the two larger buckets. Paired upsell, which is, "I give you thing A for free in exchange for buying thing B", or independent upsell, "I give you thing A for free and I will encourage you to buy thing B." Those are slightly nuanced ways of expressing the same concept or offer, but they will hopefully generate some different ideas for you on how to use this in your business or your client's business. Examples. Storage. Offer: You get a free month of storage. Paired upsell.

• 2:58Alex Hormozi?

  Do you want to buy a lock for your storage unit? The lock only fits. Our doors are the only ones we sell and cannot be purchased anywhere, by the way. Weight loss clinic. Offer: Free 28-day program. Independent upsell. At the nutrition orientation, kick off a program after first signup. You're going to want this $40 supplement package to get the best results for the free 28 days of service. Physical therapist. Four free treatments. Independent upsell. You're going to need these orthotics, bands, braces, oils, and athletic tape to maximize the effectiveness of the four free treatments. Info, coaching, education, and software. Offer: I will coach you free indefinitely on your agency as long as you use our software.

• 3:41Alex Hormozi?

  Paired upsell: We monetize inherently on the software. Real examples. Free book on real estate. Upsell 1: Shipping cost. Upsell 2: Audio version. Upsell 3: Deal contract templates. Upsell 4: Where to find deals. Training. Upsell 5: How to find financing if you have no money. Note: Each of these things are necessary requisites for being successful using the strategies outlined in the book. The hardest sale is the first sale, the opportunity vehicle, the book. The rest of the upsells are things they will need along the journey. Free versus discount note. This works with a discount wrapper. You can get service from us for only $5 per month, normally $100 per month, as long as you continue to buy and use our products. An acquaintance of mine, who owned a very successful chain of 200-plus weight loss clinics, grew it on this simple offer.

• 4:26Alex Hormozi?

  They offered $5 per month of weight loss services for a year if and only if the client used their supplements, bars, shakes, and meal program. Their guarantee was contingent on this continued usage and purchasing. They were a successful business, employed doctors and nurses at the facilities, but despite this, gave their service away because they made so much on their consumable products. This gave me an interesting insight. People were more willing to pay for the products than they were for the service from white-coded medical professionals. People love tangible goods, something I always try to incorporate with services if I can find a convenient way.

• 4:56Alex Hormozi?

  Details. You'll want to use a multi-step sales process with this offer. If you're marketing thing A for free, then you must be able to give it away for free. So it is key that you give something that has low incremental costs, i.e. adding another unit doesn't cost much. If you're using it as a free front-end offer, you want to make sure the next thing you're selling or upselling them is going to be the next natural thing the prospects would need. It is key to understand your prospect's problem and the solutions available better than they do. That is where good money model design becomes paramount. In the examples I gave, the money model does not end here. There are still more upsells that will occur in each of these scenarios. Storage would upsell boxes, larger storage units, and commitment. Weight loss clinic will upsell continuity of service, continuity of supplements, done-for-you meals, bars,

• 5:41Alex Hormozi?

  home or treatment, et cetera. They'll also likely close a card for continuity of service, so the free service is also a free trial plus penalty. This way, you're capturing multiple streams of revenue. Physical therapists will probably upsell a long-term treatment program bundle, et cetera. The effectiveness of this play is based on two things. Number one, the prospect's perception of how essential/required the next thing is, like the lock in the storage unit scenario. Number two, how seamless the upsell process is for the prospect. If you make it frictionless, you can get 90% plus take rates on upsells for these offers. These should feel like it makes total sense to buy. The biggest benefits of using this offer as a free front-end is being able to liquidate acquisition.

• 6:19Alex Hormozi?

  If you make $0 on the free thing, naturally, but you know 80% take a $300 up sale with 80% margins, then you know you are making $300 times 80% times 80% equals $192 per free thing given away. And that's just the first up sale. There will and should be many others. But since the take rate is so high, and it is upfront, this is one of the easiest ways to generate cash upfront with little to no operational drag. Physical and digital products pair very well with services for this specific money model. We use this all the time for internal stuff. What I mean is using it to market to an existing audience. You can encourage them to bring friends for the free thing. They'll be excited to do that and participate. So it'll end up generating new customers and revenue with an easy offer.

• 7:03Alex Hormozi?

  Basically, this combines a free trial with an up sale. Since most of your clients take the offer, in many cases, you make more money going free plus the up sale than selling a moderately priced thing upfront. Consider meeting with 100 folks and selling 30 people at $99 a thing versus meeting with the same 100 folks and selling all 100 a free thing, then upselling 80 of them on the $300 products. You end up with more money and more customers plus the referrals. You can obviously use this upfront. With cold traffic, you're going to want to close a trial plus credit card on the first transaction, then upsell product on the second. Otherwise, you get a lot of no-shows. Note, if someone does not buy the up sale, they are unlikely to stay.

• 7:43Alex Hormozi?

  It's the greatest predictor of backend conversion. So although the sale may seem minor, it's the most important for the long-term value of the customer. You have to focus on it. It's not a nice to have, it's a must-have. Summary points: Great internal play to your audience, generates lots of referrals, easy to sell. Pair it with a free trial for cold traffic so you can assume the backend continuity and far better backend conversion. Can generate more cash than selling something low-ish ticket, almost always gets a lot of volume in the door.