The Game with Alex Hormozi - How long will the 6 week challenge keep working... 📛 | Ep 75

Episode Date: September 4, 2018

"The point of business is not to win. The point of business is to keep playing." Today, Alex (@AlexHormozi) discusses the six-week challenge and its effectiveness in the gym industry. He breaks down the different factors that contribute to the success of a promotion and emphasizes the importance of adapting to new platforms and offers to stay ahead in the game of business.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 on his path from $100M to $1B in net worth.Timestamps:(1:32) - Better offers, faster-split testing(7:19) - Conversion rate affects economics(10:59) - Budget determines platform lifespan(13:23) - Adaptation crucial for business survival(16:37) - Saturation ≠ failure; others' success = promotion works(18:11) - Experiments lead to success, despite shifting trendsFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

What's going on, everyone? Happy Thursday. I've been on a little content here, haven't I? My sales director, Dylan, messaged me was like, hey man, you made this podcast on Stewart's What's WTF Gym Talk? And it was about the six-week challenge. And I've had this question asked me at two events and on that podcast. And so I wanted to address it straight on and kind of give you context for why I'm not worried. And then you can either agree or disagree, but that's up to it. So if you think about the 60th challenge in general, right? So people say, like, well, isn't it very saturated or like more and more people are doing it? What does that mean for the long-term ramifications?

And so I kind of wanted to like break that down. So if you look at the history of like fitness marketing, right, like LA Fitness was running a free month for 35 years, right? And they were using direct mail campaigns primarily because that would and radio because that's where the media was. It's where attention more. That's where people were paying attention. And so they were able to, and they were also some of the only players in space, they were able to do that for really long time. Now, if you look at the way that those media platforms work, you have to do very large media buys for direct mail or radio over large blanketing areas, which is why most small players couldn't play. The other downstream effect of that was that there wasn't a lot of testing that was able to happen.

And so once they found a play like a direct mail play that would work, they would only do like an A or a B test and that would be it, right? And so what's happened is that with the advent of digital marketing, we can split test things at a much faster rate. And so my argument would be that the actual offers that we have now in the creative that we have now is far more compelling than what was created 20 years ago. And that's just because we have far more ability to acquire information and see response on a much smaller budget. And it opened up the marketplace so that smaller players could get into it. And there are probably plenty of great advertising, creative people who, if they were just funding for themselves, could spend $10, $20, $30 a day,

whereas they weren't going to bet $10,000 or $20,000 on a radio buy. And so the first thing is just kind of understanding where this has come from is within the larger history of fitness marketing. The second thing is that you have to look at a market within the context of what everything that any person is hearing. And so if you have Sally Johnson, right, And she's trying to lose weight. She's 38 years old and, you know, make $60,000 a year, which is like the most prototypical,

you know, weight loss customer, right, who diets five times a year. She hears stuff constantly, right? She's got P90X. She's got weight watchers, things that are going on. And then she has gyms all around her. And all of the gyms are running different promotions all at the same time. So it's a very busy marketplace. No matter what you do, no matter what offer it is.

And the reality is that most times don't even know, like, if you go on the street and say, hey, do you know what six-week challenge is? both people are like, what are you talking about? Right? And so we, because we hear it all the time, and that's our world, assume that everyone knows about everything that we do in our business. And the reality is that that's just not true. Right.

Now, if you were to separate, there's like, there's so many more pieces to this, but I'm trying to like bring it like super, you know, three main pieces, right? You've got your traffic source and then you have your offer and then you have your conversion mechanism, okay? The conversion mechanism is arguably the most important. Okay, and that's what we sell at Jim Launch, and that's how our guys make so much money. And it's not because they necessarily have a superior offer. Now, the offer is definitely a big piece of it, but it's because the mechanism that allows them to buy traffic, which is the third pillar here, is superior, right?

And so for me, I have a free case study. That's what I give away on the front end for our ad stuff, right? Now, right now, I have successfully tested that on YouTube. I've successfully tested that on AdWords. I've successfully tested on Instagram. I've successfully tested that on Facebook. Now, I'm going to be coming out with a book in the soon future, right? I spent the last 30 days or 300 pages.

It's called Jim Lunch Secrets. I think you guys will take it. But anyways, it's really good. I'm really excited about it. But what am I going to do? I'll probably swap that for the front end. I also have an infographics book that I finished. And, like, I'll swap that for the front end.

But the point is that the conversion mechanism of how we go appointment to a phone call to a sale is, is like that's tested. We know how to get people to schedule. We know how to get people to show. And then ultimately we get people to buy and then get great results and send their friends, right? And so we know how much we can spend

to acquire a customer from a scheduling standpoint. And then all we need to do is reverse out, okay, what percentage of people who hit our scheduling page are going to schedule and show and then what percentage of people are going to opt in for that initial widget, right?

So right now the case studies has worked fine for 18 straight months. And there's really no reason for me to do it besides the fact and aboard, which is probably something that you shouldn't do, but I'm just breaking my own rules because I'm an idiotic sometimes. But to circle this back to the six-week challenge, I ran the six-week challenge at my gym for six straight years, uninterrupted, six straight years, rolling week after week after week after week. Why and how could I do that? Because I could outspend

everyone, right? It didn't matter. And it's the same thing here in this gym space is that I'm competing against people who can't spend as much as I can. Right. And so like people like the guys who will knock us will say whatever they say and like it doesn't really affect me that much because like I can spend $4,000 in email. It just doesn't matter to me. Right. Because like you let your model do the talking. And if your model is designed properly and you provide, you know, exceptional value and service, which hopefully if you're watching this, you do, then people will bring their friends and bring more friends, et cetera. Right. I'm not going to go down that rabbit hole. So to get back to like the six week challenge and how long will it keep working. The offer of the six-week challenge fundamentally is something that most people,

like as of right now, it's the offer that converts best. It's converted the best over the last six years. There may be another offer that we will find that does better. For the time being, it's the best one. Period. It's the one that gets the most clicks. And it also worked with the conversion mechanism that we have on the back end. Ryan Carus, at one point, was spending like $35 a lead and still getting 15 to 1 back. Who can compete with him on that? He could spend up to $2,000,000. He could spend up to $250 a lead to break even on the acquisition. And he still has the EFT and the back end. So for everyone who's run LBOs their whole life,

that's what an LBO is supposed to do is you break, I mean, they don't. But like, you're supposed to, they usually lose money on the acquisition, then they make their money back on the backend, right? Now, if you can still, like, all this is, is just a way better way, and this is why it's the new way of doing business, right?

Like, business landscapes evolve. Like better players and better ways of doing business come up. This is a better way of doing business. That is why Uber took over taxi companies. That's why Netflix beat out Blockbuster. It was a better model, right? This is a better model of acquiring customers. The fact that it's a six-week challenge is irrelevant.

It's just the widget. It's just the front end. It's the thing that gets the click. And the beauty of it is that you can always change it. Now, how long will it work? Keep going back to this question. It depends on the economics of the offer, right? And so right now, and it depends on the gyms.

Because I've got some guys, and that's why conversion. of how many, what percentage of leads you convert is such an important number to me. Why it's arguably the most important number for me that I look at it from looking at the health of a gym in their selling system, right? Now, if I have two gyms, let's say, let's use, let's use Ryan Karras as an example. So he's probably the number one grossing gym we have. I think he'll do one, like, 1.8 million this year or something like that. His conversion mechanism is amazing, right? He's rock solid. His guys are working the leads. Like, they come in, they close them like crazy. They get amazing amounts of referrals from everyone, right? And so for him,

Same offer, okay, he can spend up to $250 a lead, a lead, okay? And then you've got, let's say, someone else, okay, who has the same exact gym launch system. Okay, so I'm like just talking about my own system here, right? And they're running a six-week challenge and they, let's say they convert five percent of their leads, which is really kind of poor. Now, if you're converting five percent of your leads onto a $600 offer, right, then that means that you can spend up to $30. Make sure I'm doing my math right.

Times 20. Yes, divided by 20. Yeah, $30. So you can spend $30 a lead. That's still not bad. You know what I mean? And you're breaking even, right? And most people are getting leads from much less than that.

So that person's still fine. How long can Ryan keep playing in that marketplace for a lot longer than the person who can only spend $30 a lead? So does that person need a new offer or do they need to get better at converting leads. They need to get better at converting leads. They don't need to change anything in their machine. They should be better at it. Right. And you guys, love that you're listening to the podcast. If you ever want to have the video version of this, which usually has more effects, more visuals, more graphs, you know, drawn out stuff. Sometimes it can help hit the brain centers

in different ways. You can check on my YouTube channel. It's absolutely free. Go check that out if that's what you are into. And if not, keep enjoying the show. How good you are at converting your leads will dictate how profitable and how long you can run a campaign on a given ad platform. Now, that's kind of the last piece, which is the traffic. So if someone says, how long will the six-week challenge keep working? I would then ask the natural question, and that's why I had to build up to this point, which is on what platform? Because, like, how long will the six-week challenge work on direct mail? Probably does work on direct mail. It's just more profitable online, right? For right now. How long, like right now it works on Facebook. It works on Instagram. It works on Snapchat. It works on YouTube.

it works on all of these things. And Jim Lords, I think you guys are really excited about the thing that's tomorrow, so look forward to that because we're releasing a ton of New Legion stuff. I think you will dig it. But that's besides the point.

How long will it work on that platform? It will work as long as until the CPM, so the cost per eyeball, gets to a point where you're spending $250 per lead for Ryan, right? And then for somebody who's doing the 5%, it will work for that person, until they get two. So let's say, okay, I'm going to break down numbers for you.

So CPMs is cost per thousand impressions, right? So typically most, like if you were to look at CPMs of Facebook six years ago, CPMs for Facebook were like six bucks, okay, for a thousand eyeballs. And then you could even make the argument that they were even more responsive eyeballs because there weren't as many ads, not as many ads were being bought by businesses because it was a new platform. And so you had more eyeballs that were more responsive news cheaper. It's like the Wild Wild West, right?

You just get, I was getting penny clicks. It was the best. And there was no rules. I had like hot chicks that were shirtless. It was nuts. Anyways. So it evolves, right? And so from then until now, the cost of ads is literally five-xed.

Five-exed. Now, did that affect my promotions at all? No, because my ceiling was $200, right? It didn't matter, right? Because I have so much room to go. Now, you have your $1,000. Let's just use $20 because it's an easy number to work with. So right now, that's kind of like a,

slightly, like a slightly cheaper. Like right now, I'd say average gyms are getting like $25 to $30 CPMs, but I'm going to use 20 just because it's easier for math. Okay. So let's see you're doing, you know, I'll use 25 so people don't get fired. So $25 a CPM, okay? So $25 for a thousand eyeballs. Now, from those thousand eyeballs, let's say you get three leads, okay?

That means that you're spending $8 and $3.33 a lead. Okay. So you have $8.33 a lead, and that's with a $25 CPM. So if in the next. next five years, Facebook does again and five X's to up to $125 to CPM, which that's like television cost. Then still, and we're getting three people per, right, we're still getting leads for $45 a lead. And Ryan can still keep going to $250. He's still getting five to one on his acquisition. So how long do you think it will work? I don't know. It just depends on the traffic

platform. But the thing is, is at that point, there will be another traffic platform. There will always be another traffic platform because people's attention is always somewhere. And eventually the ad platforms get more developed, they get more regulated, they get more whatever. And then the biggest players come in, Coca-Cola and Budweiser, all these guys, and then they start dropping their ridiculous budgets, and then they just raise the water for everyone. And then at that point, the savvy marketers, right, go to another new platform and do the same thing again, right? And the thing is that in the very beginning of a new platform, people usually will push traffic to, like, static sales pages. They'll push them to $21, $21 day promotions.

And that's why in the very beginning LBO stuff worked, right? It's because it took zero effort and they could literally, they could buy penny clicks. If you have a penny click, even if you're converting it 10% on your page or 5% in your page, you're still getting like 21 back. It doesn't matter, right? And so guys will do that and just push assloads of traffic towards a page because they can afford to do it. But then very quickly, real players start entering and then you can't buy traffic for that cheap anymore. And then those guys go to the next one, right?

But then, so like you want to be the business who can spend the most. Does a six-week challenge the actual promotion matter at all? No, it's the conversion mechanism. You could do it for a 12-week. That's why we have a 12-week transformation that's $3,000. What do you think we can spend there to acquire customer? A lot. How many platforms do you think it works on?

A ton. Because traffic is just a store. It's a commodity. You go to the traffic store and you pay them for traffic and then they give you traffic. What you do with that traffic and how much you can spend for it It's going to dictate how long you're going to be able to use the traffic platform and how long an offer or promotion will work for you, right? And so to bring this all the way home, I'll try to do my best. The marketplace is much, much bigger than you think it is. If there's, let's say, five gyms running a six-week challenge, cool. There's 500 in a million person city. It doesn't, like, it doesn't matter. Like, even if there's 10 of you or 20 of you or 50 of you, it's still wouldn't matter, right? Because, and the thing is, in the reality is that it'll never be past that because a lot of

those gym owners don't even know how to market. They're not even aware enough. They're not even in little Facebook groups with other gym owners. They're not trying to learn, like, they're doing their thing, right? And they're not going to learn promotions. They're still giving away free weeks because that's the only game they know how to play. Right. But y'all are smarter, right?

And you know how to play a better game, which will ultimately, like, those guys will eventually go out of business or they'll continue to struggle for years and years and years. But if you don't have to play that way, then you'll win because you understand. how the game is played. Okay. So you have your traffic platforms, boom. You'll have your offers, which, like these change every five years or so, right? Three to five, it'll change. We probably have, and this is from a Gary Vee private session that he gave, he said that Facebook has about four to five more years of golden days. And then at that point, it's going to get too expensive because that all the big brands still, like the big brands still have not sort of dumped, like you don't

see Budweiser ads, not a lot of them on Facebook, right? You will. Once they get convinced that digital marketing works someday, right, they'll do that. But that's okay because we're going to have like virtual reality marketing and like all sorts of other stuff that's going to open up and we'll be on Snapchat still or Instagram or whatever, right? We're going to be there because we're always going to be in front because you're a savvy business owner. And so if you have this hope that like, well, I wish I could just run ads on one platform forever, right? Well, then just get over that hope because like you need to adapt to survive because that's the game of business. The point of business is not to win.

The point of business is to keep playing. And to continue to play is to continue to adapt and continue to learn and continue to figure out what the next thing is. And I hope that gets you off because it should because that's the game you're playing. Right. And so traffic platforms will come and go. Offers will take much longer to cycling out because that's like human psychology. I mean, this one's been going for six years and it's still crushing it. So like, I don't know.

I still think that the reason that it wasn't out earlier is just because there wasn't enough testing that was in place from the earlier players. and now we have much better players. We continue to test stuff. We spend about 30,000, 40,000 a month testing new things all the time. Still don't have anything now it pulls that. So you should feel somewhat safe in that. And the thing is, things don't happen immediately. Things happen over the span of years, like quarters slash years in order for like actual

big changes to occur, right? Which means it's not going to like die tomorrow. Usually if someone has a campaign that dies, it's because they're creative sucks. Or it's tired or it's old. And that's just normal marketing. You've got to make new shit. Excuse me. I'm making new stuff.

So I hope that puts to rest some of the like six-week challenges are saturating my market. Like the only reason that you see all those ads is because they're working. The only reason people keep running it is because they can keep affording the traffic. So maybe if you see lots of people doing it, it's because they're making money. A thought, right? And so if you're like, well, I'm too prideful to, um, to try this because someone else is doing it. Well, then it's like, okay, I'm too prideful to, like,

adjust to the fact that consumers don't go to stores anymore and start using Netflix. Okay, well, if you want to just not adjust to the times, that's fine. You know what I mean? Like, there's a place for that. Like, you just won't grow. It's okay. You know what I mean?

And I'm not trying to say that harshly. It's just, like, business changes. And so, like, you can market whatever you want to market. It's just going to have to have a superior conversion mechanism or be able to afford you a higher level of traffic than the people and the players who are using this one. And I can tell you that the people are using this promotion cannot spend you right now if you're not using it.

And so it's either like you can level up and you can change the way you're playing the game, or you can get or you can be a taxi cab. You know what I mean? While Uber comes and takes over. Everyone's using over. That's not fair. Okay.

Like, whatever. So anyways, guys, I hope you have a good Thursday. For anyone who's like not sure of like, and even for my gym owner, like if you guys aren't sure about it like well you guys are all sure that's why you're still doing it um like you're fine we're good and the beauty is that even when some even if a meteor hits right even if a meteor hits and all of a sudden all women change their mind and are like i don't want to do a six week challenge anymore cool they're going to do something else and we'll figure it out

and it won't take long because like someone will always be experimenting with stuff right and then you'll figure it out and then you'll start running that promotion as long as you have a client finance acquisition mechanism that allows you to afford traffic you'll be good to go the entire human like unless basically until men stop looking at women for how good they look women are going to continue to want to lose weight period like until we change how evolution works right until until we change how like how men are attracted to women women are going to be incentivized to to lose weight and look better and until women start not looking to men for security, like there will be more, like, guys won't start trying to

make money, right? Like, I'm saying general biases. I'm not saying women don't want to make money. I'm not saying guys, I want to be in shape. But I'm saying overall, right, societally. Like, status is still given to men for the most part for how much they can provide, not for how in shape they are. That's how you see these gorgeous supermodels with really rich older guys. Like, why? Why is that the case? Because that's where the status is. Like, he gets status by being with this young, cute thing, and she gets status by being with a, by having wrangle the tiger, right? I'm just being real with you. And so until that changes, these desires are going to always be there.

And at the end of the day, if you were a gym and you give service away, you're going to be giving service away in one way or another. There's no, like, big new thing you're going to either give a week, two weeks, three weeks, four weeks, five weeks, six weeks, 12 weeks, whatever, that's going to be your promotion is, would you like to have some and try it and see if you like it? Now, ideally, you want them to try it and pay you to try it so that they're more invested and they get better results from them. They get a better experience and they're more lucky to stay, right, the new way of doing business. But that's what it is.

And so, like, maybe 42-day challenge works better later or something. But I don't really think that's the reality. The only way that this will actually change is that the, like, we figure out a new hook on the back end that tops us from, you know, a $600 sale in the first visit to a $1,200 sale in the first visit. Maybe when we do that, something will change. But like, for this point, as long as you can afford the traffic, but you can't, as long as women are going to want to keep losing weight and keep dieting five times a year, we're good. So I hope that makes sense for everybody or anybody who's worried, like, how long is this going to work?

Like, it's going to work for a while. And I would need to know the reason for why it's not going to work. And that's just my take. That's Alex's scoop. That's my perspective on it. I hope you found that valuable. Drop any questions you have. I'll ping back.

because I love this stuff. Maybe you can see that. Like I got all flustered. I love it. So anyways, love you all. Hope you have an amazing day. Happy Thursday. And I will catch you guys.

And my gym lords, I'll see you tomorrow on a very, very cool. All right. All right.