The Game with Alex Hormozi - How to Get Rich This Holiday Season! | Ep 619

Episode Date: November 28, 2023

Watch the YouTube version of this episode HERE“If you are worried about too many people quote, taking advantage of it, You can drive even more scarcity by limiting quantity.” Today, Alex (@AlexHormozi) gives strategies for maximizing profits during the holiday season by utilizing various marketing tactics such as loss leaders, gift cards, high-ticket items, and buy one get one free promotions. He emphasizes the importance of presenting these strategies in an appealing way to attract customers.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:(1:01) - Strategy #1: Loss Leader(3:56) - Strategy #2: Gift Cards(7:58) - Strategy #3: High Ticket, High Scarcity(10:24) - Strategy #4: Free with prepay(15:01) - Using the M.A.G.I.C FormulaFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Let's be real. You're not going to change your entire business for the holidays to make something sound different, but you can make it look different based on how you present it. The wealthiest people in the world see business as a game. This podcast, The Game, is my attempt at documenting the lessons I've learned on my way to building Acquisition.com into a billion dollar portfolio. My hope is that you use the lessons to grow your business and maybe someday soon, partner with us to get to $100 million and beyond. I hope you share and enjoy. The holidays are upon us. And most businesses make more money in the last month of the year than they do any other month. If you own a business or you work for a business, this is your opportunity to capitalize. And every one of these presents, I'm going to open up and give you one holiday money-making tactic. Starting with this one. So let's open this guy up.

What do we have inside? We've got diapers and we've got baby bottles. Now, what do these have to do with making money? Inside of diapers and the baby bottles is actually one of the strongest concepts for holiday marketing, which is something called a loss leader. So what is a loss leader? A loss leader is basically where you sell a very well. well-understood product and you sell it for less than the market understands the prices for.

So you sell it at a loss. Now, why would it be called a loss leader? The leader part of it is that it brings people in the door. Most people know that if you have a baby, you got to buy diapers. The highest percentage of the population you have babies, buy diapers. They all need diapers. Sell the thing that most of them understand what the price is for that almost all customers will buy so that you can bring them in the door. Because if you have the cheapest diapers, they're going to come buy diapers from you. Now, what they might not know the prices for are all the cancelary purchases they might make once they come into your store, whether that's a digital store or a physical brick and mortar store. Like these non-drip bottles might have insane margins

in markup compared to the diapers. And so trying to make quarter or two quarters more on the diapers compared to making dollars on the baby bottles is where you can make up what you lost here, but you make it up in significantly more profit and total unit sold. How do you use this for a holiday promotion? What you want to do is you want to look at your product stack. So if I have my services, And so there's different components to my services. Like, for example, and I use fitness a lot, you have access to a facility. That's a component. You also have accountability, which is another component.

The actual workouts or service with a trainer. You could also have nutrition, meal prepping, eating out guides, an alcohol guide for the holidays. So there's lots of components to whatever it is that you sell, whether it's services or products. Many people sell something like this as a bundle, and there's nothing wrong with that. It makes it harder for other people to compete with you on price. But if you take out one of these pieces, let's say this one's accountability, I guess. And then I say, hey, I'm going to make this 90% off. People will be like, holy cow, that's a great deal.

And so what happens is you can promote this 90% off thing, which is what a huge holiday promo, big bash would be like. And you're like, well, you don't just want accountability, right? You probably also want some help with your food. You probably want some workouts. You probably want actions the facility. You probably want these other things. And people are like, you know what?

You're right. I do kind of need that stuff. But the reason they came in doesn't necessarily need to be the way. you make money. And so that's the big theory or strategy behind loss lead. And I'm pretty sure diapers.com, I think, was what it was called. This was the strategy they actually used to take over the baby market was they sold them cheaper than everyone else did, but they made all the profit up on the other ancillary upsellor. And so this works for products. It works for services and it even works for technology. Look at what you have. Put it into an itemized list of all the things you could potentially

market or advertise. And then you peel off one of them. I call it splintering your offer. And then you make an insane discount around one of those pieces. Now, ideally, even if you lose a little bit of money on this, you will make it up in the total amount of leads. And the reason it's so important in general to have a promotion going on during the holidays is the thing I said at the very beginning. Most businesses make more money in the last month of the year. And that's for two reasons. One, because they advertise more. And two, because people want to spend it. So if people are buying during that month, then that's when you want to be selling even more. All right. So that's it with our loss leaders. Now we have gift number two, gift cards.

What do gift cards have to do with holiday promotion? First off, gift cards are one of the most lucrative things that you can sell in general. Did you know that Best Buy has an insanely low redemption rate? So when Grandma gets all the kids Best Buy gift cards, the percentage of people who actually spend the money is very low. But it essentially is a loan that a customer gives to a business. And the business just keeps the cash on their balance sheet, can earn interest on it while they wait to redeem for it. And after a certain point of expiration, they can just keep all of the money without even providing goods. Unbelievable profitable thing.

People literally give you money for nothing. not a bad idea. But how do we use this, besides the way Best Buy did, to generate leads? So I call this the gift card strategy. And this is one that I used all the time my brick and mortar location. You offer $200 gift cards to your services, one purchase worth of services. So if you give out massages or you have a membership to a facility or you do cleanings, it doesn't really matter what it is, but one units worth, you do that dollar amount as a gift card. That's number one. One full unit in dollar amounts. That's step one. The next step is that you market to your existing customers. Step three is you say this is a $200 gift card,

but I'm selling it for 90% off or 80% off, whatever you want. I'm going to say 90 because I'm going, I'm going big here. So your $200 gift card is actually $20, which is 90% off. Remember, we're trying to get attention. Everyone else is doing promos and we need to break through the noise. And this is a crazy good promotion. But here's the catch only as gifts for friends and family. So this is the ultimate stocking stuffer. You tell your entire client base, they can buy two of these gifts for other people. And they get the credit for it being $200 because it's a gift card. So imagine you open a gift and says $200 on it.

You're stoked. The fact that grandma went to Alex's gym and she only paid $20 for it, you don't know that. Nor do you really care. But this is the genius part of this strategy. Number one, this is an insane promotion. So you're going to get a lot of attention and a lot of people are going to want to buy it. Number two is that you're actually going to get paid money for selling these gift cards, but here's the secret. All of this is new customers. And so what this basically

means is that you're going to get paid to get new customers. And you would probably give the services away for free anyways to get a customer, but rather than marketing and spending money to get someone in the door to try your stuff out, you're going to get paid to do it. But not only that, these are the highest quality customers because they're referrals. And referrals, buy in higher rates, stay in higher rates. And because they're coming from somebody else, they can usually help assist them in kind of onboarding and figuring out the app if you need. need to check in for a facility or whatever it is that you sell. You get the assist from the friends. You can double a client base because you can get every single person to bring not one,

but two. And the reason we limit it to per customer is because it increases the perceived value. You could sell two units and make it 70% off. Two units would be $400 and you give 70% off, which would be $60. Doesn't matter. You're getting paid to get new customers and the highest quality source. And so one of the important details to do with this is that when you make the sale, ask them who they're going to give it to and get the contact information. So not only that, You're actually going to get these as leads. So if for whatever reason that person doesn't redeem it, you can follow up with the lead to bring them in.

And because you'll have the contact information, you can do a three-way intro with the customer who bought it and the prospect. But what else can you do with this? The gift card is for $200, right? Well, what if everybody who comes in you have a sales console with and you try and sell them all a $1,000 thing? Well, now you take that $200, you mark it off, and you can turn these into $800 sales.

And that's the last step of this. So big picture. One full unit, $200. $400, $400, $400, whatever one unit or whatever it is you sell is. Limit it in some way, two, three people per person. Make it 90% off, 80% off so you get paid for it. Limit it to referrals of friends, so they're not going to use it on themselves, so they bring you more customers.

Get the three-way introductions, so you get the leads. And then when you bring them in, actually sit down at them for a sale. And this is one of those great things that you can use to immediately attract tons of new customers out of profit during the holidays when it's hard to break through. So that's enough with that. All right. Now, we're going to talk about, ooh, what's inside of here? Ah, it's tickets.

So this strategy is about high ticket. So let me explain how this works. You look at what your services are and think, what would the ultimate version of this be? Like 10 times or 50 times as expensive as whatever I normally charge. Like a complete transformation, this works especially well with services, which is what I'm focusing on. You could probably think of a version of this for physical product. If my normal client load, let's say at my business, and I have 100 clients and I can't manage more than that, then you say, okay, I'm going to limit this promotion to 5% of my customer base. If you're a hair salon person, you have this many customers or you're a chiropractor

this many customers, it doesn't really matter. But you say, this is how many I have and I'm limiting it to this. You say, hey, I'm doing this personal program that you're going to get more service. This is the 10x to 50 or 100x of your normal price with a massive scarcity. So you limit it to 5% to 10% of your customers. I'd recommend 5 if it's your first time because you want to sell out. That's the point. And then next year you can bump it to 6%, 7%.

Let's say that you sell normally a $200 thing. thing. Well, then you would sell something that's between $2,000 and $20,000, which sounds like a huge price gap, and it is, but the thing is that most customers are fractal. And so what that means is that it's 80-20. 20% of customers will spend five times more than 80%. And so when you do 5%, it's actually 80-20 twice. So you have the remaining 20 that are the five-time spenders, and you do another 80-20 on that. That's the magic between 5%. Because those customers are two standard deviations above the rest of the group. And we capitalize on that by making a product or service package that people like that want to buy because it's scarce. Let's say you had 100 customers

and you sell five of them a $5,000 package. You make $25,000 and if you're used to making $10,000 a month or $20,000 a month from your remaining customer base, you can literally double your revenue that month only by selling 5% of your customers a much more expensive thing. The key to making this work, you build lots of hype around it before the holidays, you advertise the crap out of how scarce it is and you talk about the minute it's going to go live and you prepare people. You say, hey, have your credit cards ready, be ready for it, because I'm going to drop it, and they're going to sell it immediately. And then when you do, the moment you get your first sale, let everyone know, four left,

three left, two left, one left, sold out. Every time you do that, you'll drive even more FOMO and more scarcity and more purchases. So that's the high ticket, high scarcity strategy. Hey, Mosin, Nation, quick break just to let you know that we've been starting to post on LinkedIn and want to connect with you. All right, so send me a connection request and note letting me know that you listen to the show and I will accept it. There's anyone you think that we should be connected with, tag them,

in one of my or Layless posts, and I will give you all the love in the world. All right, so let's get back to the show. Let's open up our next gift. We've got shirts. Wow. Not only is there one shirt, there's two shirts in this package. Now, how are we going to do one shirt to get someone to buy two shirts? I'll tell you.

So this strategy is called free with prepay. Buy X, get Y, free. We're talking holiday season. We're talking special occasion. The key to this is how insane you make the free thing. If you're giving away your core service, then what you can do is, is think about what's the highest margin service I have and package that in a way that you can have people prepay to get X amount free if it's services or buy X and get Y free. And I'll tell you the

first place I learned this. So there's a place in Nashville I saw and I came back 10 years later and it was still there and it had expanded. So I was like, oh, they must be doing well. And their entire window pane said buy one, get two free. And it was pairs of boots. And I was like, that's wild. So I went inside the store and I was like, huh, I wonder how this works. And the boots were all 600 bucks. Now, if you're familiar with cowboy boots, Kabul boots probably run about $200 normally. So all they did was they tripled the price for one pair and said, buy one, get two free.

And they capitalized on the fact that for them specifically, there was Bachelorette parties and all the girls come in. It's like, well, I'll buy one. And then my friends will get two free or whatever. And ideally, if you really want this thing to crush, you actually give more away free than you charge for. So it's buy one, get two free. It's not even just buy one T-shirt, get a second T-shirt free.

it's buy one t-shirt, get three t-shirts free. But the thing is, is that for most products and services, you can increase the price of the one. And so if you want to have a level of service that you haven't offered before that you want to do specific for the holidays or a product you want to come out with, this is the perfect time to do it

because no one had any comparison for the pricing. Let's say normally I would sell these shirts for five bucks a pot. I might say, buy one shirt for $10 and get two free. Now, what ended up happening is that I got $10 and I sold three shirts, which is really just like a 30% discount. Not a huge deal. But the perception of how much more compelling

get one to get more free than what you paid for is the thing that drives the buying behavior. So I just gave you a two different physical products examples. But this is actually super deadly with services. But it can be abused. And then some people can become dependent on this. There are businesses that I have looked at in order to invest and decided not to invest

because they were too dependent on this because it's such a strong strategy. And the reason it's so strong is because all the cash is front loaded. So normally, if let's say you have a recurrent membership of some kind, that's $100 per month. That means it's going to take you a year to get $1,200. But if you say, hey, I'll give you the year for $600 one time, that's a crazy discount. Here's the key. If you're really expensive for whatever it is that you sell, they have to prepay it.

They can't lock in the price and then say, can I make a payment plan on your discounted services? Like, no, it doesn't work that way. That's the normal price if that's what you want. With any of these things, if you want to make sure that you limit downside, if you are worried about too many people, quote, taking advantage of it, you can drive even more scarcity by limiting quantity. For most holiday promotions, I'd recommend doing anyways because, one, you can just get your immediate shot, you don't risk the business, and you can take some cash off the table that you can buy your own Christmas threats with. This one I've even seen work really effectively as a grand opening strategy, even though we're talking about holidays. But if you wanted to cash flow the opening

of a facility so that you could cover all the costs of the place without even having to take capital out of your pocket, you just say, hey, for the first 50 people who sign up as patients at my chiropractor clinic or my first 50 patients at my dental clinic or my first 50 whatever's. You just say, cool. If you buy six, I'll give you six. And they're like, holy cow, what a deal. Now, again, you control the price and you can control the service. And this is a key part. Let's say we want to have this $100 month as our standard service. So what we'll do is we can bump this price, let's say, to $200 a month for this promotion. Pause. Don't think I'm doing something. I think I'll let me explain. You then add in one to two things you wouldn't normally do with the main service.

that don't cost you a lot, but is enough to differentiate the offers so that if someone else later comes in is paying $100 a month, this person doesn't get upset because you can clearly say, well, that person doesn't get these things that you get. And they're like, oh, that's the reason why. And so if you're going to use this promotion, if you're already in business, come up with a service level that you already have, add one to two things. You can increase the price and then do buy six get six or buy four, get eight. And you can drive an insane amount of cash and purchases in a short window, and then you can limit it by saying, no more than X can buy. And it's one of the strongest promotions that you can run any time of the year, but specifically during the

holidays, it crushes. So that's our buy X get Y free. Now let's talk about the final thing, which is the wrapping paper itself. So we give four strategies on how you can maximize how dollars you make are in the holidays. Let's see what present number five has. So we've got a magic hat and a magic wand. Now, why is this relevant? It's actually more about the wrapping paper itself because every one of the strategies that I outlined is basically a gift that you can deliver to your customers. And you can actually use them year-round, but they're especially powerful during the holidays. But the key is how you want to wrap it. Because let's be real, you're not going to change your entire business for the holidays to make something sound different, but you can

make it look different based on how you present it. And that's where the magic wrapping paper comes in. I call it magic because it's an acronym. M is a magnetic reason why. All right, and this is key. the reason why we already have solved for us because it's the holidays. And everyone expects that. But the rest of the year, you can still use the same concept. The second is the avatar, is that you actually want to say who you're targeting. You don't want to just say this is available for everyone. You want to say it's available for a local market or somebody of a certain age group or someone

has a certain interest. Any of those things you want to call out so they're like, oh, this is for me. And then they pay attention. G is for goal. What's the ultimate outcome you want the person to experience? What is the dream that they envision in their minds that you want to say that you can help them deliver through the gift that we're wrapping with this wrapping paper. The I is for a time interval, which basically just says, when is this person going to get this goal? Or when are

they going to experience it? And then C is something that I call the container word. I don't have a fancy word for this. I just know that it has worked and it continues to. So this is when you say, Blueprint, Accelerator, program, intensive, whatever, right? Launchpad. Like, there's a million different words that you can use to bucket in all of the things that you're trying to sell in one bundle. If I wanted to do something around stress, right? I might say avatar, busy moms. So we got our avatar. Check.

Goal is relaxation. Holidays is my reason why. Interval, 30 days. And then this would be getaway. So just like that, we can create our busy moms, 30-day relaxation getaway for the holidays. Boom. And so if we're a spa, we put this together in the call out for a promotion. This becomes the naming convention that we use around the first four.

So this could be our reason why we're doing a loss leader for the diapers, or that we are giving the gift card or making it available is because we want them to bring their other busy mom friends. Or if we have a high ticket thing, then we say this is only for this specific type of person, which is why only 5% of our audience can buy it because it's the high scarcity high ticket program. Or the reason we're saying you can buy one and get too free is because of these things. And so this magic wrapper allows you to give the wrapping paper that we're going to put on any of the first promotions to get even more people to want to buy yours compared to everyone else's.