The Game with Alex Hormozi - Max Client Value Extraction | Ep 172

Episode Date: January 26, 2020

"The amount of goodwill you have times the number of times you ask for a sale equals revenue equals how much money you make." Today, Alex (@AlexHormozi) discusses the importance of maximizing value extraction from customers by providing multiple revenue streams and upsell opportunities. He uses the example of a rental car company and outlines a choreographed process for upselling and ascending customers in a pipeline.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:(0:30) - Enterprise businesses extract and provide value to end users.(1:51) - Goodwill times sales equals revenue.(2:27) - Upselling includes multiple revenue streams and conversations.(6:52) - Upselling for gym owners: sell to goals, multiple revenue streams.(12:22) - Consistent value extraction is key to increasing revenue per customer.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Welcome to the Jim Secrets podcast where you talk about how to get more customers, how to make more per customer and how to keep them longer, and the many failures and lessons that we have learned along the way. I hope you enjoy and subscribe. I am breaking lots of rules and making more pieces of content one day because I'm feeling it. So one of the other pieces on my mind was about Max client value extraction, which is just a, I guess, fancy way of saying how to get the most money from people who are coming through your business. And ultimately, if you look at the difference between small business owners and enterprise businesses, big, large businesses, you know, multinational corporations, et cetera, is their ability to extract and provide value to end users. And typically they do this through a very choreographed process, right? And so what I want to do is give you an example of something that's not in the fitness space and then give you an example of what we have as a pretty refined process for upselling and a set. sending customers in a pipeline.

So most small business owners feel bad about selling people, and that's why they're broke and can't make money and blah, blah, right? But hopefully you're beyond that point and you're okay with selling things because that is kind of how business works as long as you're, yeah, this is really kind of how business works. Don't have time to break your belief on that. It just is what it is. So if you were to look at like rental cars, right, this is a pretty,

you know agnostic just you know grabbing a grabbing a copy from out there right and you look at the process that they take somebody through okay so when you're ordering online you have multiple times where they're going to try and one click upsell so with the the online selling process mirrors the in-person selling process and they do it multiple times because what they have figured out is the one equation that i can tell you right now for making money which is the amount of goodwill you have times the number of times you ask for a sale equals revenue right equals how much money you make right and so in a in a rental car space you would go it you you order online you'd make your reservation they try and upsell you a couple things online maybe you say yes or no whatever um

and then you come in person all right now i just recently rented a car because we were on vacation in uh Utah and so it was just for me i was smiling the whole time because i just enjoyed i enjoy selling processes what you know in general and seeing what they're doing and it was clear that the rep who was who is selling us was she was brand new right but even though she was brand new you could tell that this one conversation this one process had been just absolutely like this is your job is to do these things and they made it so stupid simple that anyone can do it right and so as we're signing we're going through right first question she asks is hey are you sure that This is going to be a big enough car given, you know, hey, you might need boots or skis or blah, boy.

You sure you don't want like a bigger sized vehicle, right? So right there, upsell number one. Okay. Now, for the gym owners or for the fitness professional, professionals in general, we're listening to this. Like, she just asked me if I wanted more, right? I didn't feel offended. I wasn't like, how dare you ask me if there's something else that I would like? I was like, huh, let me consider that.

Do we need another car that's bigger than the basic one? Are we going to take anything? probably not I think we should be okay right upsell opportunity number one then next thing that she says when when we're going through this she's like so would you like the uh standard uh insurance or would you like the minimum right now mind you they're both upsells i can always opt to say i'll take zero i'll take none of those things and take it on the fact that my mx covers for car damage because it does and so does yours um but that was upsell opportunity number two and the choices that she gave wasn't like she didn't say um do you want us to

just add insurance on to your vehicle she didn't say that she was like would you like the standard or would you like the minimum and the minimum imply it must be wrong no no no i just take the minimum right when in reality it's still an upsell okay so that was upsell number two that happened and this is just in a matter of like a four minute conversation all right then and and let's like she's like I don't feel like dealing with the card if something happens. It's going to be icy. She's like, just get the freaking insurance. And I was like, no.

And she was like, just get it. And I was like, fine. Right? So end up getting the insurance, okay? Which was an egregious, ridiculous amount, which was like, I think it was like 20 bucks a day. Right. Now for insurance, most insurance is like $20 a month, right? And so for them to charge that for that period of time is literally pure profit.

You're talking like 98% margin on that money because the likelihood that it happens is zero. and you have to have recorded every single dent on your car, which is another revenue opportunity, which I'll get to in a second. Now, that was upsell number two. And this is after we had all the upsells that happened on the actual page during the ordering process. This is just us picking up the damn car

that we already made the decision on, right? Number three, thank you, Ari Lewis, right? Upsail number three was, hey, would you like to just prepay for gas? That way you don't have to worry about filling it up. it's only 270 a gallon, right? Which is the same rate or a little cheaper than what the gas was in the area at the time. Now, she said it like that, which is the way she was, which is the way she was trained to say it. But what they don't tell you is that you're prepaying an entire tank of gas,

which means that if you only use a third of your tank, you still paid for the entire tank of gas. Right. And so that upsell is, let's say it's a truck, which is what we ended up. getting. I think that they actually gave it to the truck, even though I didn't take an upsell. They gave it to us anyways because they hit too many. I think it's a, it's like a 25-gallon tank times $3, right? So it was a $75 upsell, and we probably, I think when we drove it back in, I think we'd only used a third or maybe half a tank of gas, and we actually drove a decent amount, right? And so each of these things ended up being upsell opportunities, and it actually

added a total of $400, I think, to the ticket for our stay there, right? All of these little things that they added on. And I looked at layout, I was like, you realized I would just add a $400 in this ticket, right? Now, at this point, I'm okay with this stuff. Like, it's more just worth than not dealing with the headache. But the point is, is that you have to have a choreographed experience for upselling. Now, mind you, once I got to the car, I then had to, you know, you take your video, by the way, quick hack is just take a video on your phone to your whole car, rather than try to like market on the thing so that if they do try and ding you can show the time and date stamp that the ding was already there. Anyhow, now what I want to do is now explain the process that most people have at their gyms and why they don't make money.

Like if I had just, the reason that hurts and budget and dollar and all these ones had been in business is because they understand the process. This is the process of getting as much value from each client that that uses the vehicle, right? And in the same degree, it's also providing value because some people might not want to deal with filling up the gas tank. They might value their time like we do, right? And they might not want to have to worry about slipping on ice and getting a tent in the car, blah, blah, blah, blah, and having to file it with the credit card. Like, you don't have to deal with it, right? And they might value having a bigger car. Like, these are all things that some people might value.

And they know that on average, X percent are going to take each one of these upsells. And the more times they ask, the more money they make. Real quick, guys, if you can think about how you found this podcast, somebody probably tweeted it, told you about it. shared it on Instagram or something like that. The only way this grows is through word of mouth. And so I don't run ads. I don't do sponsorships. I don't sell anything.

My only ask is that you continue to pay it forward to whoever showed you or however you found out about this podcast that you do the exact same thing. So if it was a review, if it was a post, if you do that, it would mean the world to meet and you'll throw some good karma out there for another entrepreneur. Right. And in fitness, because we have poor views about money as a community, we say it is bad to upsell people, right? Which is stupid.

But anyways. Now, in fitness, this is the best process that I'm aware of up to this point. When someone walks in the door, at that point is when you sell them service. And you don't just sell them a membership. You sell to their goal. So that means that someone might come in for a 28 day, a 6 week, a 14 day, a 12 week, a whatever, a referral for God's sake, right? They come in the door. And you're going to sell them to their goal.

You're going to sell them for 36 weeks or however long. you think it's going to help to take to it's going to take to get them to whatever their goal is right so that's number one most people don't even do that so they're like just the people come in and they're like hey why don't you just do a free try right you're like god it's like god anyways no wonder you're not making anything anyways someone walks in you sell them on that because that's when they're the most excited that's when they're most committed they walk in the door right now that's if you just do that you're already ahead of everyone else all right but if you want to go even further right and be a really smart business owner, the next thing you do is you should have a nutrition orientation,

all right? And this is where you talk to someone. Again, you reiterate their goals, you reiterate their pain, and then you onboard them with a good experience, but then you ask them about their food. And at this point, you can upsell them supplements, right? And you can upsell them meals so that they don't have to, like, now for some consumers, that's not going to be everyone, but you're going to know that X percent of people, you're going to 80 percent of people are going to buy at least two products for supplements and one out of three or one out of two, depending on how good your salesperson is, is going to take one, two, or three meals a day off their plate so they don't have to worry about it anymore.

Right. And that's real value to a consumer, right? But to the business, it's also adding multiple revenue streams and upsells. Like, think about that car company, right? Multiple revenue streams for them was gas, right? Insurance, the size of the vehicle, right? Each of those things and the dents that happened later, whatever, right? All of these things were different categories of revenue that they were able to derive

you know, or provide value from, and then extract value and return from the customer, right? And for us as gym owners, what else does someone buy? You're going to buy gas if you use their own car. You're going to buy supplements if you get into fitness. You're going to buy food if you get into fitness. So we should have each of these things. Now, that's just upsell number two, right? It's the second orientation.

You have two upsells during that conversation. Now, after that point is there, that's where most people are like, all right, I'm already done. I've already provided enough value, I've already extracting it to value. But no, there's more, all right? at day 14 or day 21, typically in that range, is when you can actually meet again with the person, establish how they're doing, provide more value in terms of goal setting, and really just looking back at their performance up to this point, looking at their attendance, et cetera. And the beauty of this next meeting is that you actually have yet another opportunity for upsell,

because there's really two scenarios. Scenario one is the person is not getting the weight loss that they want. They're not hitting the goals at the speed that they're looking for. And at that point, you upsell them additional levels of accountability, right, if you're at the gym. So it's like, hey, we're going to provide one-on-one accountability for you. We're going to be, I want to be, you know, I'm going to text you every day, make sure that you show up for your workouts. I'm going to make sure that you're doing your food stuff. And you can give them a deal for signing up today in that moment, right?

Now, if the person is really happy, then they like you and we'll probably take whatever offer you give them at this point because they're already so thrilled with the results. So either scenario actually works to your advantage because if they're struggling, now you can solve the pain and if they're succeeding then you can have the goodwill that you can bank on to say hey this is if you if you're gonna results on this imagine the results you're gonna get with our more advanced program with our more with more accountability more coaching etc right and so to recap this the choreographed experience you need to take some through has to be multiple revenue streams has to well many times in the gym space

be multiple conversations because renting a car is different than signing up for training because you don't have to arm wrestle someone to sign up for a run a car they have to do it whereas at the gym you do often have to arm wrestle someone for 30 or 40 minutes to get them to become you know to make the decision to be healthy for themselves all right so sale number one is going to be your service sale where you sell to goal not sell them a membership or sell them a trial but you sign them send them up all the way to the goal just like that you take somebody who's going to be worth a trial and maybe not convert and you get them committed and now they're committed

for 36 weeks at x right so now all of a sudden you have a two thousand dollar sale which automatically sets you up as two times the lifetime value of the average gym or three depending how you're doing there all right then after that you establish two other revenue streams from supplements and food at the second consultation that you have which is for nutrition all right great now we have two more revenue streams that we're kicking in then at day 14 or day 21 depending on how you want to structure but in that second to third week you're going to sit down with them again and then upsell either more continuity or high levels of service if you want hey you want to do some of private training instead of group maybe that might actually help you advance fashion

might hold you a little more accountable showing up hey do one-on-one accountability with me so you can actually do some of these workouts remotely all of these things are different ways of having the conversation where you get upsell different levels of service right and so this experience this choreographed experience allows you to maximum extract value from the customer and then if you want to be even sexier as a gym or once a quarter you're doing an entire campaign to your your whole list your current customers and your list of past customers and reactivations to get them back in the door and upsell them into a defined period program like a 208D belly fat blast or a you know a six-week challenge or a big-booty boot camp or a accountability

challenge or whatever and guess what on the back end of that you should have that continuity service set up so that they can stay and keep doing it and they're going to pay more to do so and so if you do that on a quarterly basis then it means that you're going to on a consistent basis upsell the customers that didn't take the initial offers on the front end, right? And so overall, after having your first service sale, and then your supplements and nutrition sale, and then you have your higher level of service upsell for a semi-private, for one-on-one, for accountability, for remote training,

all those things on conversation number three. And then you have on a regular basis, you kind of catch with a big net. Anyone else who slip through the cracks, get them to bring friends, reactivate, and that is the process of being able to consistently extract max value from customer. and to also provide value to customers, which is how this whole game works.

Right? And so right now, if you look at your business and you're like, man, we only do one of these things or two of these things. Well, then you're leaving money on the table, and the good news is that all you have to do is implement it and you can increase your revenue per customer without doing anything else in your business

and you can make more. So anyways, I hope this is valuable for you. If you did like it, tag someone or comments or leave a kind review on the podcast if you're listening. something and I hope you guys have an amazing day and implement this and don't be afraid to make more by providing you.