How to create compelling offers

From: alexhormozi

Creating a compelling offer is considered the single strongest lever for business success, capable of generating more money than almost anything else [00:00:09]. By getting the offer right, all other aspects of sales and marketing become easier [00:01:58].

Key Principles of Offer Creation

The core agenda for creating compelling offers includes:

• Understanding why nailing your offer generates more money than anything else [00:00:06].
• Recognizing why selling to the right people increases revenue significantly [00:00:13].
• Justifying charging premium prices for your products or services [00:00:19].
• Learning how to reverse engineer value [00:00:22].
• Employing scarcity, urgency, and guarantees to increase desire and pricing [00:00:28].

The secret to sales is to “make people an offer so good they feel stupid saying no” [00:01:46]. This means focusing on the offer itself rather than solely on individual sales or marketing skills [00:02:16].

What is an Offer?

An offer is what you literally give someone in exchange for money [00:02:24]. It acts as the bridge between the product (the “stuff”) and the market (the “peoples”), packaging and communicating the value exchanged for dollars [00:02:28].

Signs of a Poor Offer

A “shitty offer” results in:

• Difficulty in getting leads [00:02:51].
• Most people not wanting to buy [00:02:52].
• Customers comparing your prices to competitors, leading to price-driven decisions rather than value-driven ones [00:02:54]. When two things seem the same, customers will opt for the lower price [00:03:16].

Benefits of a Strong Offer

A strong offer connects with a large segment of the market, leading to more money [00:03:35]. If an offer is so compelling that the entire niche you’re targeting feels they “need this,” you will have an easier time getting leads and making sales [00:03:44]. This shifts customer decisions to be value-driven, where they recognize unique value despite higher prices [00:04:02].

Nailing your offer yields:

• Increased response rates on all advertisements [00:04:17].
• Higher conversion rates, meaning more people you talk to will buy [00:04:26].
• The ability to implement premium pricing [00:04:33].

This combination of more responses, more sales, and higher prices leads to significantly increased profits [00:04:41].

Case Study: Facebook Ads Agency

A traditional Facebook ads agency offered a generic service: “$1000down,$1000 a month” for running ads, with no guarantee of leads [00:05:16]. Their initial return on advertising was 0.5:1, meaning they spent $10,000andmade$5,000 upfront [00:06:03].

By changing only the offer, not the business mechanics, their new offer was: “$4000 down (one-time setup), no monthly fee, and only pay me when people show up” [00:06:20]. This implied a guarantee, as no show-ups meant no further payment [00:06:34].

This single offer change resulted in:

• 2.5 times the response rate [00:06:53].
• 100 booked calls instead of 40 [00:07:01].
• 2.3 times higher close rate on calls [00:07:18].
• 28 sales for $10,000 spent, up from 5 sales [00:07:29].
• Upfront price point increased from $1,000to$4,000 [00:07:36].

This led to $112,000incashcollectedupfrontfrom$10,000 spent, an 11.2:1 return on ad spend, making it 22 times more effective just by changing the offer [00:07:48].

Selling to the Right People

Who you sell to matters as much as what you sell [00:12:34]. Value derived is often about “who you find, not necessarily what you provide” [00:12:41]. Helping someone more valuable (e.g., a billionaire whose mortgage is paid off for pushing his car) can lead to disproportionately higher rewards for the same effort [00:13:14]. It’s crucial to say “no” to difficult clients to make room for those who will pay more [00:13:48].

When selecting target markets or customer segments, consider these four characteristics:

1. Pain: Do they have a significant problem that needs solving? [00:14:19] Find the “starving crowd” within a market, as they are often underserved and willing to pay [00:15:28].
2. Purchasing Power: Do they have the money to spend? [00:14:21] Revealing the price earlier in the process can attract higher-income prospects [00:16:32].
3. Easy to Find: Can you easily locate and advertise to them? [00:14:24] Niches with existing associations, Facebook groups, or professional services make targeting easier across platforms [00:17:12].
4. Growing Market: Is the market expanding, or shrinking? [00:14:26] Being in a growing market allows your business to grow by default, even with the same effort [00:19:00]. As Warren Buffett said, “it wasn’t about how hard you row, but the boat you’re in” [00:18:55].

Why Charge More (Pricing Strategy)

Dan Kennedy advises, “charge as much as you can without cracking a smile” [00:20:56].

Price to Value Discrepancy

Price is what you pay, value is what you get [00:21:11]. Everyone wants a bargain, which means maximizing the perceived value for the price [00:21:30]. The problem is that most businesses try to lower prices (the “hard way”) to increase discrepancy, leading to a race to the bottom [00:21:47].

The “easy way” is to compete on value, creating a value-driven decision [00:22:13]. The goal is to charge 10 times more for something 100 times more valuable [00:22:33]. This positions your offer in a vacuum, where there’s nothing else to compare it to [00:22:57]. Price can only go down to zero, but value can go infinitely high [00:23:21].

The Virtuous Cycle of Price

Most businesses set prices by looking at competitors and then offering a little more for a little less, creating a “vicious cycle of price” that leads to commoditization and razor-thin margins [00:24:00].

Instead, a “virtuous cycle of price” operates as follows:

1. Increase Price: [00:25:47]
2. Increased Emotional Investment & Perceived Value: Prospects believe they’re getting more [00:25:52].
3. Increased Results: Due to their higher emotional investment [00:25:57].
4. Decreased Demandingness: Richer clients tend to be less demanding [00:26:03].
5. More Revenue for Fulfillment: Allows you to provide even better service [00:26:25].
6. Higher Profit: Leading to better feelings about your business and increased perception of impact [00:27:06].
7. Increased Service Level & Sales Team Conviction: Better talent and stronger belief in the product [00:27:32]. A sales team’s belief in the product’s value is paramount for effective sales tactics to build trust and overcome objections [00:27:50].

Price as a Component of Value

A scientific experiment showed that people perceive the same wine as cheap, medium, or great based solely on its stated price [00:31:07]. This illustrates a bi-directional relationship where increasing the price can directly increase the perceived value of a product or service [00:31:17].

For service-based businesses, a higher price ensures greater client investment, leading to better outcomes [00:32:01]. The “Six-Week Challenge” at Gym Launch, where clients paid $500 upfront and got it back if they lost 20 pounds, resulted in 78% success because clients had “skin in the game” [00:32:32].

Charging more also naturally filters out less desirable prospects, increasing the quality of your client base and improving overall results [00:33:35]. One weight loss brand increased their price by 50% without changing anything else and saw their revenue double, closing rates increase, and profit nearly triple in eight weeks [00:34:12].

Reverse Engineering Value (The Value Equation)

To make your offer remarkable, particularly for high-priced items, reverse engineer value using four key variables [00:37:26]:

Value = (Dream Outcome x Perceived Likelihood of Achievement) / (Time Delay x Effort/Sacrifice)

• Dream Outcome: Ensure your offer delivers an amazing desired result [00:37:28].
• Perceived Likelihood of Achievement: Increase the customer’s belief that they will achieve the outcome [00:37:32].
• Time Delay: Deliver the outcome as quickly as possible [00:37:36].
• Effort/Sacrifice: Make the process as easy as possible for the customer [00:37:37].

By manipulating these variables, you can make your offer more valuable and reduce the perceived risk for the customer [00:37:39].

Enhancing Your Offer

Beyond the core value proposition, you can significantly enhance your offer using additional components:

• Scarcity: Limit the quantity available to create exclusivity and demand [00:40:54].
• Urgency: Impose a time limit on the offer to encourage immediate action [00:38:50].
• Guarantees: Offer strong assurances, like money-back guarantees or results-based payment, to mitigate risk [00:38:51]. For example, guaranteeing three times the paid amount over 12 months [00:42:48].
• Bonuses: Add valuable extras that complement the main offer and increase its perceived worth [00:38:51]. Examples include:
  • Personal cell phone access [00:41:04].
  • Reviewing sales calls and management meetings for a potential 30-50% sales boost [00:41:22].
  • Traffic expert reviewing funnels and ads for increased leads and traffic [00:41:35].
  • Using a network to find missing key personnel [00:42:01].
  • One-on-one offer strategy sessions [00:42:12].
  • Feature on a show with significant impressions [00:42:27].
• Naming: A compelling name can elevate the offer’s perception [00:38:52].

By stacking these elements, you can create an offer so valuable that people feel “stupid saying no” [00:01:48], enabling you to sell the same thing for more money [00:00:00].