Strategies for premium pricing

From: alexhormozi

Selling for more money involves making offers so compelling that people feel “stupid saying no” [00:00:01], creating an irresistible offer, and targeting the right audience [00:00:06]. A core principle is to charge a lot of money for what you sell [00:00:19].

Why Charge More?

The speaker learned early on that the secret to sales is to “make people an offer so good they feel stupid saying no” [00:01:46]. If the offer is strong enough, other aspects like sales and marketing become easier [00:01:58]. A strong offer packages and communicates what you provide in exchange for money [00:02:34].

A “shitty offer” leads to difficulty getting leads, low buy rates, and price comparisons [00:02:50]. This forces prospects into a price-driven decision rather than a value-driven one [00:03:13]. A strong offer connects to a large market segment, making lead generation and sales easier [00:03:35]. This shifts customers to a value-driven decision, where they are willing to pay more because they perceive unique value [00:04:02].

Nailing the offer increases:

• Response rates on advertisements [00:04:17].
• Conversion rates (sales) [00:04:26].
• Premium pricing [00:04:33].

Agency Offer Transformation

A generic Facebook ads agency charging $1,000downand$1,000 a month had a return on advertising (ROAS) of 0.5:1 upfront [00:05:16].

By changing the offer to $4,000 down (one-time setup), no monthly fee, and payment only when people show up (implied guarantee) [00:06:20], they achieved:

• 2.5 times higher response rate [00:06:53].
• 2.3 times higher close rate [00:07:18].
• 4 times higher price point upfront [00:07:37].

This resulted in an ROAS of 11.2:1 upfront, making the new offer 22 times more effective, solely by changing the offer [00:07:48].

Sell to the Right People

Selling to the right people significantly increases earnings [00:00:13]. The value derived from a service is often more about who you find than what you provide [00:12:41].

CRO Agency Comparison

Performing the same conversion rate optimization (CRO) work for:

• A business doing $1millionannually,resultingina$100,000 increase, could yield $36,000 in fees [00:09:16].
• A business doing $100millionannually,resultingina$10 million increase, could yield $3.6 million for the same work [00:09:38].

This demonstrates that the same effort can lead to 100 times the pay by serving a more valuable client [00:09:56]. This is leverage: putting in a little to get a lot out [00:10:31].

Characteristics of Ideal Markets/Customers

When choosing a market or customer segment, look for:

1. Pain: Do they have a problem you can solve? [00:14:19]
2. Purchasing Power: Do they have the money to spend? [00:14:21] (e.g., unemployed people struggle to afford consultations [00:15:52]). Revealing higher prices earlier can filter out those without purchasing power, leading to higher ROAS even if calls cost more [00:16:32].
3. Easy to Find: Are they aggregated somewhere, making them easy to advertise to? [00:17:10] (e.g., niches with associations, Facebook groups, or professional services [00:17:31]).
4. Growing: Will the market be bigger tomorrow than it is today? [00:14:28] (e.g., don’t be in a shrinking market like newspapers [00:19:16]). As venture capitalist Arthur Rock said, “When a great manager meets a bad market, the market wins” [00:19:57].

Charge Lots of Money

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

Price to Value Discrepancy

Value is what you get, price is what you pay [00:21:11]. People will cancel or not buy when perceived value falls below the price [00:21:20]. Everyone wants a bargain, even at a high price [00:21:30].

There are two ways to increase the price-to-value discrepancy:

1. Lower prices (the hard way): This leads to competing on price, commoditization, and often losing money [00:21:48]. This creates a “vicious cycle” where everyone offers “a little bit more for a little bit less” until no one is profitable [00:25:04].
2. Increase value (the easy way): Compete on value to create a value-driven decision [00:22:13]. The goal is to charge 10 times more for something 100 times more valuable [00:22:33].
   • You can only go down to zero on price, but you can go infinitely high on value [00:23:18].
   • The aim is for customers to perceive a tremendous amount of value at a discount, achieved by maximizing value [00:23:37].

The Virtuous Cycle of Price

When you increase your price:

• Prospects increase their emotional investment [00:25:52].
• Their perceived value increases [00:25:54].
• Their results increase [00:25:57].
• Their demandingness goes down (wealthier clients are often less demanding) [00:26:03].
• You have more revenue per customer, allowing you to invest more in providing better service and results [00:26:25].
• You make more profit [00:27:05].
• You feel better about your business and impact [00:27:09].
• Service level increases because you can attract better talent [00:27:30].
• Sales team conviction increases because they genuinely believe in the value [00:27:39].

Price as a Component of Value

Wine Experiment

In a blind taste test, participants rated three wines (cheap, middle, expensive) based on their perceived quality. They consistently rated the “expensive” wine as tasting the best, even though all three were the exact same wine [00:30:41].

This demonstrates a bi-directional relationship between price and value: increasing the price can actually increase the perceived value of your product [00:31:12]. The goal is to be so much more expensive that consumers must pause and think: “This can’t be the same category of solution as everyone else” [00:31:41], thereby forcing them to make a decision in a vacuum without direct comparison [00:31:56].

For services where client performance is key, charging a higher price increases client investment, leading to better outcomes [00:32:05].

Weight Loss Brand Success

A weight loss brand doing $450,000/monthwitha5:1ROASand30$150,000/month profit, simply raised its price by 50% without other changes [00:34:00]. Within eight weeks, they reached $1 million/month, achieved a 10:1 ROAS, and almost tripled their profit, because people believed the product was worth more and got better results [00:34:40].

How to Reverse Engineer Value

To charge a lot of money, make your offer remarkable [00:35:36]. The value equation has four variables to optimize [00:37:26]:

1. Dream Outcome: How amazing is the result you provide? [00:37:28]
2. Perceived Likelihood of Achievement: How confident are they that they will get the outcome? [00:37:30]
3. Speed: How fast can you deliver the outcome? [00:37:36]
4. Effort & Sacrifice: How easy is it for them to achieve the outcome? [00:37:36]

Enhancing Value for Pricing Strategies and Adjustments

Beyond the core offer, you can enhance value and increase buyer desire using:

• Scarcity: Limiting availability (e.g., only one book left [00:43:02]).
• Urgency: Creating a time-sensitive reason to buy.
• Guarantees: Reducing perceived risk (e.g., a 3x money-back guarantee over 12 months [00:42:48]).
• Bonuses: Adding extra components to the core offer (e.g., autograph, personal cell number, sales call review, traffic funnel review, talent search, one-on-one offer review, feature on a show [00:41:04]).
• Naming: How the offer is presented.

These elements contribute to making an offer feel more valuable, compelling customers to make a purchase decision and enabling higher prices and volumes [00:43:23].