From: alexhormozi
Product quality and customer advocacy are pivotal for business success and sustainable growth. Exceptional value delivered to customers naturally leads to strong word-of-mouth referrals and reduced marketing costs.
The Power of Exceptional Product Quality
A foundational principle for business success is that the product has to be exceptional [00:02:05]. When customers are “in love with your product,” the benefits compound significantly [00:02:07].
For instance, the business model for Gym Launch, a licensing business for gym owners, focused on providing a model that enabled gym owners to significantly increase their profits [00:00:14]. On average, gym owners would make an extra $100,000 per year in profit [00:00:20]. This level of impact was not achieved overnight; it took six years to assemble and refine the pieces of the deliverable [00:02:11].
The tangible benefits of a high-quality product are clear:
- The average gym utilizing the Gym Launch system took home an additional 36,000 per year in profit [00:04:12].
- This level of value meant that, for the first 18 months, the business’s return on marketing was 100 to 1, largely because the product’s effectiveness generated its own momentum [00:04:20]. The business probably would have seen similar growth even without extensive marketing [00:04:23].
The Return on Quality
The effort invested in making a product “good and great” yields a return from word-of-mouth that is “hard to fathom” [00:02:19]. Businesses that focused on creating high-quality, impactful solutions, like Gym Launch, survived and thrived, while “copycats” who lacked the depth of the original offering eventually went out of business [00:04:33].
Client-Financed Acquisition and Customer Alignment
One strategic approach to business growth involves client-financed acquisition, where existing customers effectively fund the acquisition of new ones [00:02:44]. This model requires that the initial sale generates enough profit to cover the cost of acquiring and fulfilling the current customer, plus the costs for the next customer [00:02:51]. By eliminating capital as a constraint, businesses can outspend competitors because each customer acquisition leads to more customers [00:03:02].
Prestige Labs, a sister company to Gym Launch, exemplified this by having gym owners sell supplements to their clients [00:05:14]. The revenue from these physical products covered the cost of acquiring the gym owner as a customer [00:05:19]. This system also ensured that the gym owners did not have to manage fulfillment, as products were shipped directly to the consumer [00:05:35].
Aligned Incentives
Having aligned incentives with your customers often leads to more revenue and greater scale [00:09:52]. In the case of Allen.com, a scheduling software:
- Small business owners wanted people to show up for appointments [00:10:01].
- Agencies working with these businesses also wanted high show-up rates [00:10:03].
- Allen.com’s compensation was based on the number of people who showed up [00:07:39].
This created a powerful alignment where every stakeholder benefited from the product’s effectiveness [00:10:05]. This alignment was a significant factor in the business’s ability to scale rapidly, reaching $1.7 million per month within six months through just two major pitches [00:08:50].
Learning from Customer Problems
Continuously addressing customer problems is crucial for improving product value and customer retention [00:01:23]. With Gym Launch, the team would:
- Identify common problems among gym owners (e.g., churn, margin issues, lead close rates) [00:01:27].
- Formulate hypotheses about potential solutions [00:01:33].
- Survey the community to find those with the best results in the problem area [00:01:35].
- Invite successful owners onto a call to take notes on their practices [00:01:40].
- Isolate the few key actions that all successful individuals were consistently doing [00:01:49].
- Present these proven strategies as high-impact solutions to the wider community, emphasizing their demonstrated long-term benefit [00:01:51].
This method ensured that solutions were data-driven and directly addressed real customer needs, fostering customer loyalty and growth.