Part 7: Continuity Offers | $100M Money Models Audiobook | Ep 944
In this episode of The Game, Alex Hormozi explores the fundamentals of continuity offers—business models built around recurring payments for ongoing services. He explains how these offers can generate more profit than one-time sales while creating opportunities to upsell and cross-sell to existing customers, despite initially bringing in less upfront revenue.
The episode covers various continuity offer structures and strategies for their implementation. Hormozi describes how to design member-exclusive bonuses, implement strategic discounts for longer subscriptions, and create effective promotional messaging. He also addresses practical aspects of customer retention, including the importance of clear cancellation policies and how exit interviews can help businesses maintain their subscriber base.
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1-Page Summary
The Benefits and Power of Continuity Offers
Continuity offers provide ongoing value to customers through repeated payments for continued service until cancellation. This model generates recurring revenue that can be more profitable than one-time sales while creating opportunities for upselling and cross-selling to an established customer base.
While continuity offers typically attract more customers due to lower entry costs, they initially generate less upfront revenue compared to one-time sales. However, the long-term benefits of recurring revenue often outweigh the initial reduced cash flow.
Different Types of Continuity Offer Structures
Alex Hormozi outlines several effective continuity structures. He recommends using member-exclusive bonuses like complementary services, VIP events, and special titles to incentivize subscriptions. These bonuses create psychological attachment, with customers often identifying themselves by their membership tier.
Hormozi also suggests implementing strategic discounts for longer subscription periods. These can include bonus time for completing payments, monthly rate reductions, or one-time discounts after initial payments. Additionally, he advocates for waived fee offers, where customers can avoid upfront costs by committing to longer subscription terms.
Strategies For Designing Effective Continuity Offers
When promoting continuity offers, Hormozi emphasizes focusing on the bonuses and discounts rather than the subscription itself. He suggests highlighting individual dollar values of bonus items to anchor their worth in customers' minds.
To accommodate different customer needs, Hormozi recommends offering various commitment levels, from month-to-month options to longer-term subscriptions with waived fees. He notes that the larger the price difference between standalone and continuity offers, the more likely customers are to choose continuity.
For managing customer retention, Hormozi advises implementing clear cancellation policies and conducting exit interviews. These interviews often lead to retaining up to half of canceling customers by addressing their concerns or offering enhanced services.
1-Page Summary
Additional Materials
Clarifications
- Continuity offers are subscription-based models where customers pay regularly for ongoing services until they choose to cancel. These offers create a steady stream of revenue over time and often lead to higher customer retention rates. They can include incentives like exclusive bonuses, discounts for longer commitments, and waived fees to encourage customer loyalty. Managing continuity offers effectively involves emphasizing the value of bonuses, offering flexible subscription options, and implementing clear cancellation policies to enhance customer satisfaction and retention.
- Upselling is the practice of encouraging customers to purchase a higher-end or more expensive product than the one they originally intended to buy. Cross-selling involves offering complementary or additional products to customers based on their current purchase or interests. Both strategies aim to increase the value of the customer's purchase and enhance the overall shopping experience.
- Member-exclusive bonuses are additional perks or rewards offered to customers who are part of a membership or subscription program. These bonuses are not available to the general public and are designed to incentivize customers to join or remain part of the membership. They can include benefits like exclusive services, early access to products, special events, or discounts that are only accessible to members. Member-exclusive bonuses aim to enhance the overall value proposition of the membership, creating a sense of exclusivity and loyalty among customers.
- Psychological attachment in marketing involves creating emotional connections between customers and a brand or product. This connection can lead to increased loyalty, repeat purchases, and positive word-of-mouth referrals. By offering exclusive benefits or privileges, companies aim to foster a sense of belonging and identity among customers. Understanding and leveraging psychological attachment can help businesses build long-lasting relationships with their customer base.
- Strategic discounts for longer subscription periods involve offering price incentives to customers who commit to extended subscription durations. These discounts can come in various forms, such as reduced monthly rates, bonus time for completing payments, or one-time discounts after an initial period. The aim is to encourage customers to opt for longer-term commitments by providing cost savings and added value over time. By rewarding customers for extended loyalty, businesses can secure a more predictable revenue stream and enhance customer retention.
- A waived fee offer in the context of continuity offers means that customers can avoid paying certain upfront costs by committing to a longer subscription term. This strategy aims to incentivize customers to choose longer subscription periods by removing or reducing initial fees. It is a way to attract and retain customers by providing financial benefits for their commitment. Waived fee offers can help businesses increase customer retention and generate more predictable revenue streams.
- Exit interviews for customer retention involve gathering feedback from customers who have decided to cancel their subscriptions or services. These interviews aim to understand the reasons behind the customer's decision to leave and address any issues or concerns they may have had. By conducting exit interviews, businesses can gather valuable insights to improve their offerings, potentially retain customers by addressing their feedback, and enhance overall customer satisfaction and loyalty.
Counterarguments
- Continuity offers may lead to customer fatigue if the perceived value diminishes over time.
- Recurring revenue models can create a barrier to entry for customers who prefer not to commit to ongoing payments.
- Upselling and cross-selling strategies might be perceived as aggressive or intrusive by some customers, potentially harming the customer relationship.
- Lower entry costs might attract customers who are less committed and more likely to churn, which could increase customer acquisition costs in the long run.
- The initial lower upfront revenue from continuity offers could strain cash flow for businesses that are not well-capitalized or that have high upfront costs.
- Psychological attachment to membership tiers can lead to customer dissatisfaction if the perceived status does not match the actual benefits.
- Offering too many bonuses or discounts can devalue the core service or product, leading customers to expect more for less.
- Waived fees for longer commitments may not appeal to customers who are wary of long-term financial commitments or who prefer flexibility.
- Focusing too much on bonuses and discounts might distract from the intrinsic value of the subscription service itself.
- Highlighting the dollar values of bonus items could set unrealistic expectations if the customer does not perceive the same value.
- Offering various commitment levels could complicate the sales process and overwhelm customers with too many choices.
- A significant price difference between standalone and continuity offers might lead to a perception that the standalone products are overpriced.
- Clear cancellation policies are important, but they might also make it easier for customers to cancel, potentially increasing churn rates.
- Exit interviews can be resource-intensive and may not always lead to actionable insights or retention of canceling customers.
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The Benefits and Power of Continuity Offers
Continuity offers serve as a powerful tool for businesses to secure ongoing engagement from customers, offering unique benefits over traditional one-time sales.
Continuity Offers Provide Ongoing Value For Customers Until Cancellation
Continuity offers provide customers with ongoing value, as they can make repeated payments for continued service or products until they choose to cancel. This system allows businesses to foster a more consistent revenue stream compared to the sporadic nature of one-time sales.
Continuity Lets Businesses Earn Recurring Revenue, Boosting Profits Over One-time Sales
The speaker emphasizes that a continuity model, such as memberships, brings in consistent customers and revenue, which can be more lucrative in the long run than one-time challenge sign-ups. Alex Hormozi incorporates this into his sales strategy by offering bulk payments at a discount before transitioning customers into a continuity plan that ensures recurring profit for the company.
Continuity Offers Provide a Customer Stream For Upselling and Cross-Selling
Moreover, continuity offers create an avenue for businesses to upsell and cross-sell to their existing customer base. The stable relationship that's built through continuous services or subscriptions increases the potential for additional sales.
Continuity Attracts More Customers but May Generate Less Upfront Revenue
The structure of continuity plans can initially attract more customers due to their typically lower entry cost compared to high-priced one-time purchases. However, this approach often results in lower cash intake at the outset.
Continuity Reduces Cash Upfront, Boosts Recurring Revenue
The speaker n ...
Here’s what you’ll find in our full summary
The Benefits and Power of Continuity Offers
Additional Materials
Clarifications
- Alex Hormozi's sales strategy involves enticing customers with bulk payment options at a discounted rate initially. This approach aims to attract customers by offering a cost-saving incentive for committing to a longer-term purchase. Once customers opt for the discounted bulk payment, they are then transitioned into a continuity plan, ensuring ongoing revenue for the company. This strategy leverages the psychology of saving money upfront to secure long-term customer engagement and profitability.
- Continuity plans often have lower initial costs, making them more accessible to a broader customer base. This affordability can attract more customers at the outset compared to high-priced one-time purchases. The lower entry barrier encourages more people to sign up initially, increasing the customer base. This strategy prioritizes building a larger customer pool over immediate high revenue per transaction.
- In the context of continuity offers, the trade-offs between immediate profits and long-term sustainable revenue involve sacrificing upfront cash flow for the potential of consistent, recurri ...
Counterarguments
- Continuity offers may lead to customer fatigue if the perceived value diminishes over time.
- Recurring revenue models can create a dependency on a limited customer base, which may be risky if churn rates increase.
- Upselling and cross-selling opportunities might not be as straightforward if customers feel overwhelmed or bombarded by too many offers.
- Attracting more customers with lower entry costs doesn't guarantee long-term engagement or satisfaction.
- The initial reduction in cash flow from continuity offers ...
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Different Types of Continuity Offer Structures
Alex Hormozi shares insights on various strategies to encourage recurring subscriptions through creative continuity offer structures.
Continuity Bonuses Offer Valuable Incentives for Recurring Subscriptions
Hormozi suggests using bonuses to create member exclusivity and incentivize customers to sign up for subscription services.
Bonuses Include Complementary Free Products, Services, or Features
These member-exclusive bonuses can include better class times, access to tanning booths, VIP events, or titles like silver, gold, and diamond for members who remain subscribed over time. Hormozi believes customers become attached to these titles to the point of identifying themselves by them, showing the psychological impact and value of such bonuses.
Valuable Customer Bonuses
To further encourage continuity, Hormozi recommends making bonuses available only to those who join the membership. He argues that if you can't think of any material bonus, at the very least, you can offer customers special titles. Tactics such as bulk continuity upsells—offering "buy five months, get one free"—are highlighted as ways to boost 30-day profits.
Discounts for Longer Subscription Periods
Applying discounts strategically for customers who commit to long-term subscriptions can be an effective way to ensure continuous membership.
Types of Discount Applications
Hormozi describes several ways to apply discounts, such as:
- Granting bonus time equivalent to the discount value at the end if all payments are made on time.
- Providing a monthly discount, like $50 off on a $200 subscription for a certain period.
- Offering a one-time discount after the first or second payments to cover initial costs.
Discounts Deter Early Cancellations By Increasing Costs
By employing these strategies, Hormozi's approach deters customers from canceling early, as they stand to gain from the continued discounts and may earn a lower rate if they continue their subscription past a typical cancellation point.
Waived Fee Offers Remove Upfront Fees With Longer Subscription Commitment ...
Here’s what you’ll find in our full summary
Different Types of Continuity Offer Structures
Additional Materials
Counterarguments
- Continuity bonuses may lead to a perceived inequality among customers, potentially alienating those not willing or able to subscribe long-term.
- Special titles and VIP status can create a superficial sense of value that might not translate into real-world benefits for the customer.
- Bulk continuity upsells could encourage overcommitment from customers, leading to financial strain or buyer's remorse.
- Discounts for longer subscription periods might lock customers into services they no longer need or want, reducing their flexibility.
- Offering discounts can sometimes devalue the service in the eyes of the customer, making it seem less premium or exclusive.
- Waived fee offers might obscure the true cost of the service, leading to a lack of transparency in pricing.
- The strategy of using cancellation fees donated to a cause the customer disapproves of could be seen as manipulative or unethical.
- Relying heavily on upfron ...
Actionables
- You can create a personal reward system for consistent habits by setting up a "continuity bonus" for yourself. For example, if you're trying to exercise regularly, promise yourself a reward after a month of consistent workouts. This could be a new piece of workout gear or a massage, something that feels exclusive and is a treat for your dedication.
- Consider implementing a "bulk purchase" strategy for your household expenses. Buy in bulk and set a goal that if you manage to stay within a budget for six months, you'll use the savings for a family treat, like a weekend getaway. This mirrors the "buy five months, get one free" approach and can motivate you to stick to your budget.
- You can apply the concept of waived fees to personal projects by removing barriers that prevent you from ...
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Strategies For Designing Effective Continuity Offers
Creating effective continuity offers involves not only offering value to customers but also managing how the offers are perceived and ensuring they fit varied customer needs. Below are strategies focusing on how to do this successfully.
Highlight Bonuses/Discounts Over Subscription Value
Promoting Free or Discounted Items Is More Effective Than the Subscription
In the podcast, Alex Hormozi emphasizes that advertising what is given away, rather than what is being sold, is a powerful strategy to make offers more attractive. To make the continuity offer more appealing, bonuses should be anchored first by selling the benefits of the amazing bonus, not the continuity offer itself. Mentioning the individual dollar values of each bonus item can anchor the value and get more people to join your community.
Aligning Bonuses and Discounts Helps Attract Target Customers
Hormozi stresses that offering real discounts followed by valuable free bonuses can make offers more attractive. By stacking these bonuses or providing them as free gifts for joining, the actual subscription becomes more desirable, as customers perceive they are getting more value for their money.
Offer Continuity Options With Varying Commitment and Pricing
Offering Monthly and Long-Term Subscription Options For Customer Self-Selection
Different customers have different needs and financial capabilities, so it's crucial to offer continuity options with varying levels of commitment. Hormozi suggests offering both a month-to-month option as well as a commitment that waives a larger fee. This allows customers to self-select based on their preference for flexibility or savings.
Discounting Commitments Boosts Appeal of Continuity Offers
Adjusting the ratio of standalone offer pricing to continuity pricing can influence the percentage of customers who choose the continuity option; the larger the price of the standalone offer relative to the continuity price, the more people are likely to opt for the continuity offer. Hormozi notes that discounting commitments—for instance, offering 15 months for the price of 12—can encourage a longer commitment by customers.
Implement Policies and Procedures to Manage Churn
Streamline Cancellation Policies and Facilitate Easy Cancellations
Hormozi advises having clear cancell ...
Here’s what you’ll find in our full summary
Strategies For Designing Effective Continuity Offers
Additional Materials
Counterarguments
- Highlighting bonuses and discounts over the subscription value might lead to undervaluing the core service or product.
- Mentioning individual dollar values of bonuses can create a fixation on price rather than the intrinsic value or quality of the offer.
- Aligning bonuses and discounts could potentially attract customers who are only interested in short-term gains rather than long-term relationships.
- Offering too many bonuses or discounts upfront might not be sustainable for the business in the long run.
- Providing a range of commitment options could complicate the decision-making process for customers, leading to decision fatigue.
- Discounting commitments might encourage customers to make longer commitments than they need, leading to dissatisfaction if their circumstances change.
- Streamlining cancellation policies too much may lead to higher churn ...
Actionables
- You can create a personal rewards system for achieving goals, where you treat yourself to a free or discounted item after completing specific tasks. For instance, after a week of meeting your fitness goals, you might reward yourself with a free movie night at home, including homemade popcorn and a rented film, reinforcing the effectiveness of incentives.
- Develop a habit of giving thoughtful, non-monetary bonuses to friends and family when they help you out. For example, if a friend assists you with moving, instead of just saying thanks, offer to pet-sit for them the next time they're out of town, enhancing the value of their assistance and your gratitude.
- When negotiating personal commitments, such ...
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