Part 8: Making Your Money Model | $100M Money Models Audiobook | Ep 945
In this episode of The Game, Alex Hormozi outlines a three-stage framework for building a profitable business model: attraction offers to convert strangers into customers, upsell and downsell strategies to increase customer value, and continuity offers to establish recurring revenue streams. Through examples from his own business experience, Hormozi demonstrates how each stage can be implemented effectively.
The episode covers practical approaches to optimizing this money model, including the strategic use of affiliate partnerships and the importance of perfecting one offer at a time. Hormozi explains how businesses can experiment with different combinations of these strategies, gather customer feedback to improve products, and present existing products in multiple ways rather than creating new ones. His framework emphasizes patience and adaptability in finding the right mix of tactics for specific business needs.
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1-Page Summary
Effective Money Model Stages: A Three-Part Framework
Hormozi presents a strategic framework for business growth through three key stages: attraction offers, upsells/downsells, and continuity offers. The model begins with attraction offers that convert strangers into customers through free or discounted products. This is followed by upsell and downsell offers that boost customer profits by providing advanced solutions to post-purchase needs. The final stage involves continuity offers that establish long-term value through recurring revenue streams like subscriptions and memberships.
Implementing the Money Model Through Examples
For attraction offers, Hormozi demonstrates success through his Gym Launch business, where he offered free consultation calls alongside premium implementation packages. Upsell strategies include various approaches such as classic, menu, and anchor upsells, while downsell options feature payment plans and feature-based alternatives. For continuity, Hormozi suggests using bonuses and discounts to encourage long-term commitments, timing these offers strategically after the initial 30-day window.
Building a Patient, Reliable Approach
Rather than implementing the entire money model at once, Hormozi advises perfecting one offer at a time and measuring success quarterly. He emphasizes the importance of gathering customer feedback to improve products before raising prices, and recommends focusing on presenting the same product in multiple ways rather than creating numerous different products.
Optimizing the Money Model
Hormozi recommends using affiliate partnerships to expand offerings without operational burden. He encourages mixing money model tactics flexibly, noting that upsells can be incorporated into attraction offers, downsells can be used with any offer, and continuity offers can help attract new customers. The key to success lies in experimentation and adaptability, allowing businesses to find the most effective combination of these strategies for their specific needs.
1-Page Summary
Additional Materials
Clarifications
- In the context of downsell options, payment plans involve breaking down the total cost of a product or service into smaller, more manageable installments for customers. Feature-based alternatives offer customers a scaled-down version of the original product or service, focusing on specific features or functionalities at a reduced price point. These strategies aim to cater to customers who may be hesitant to make a full-price purchase, providing them with more accessible options to still benefit from the offering.
- Affiliate partnerships involve collaborating with external individuals or businesses who promote your products or services in exchange for a commission on sales. This arrangement allows companies to reach new audiences and increase sales without directly managing the marketing efforts themselves. By leveraging affiliate partnerships, businesses can expand their reach and offerings while sharing the workload and costs with their partners. This strategy is commonly used in e-commerce and digital marketing to scale operations efficiently and tap into new markets.
- Mixing money model tactics flexibly involves integrating different strategies like upsells, downsells, and continuity offers in a fluid and adaptable manner. This approach allows for experimentation and customization based on the specific needs and responses of the target audience. By combining these tactics strategically, businesses can optimize their revenue generation and customer retention efforts effectively. Flexibility in mixing tactics enables businesses to find the most successful combination for maximizing profitability and long-term growth.
Counterarguments
- The framework assumes a one-size-fits-all approach that may not be suitable for all business models, especially those in niche markets or with unique customer bases.
- Attraction offers that rely heavily on discounts or free products could potentially devalue the product or service in the eyes of consumers.
- Upsells and downsells might be perceived as aggressive or pushy, which could harm the customer experience and brand reputation.
- The focus on upselling and downselling could distract from the quality and development of the core product or service.
- Continuity offers, such as subscriptions, require a high level of ongoing value to prevent customer churn, which may not be sustainable for all businesses.
- The strategy of perfecting one offer at a time could result in missed opportunities to capitalize on market trends or customer feedback that calls for a more dynamic approach.
- Quarterly measurement of success may not be frequent enough for fast-paced industries where consumer preferences and competitive landscapes change rapidly.
- Relying on customer feedback to improve products before raising prices assumes that customers know what they need, which may not always be the case, especially for innovative or disruptive products.
- Presenting the same product in multiple ways could confuse customers or dilute the brand message.
- Affiliate partnerships, while beneficial for expanding offerings, could lead to a lack of control over the customer experience and potential brand misalignment.
- Flexibility in mixing money model tactics might result in a lack of consistency, making it difficult for customers to understand the value proposition.
- The recommendation to use continuity offers to attract new customers may not work for all target demographics, particularly those averse to ongoing commitments.
- The emphasis on experimentation and adaptability could lead to a lack of focus and strategic direction, potentially overwhelming small businesses with limited resources.
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Effective Money Model Stages: Attraction Offers, Upsells & Downsells, Continuity Offers
Understanding the stages of a successful money model is crucial for any business's growth. Hormozi breaks the money model into three intentional stages aimed at initially attracting customers, increasing profitability through additional offers, and ensuring long-term customer value and revenue.
Three Stages of a Money Model: Attraction, Upsells/Downsells, Continuity
Attraction Offers Convert Strangers Into Customers and Cover Costs By Offering Free or Discounted Products/Services to Generate Leads and Initial Sales
The first step in an effective money model is to start with an attraction offer. The goal at this stage is to convert strangers into customers as efficiently as possible and cover costs by offering free or discounted products/services. These attraction offers serve the purpose of generating leads and initial sales, which is essential for getting a business off the ground.
Upsell and Downsell Offers Boost Customer Profits By Providing Advanced or Tailored Products/Services for New Issues Post-Purchase
Once customers are acquired, stage two involves picking an upsell offer to boost customer profits. This means providing advanced or tailored products/services to address new needs or issues that customers might encounter post-purchase. An upsell offer is designed to get 30-day profits above the cost of acquiring a custo ...
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Effective Money Model Stages: Attraction Offers, Upsells & Downsells, Continuity Offers
Additional Materials
Clarifications
- Hormozi's breakdown of the money model into three intentional stages involves: 1. Attraction Offers to convert strangers into customers, 2. Upsell and Downsell Offers to increase profitability post-purchase, and 3. Continuity Offers to boost long-term customer value through recurring revenue. Each stage plays a specific role in the overall strategy of attracting, retaining, and maximizing revenue from customers. Hormozi emphasizes the importance of progressing through these stages systematically to optimize business growth and profitability.
- Continuity offers stabilize a business's cash flow by providing a predictable and recurring source of revenue. This consistent income stream helps offset f ...
Actionables
- You can create a personal referral program to share products you love with friends and earn rewards or discounts. Start by identifying products or services you frequently use and are passionate about. Reach out to these companies and ask if they have a referral program. If they do, sign up and share your unique referral link with friends. When your friends make a purchase using your link, you could earn discounts, free products, or other incentives, effectively applying the concept of attraction offers to benefit both you and your friends.
- Enhance your personal investments by researching and investing in companies that offer subscription-based models. Look for companies that have a strong subscription or membership base, as they may provide more stable and predictable long-term returns. Before investing, evaluate the company's customer retention rates and the value they provide to subscribers to ensure they align with the continuity offer strategy.
- ...
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Examples and Tactics For Implementing Money Model Stages
Understanding the stages of the Money Model by Alex Hormozi can be pivotal for businesses aiming to optimize their revenue streams. Let's explore some examples and tactics that can be employed at each stage.
Effective Attraction Offers: Guarantees, Giveaways, Decoy Offers, Discounted Trials/Bundles
Appealingly Present Attraction Offers to Solve Problems and Deliver Clear Value
For the attraction stage, Hormozi's approach with Gym Launch showcases the power of decoy offers. He provided a free call to discuss a gym growth plan, presenting customers with a choice to either implement strategies on their own or opt for a premium offer costing $16,000 over 16 weeks for assisted implementation. This tactic playfully encourages customers to see greater value in the premium offer. Similarly, Microgyms attract customers with a fitness challenge that offers the chance to win back entry fees upon meeting set goals.
Well-loved attraction offers include money-back guarantees, giveaways, and buying X to get Y free. These offers are engineered to present clear value and solve specific problems, drawing customers into the initial stages of engagement.
Upsell Examples Include Classic, Menu, Anchor, and Rollover Upsells, Offering Additional Products or Services at the Customer's Point of Greatest Need
For Gym Launch, a classic upsell offer is presented with a price tag of $42,000 per year, or $36,000 if prepaid for advanced business services. Microgyms use a menu upsell approach, offering supplement bundles tailored to individual goals. Upsell offers like the classic, menu, anchor, and rollover upsells are strategically positioned at the customer's point of high engagement or need.
Downsell Examples: Payment Plans, Feature-Based Options, Alternating Tactics for Increased Conversions
If customers hesitate at the premium offers, Hormozi suggests alternatives such as payment plans and feature downsells, which are less comprehensive but still valuable iterations of the service. Providing these options increases the chance of conversion by aligning with diverse customer needs and financial situations.
Examples of Continuity: Bonuses, Discounts, and "Wait Fee" Offers to Incentivize Long-Term Commitments and Recurring Revenue
For the Gym Lords offer, Hormozi pr ...
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Examples and Tactics For Implementing Money Model Stages
Additional Materials
Clarifications
- The Money Model by Alex Hormozi is a business framework that focuses on optimizing revenue streams through strategic stages: Attraction, Upsell, Downsell, and Continuity. It involves using various tactics and examples at each stage to attract customers, increase sales, and encourage long-term commitments. Hormozi's approach emphasizes offering clear value, solving customer problems, and strategically positioning offers based on customer engagement levels. The model aims to maximize revenue by guiding businesses on how to effectively navigate each stage of the customer journey.
- Microgyms are small-scale fitness facilities that typically focus on specialized training programs, personalized coaching, and a sense of community. Unlike traditional big-box gyms, microgyms offer a more intimate setting and cater to specific niches such as CrossFit, HIIT, or boutique fitness classes. They often prioritize quality over quantity, providing a more tailored and engaging fitness experience for their members. Microgyms are known for their strong emphasis on building relationships with clients and creating a supportive environment for achieving fitness goals.
Classic, menu, anchor, and rollover upsells are different strategies used in sales to offer additional products or services to customers at specific points in their buying journey.
Classic upsell: Involves offering a higher-priced or upgraded version of the original product or service.
- Menu upsell: Offers customers a selection of add-ons or upgrades to choose from based on their preferences or needs.
- Anchor upsell: Presents a high-priced item first to make other options seem more affordable in comparison.
- Rollover upsell: Encourages customers to commit to a longer-term or higher-value purchase by providing incentives or discounts.
- A "wait fee" offer is a tactic where customers are charged a fee for delaying a decision or action. This strategy is used to incentivize prompt decision-making by introducing a cost for delaying a purchase or commitmen ...
Counterarguments
- Attraction offers that are too aggressive or misleading can damage trust and brand reputation.
- Upsell tactics might overwhelm or annoy customers if not done tactfully, leading to a negative perception of the brand.
- Downsells may inadvertently devalue the premium offerings if customers perceive the lower-priced options as sufficiently good.
- Continuity offers risk locking customers into long-term commitments that they may later regret, potentially ...
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The Importance of a Staged, Patient, Reliable Approach to Model Building
In the pursuit of building a solid business foundation, the author emphasizes the significance of a thoughtful and meticulous development strategy over rapid expansion.
Author Advises Against Implementing Full Money Model At Once
Perfect one Offer At a Time, Measure Quarterly, Ensure Reliability Before Progressing
The author advises against rushing to implement the entire money model in one go. Instead, businesses should focus on perfecting a single offer at a time, allowing for more controlled growth. It's crucial to measure the success of these offerings on a quarterly basis—not weekly—to gain a realistic understanding of their progress. The adage "Build it right or you build it again, and again, and again" serves as a reminder that taking shortcuts often leads to additional work. Doing things right the first time, despite it being a slower process, is ultimately quicker than having to rebuild. Implementing a full money model too quickly can be detrimental, potentially harming the business.
Gradually Raise Prices Using Feedback For Product Improvement Before Increases
Simplify By Offering the Same Product In Multiple Ways Rather Than Many Different Products
When it comes to pricing strategy, the author recommends starting with lower-priced offers to gather ...
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The Importance of a Staged, Patient, Reliable Approach to Model Building
Additional Materials
Counterarguments
- While perfecting one offer at a time can be beneficial, it may also limit a business's ability to quickly adapt to market changes or take advantage of emerging opportunities that require a broader range of products or services.
- Quarterly measurements might miss short-term fluctuations or problems that need immediate attention; weekly or monthly metrics could provide more timely insights to make necessary adjustments.
- Some business models, particularly in fast-paced industries, may require rapid iteration and deployment to stay competitive, which could contradict the slow and steady approach.
- A full money model implemented quickly, if done with proper planning and resources, could capitalize on market momentum and establish a strong market presence before competitors.
- Starting with lower-priced offers might undervalue the product and attract a customer base that is not sustainable in the ...
Actionables
- You can refine your primary service by setting a customer satisfaction goal and not moving on until you achieve it. For instance, if you're a freelance graphic designer, decide that you won't expand into web design until 90% of your clients rate your work as excellent. Collect feedback through simple surveys after each project to gauge satisfaction.
- Establish a personal progress report to review every three months, focusing on specific goals like skill improvement or financial savings. Create a simple spreadsheet where you track key metrics, such as hours spent learning a new language or the amount saved from your monthly budget, and review your progress at the end of each quarter to adjust your strategies accordingly.
- When introducing a new personal habit or routine, st ...
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Tips For Creating an Effective Money Model
Alex Hormozi provides valuable insights on optimizing revenue streams by effectively structuring offers and using affiliate partnerships as part of a versatile money model.
Affiliate Partnerships Bridge Gaps in Money Models By Offering Extra Products Without Operational Burden
Affiliates Help Expand Offerings and Generate Revenue Without Operational Expansion
Hormozi highlights the advantage of affiliate partnerships, which allow for the expansion of product offerings without the complexities of operational growth. He suggests that rather than creating numerous products, it’s more effective to have multiple ways to offer your product. Employing affiliate relationships enables selling other businesses’ products for a commission, which can augment your money model by providing additional offerings without the headache of handling the actual delivery.
Mixing Money Model Tactics Is Encouraged; No Strict Rules - Use Upsells in Attraction Offers, Downsells in any Offer, and Continuity to Attract New Customers
Experimentation and Adaptability in Money Models Are Key to Optimization
The money model approach recommended by Hormozi encourages flexibility and creativity. He describes a multifaceted offer that can serve as an attraction offer, an upsell offer, and a continuity offer simultaneously, referring to it as a "six-headed money making monster." Hormozi suggests using upsell tactics during the attraction offer stage, implementing downsells with every offer rejection, and deploying continuity offers ...
Here’s what you’ll find in our full summary
Tips For Creating an Effective Money Model
Additional Materials
Clarifications
- Money model optimization strategies involve structuring revenue streams effectively by utilizing tactics like affiliate partnerships to expand product offerings without operational complexities. These strategies encourage flexibility and creativity in combining various offers like upsells, downsells, and continuity offers to maximize revenue potential and create a more effective money model. Experimentation and adaptability play a crucial role in optimizing money models, allowing businesses to trial different combinations and adjust based on customer responses for successful revenue generation. Hormozi's approach emphasizes the importance of mixing and matching tactics to create a versatile and revenue-generating money model.
- Affiliate partnerships in revenue generation involve collaborating with other businesses to promote and sell their products or services in exchange for a commission. This strategy allows companies to expand their offerings without the need to create new products themselves. Affiliates typically earn a percentage of the sales they generate, creating a mutually beneficial relationship between the business and the affiliate partner. By leveraging affiliate partnerships, businesses can tap into new markets, increase re ...
Counterarguments
- Affiliate partnerships may dilute brand identity if the products offered are not aligned with the company's core values or quality standards.
- Relying on affiliates could lead to less control over customer experience and potential damage to reputation if affiliate products are subpar.
- Overemphasis on upselling and downselling might lead to customer fatigue or perception of aggressive sales tactics, which could harm long-term customer relationships.
- Continuity offers, if not managed properly, could result in customer backlash due to unexpected charges or difficulty in canceling subscriptions.
- Experimentation without proper tracking and analysis can lead to wasted resources and confusion about what is truly effective in the money model.
- Not all products or services lend themselves well to affiliate partnerships or upsell/down ...
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