How to Sell High Ticket Offers to the Right Customers | Ep 996

The United States grapples with significant wealth disparity, with the top 10% of earners receiving a disproportionate volume of income and holding a significant share of net worth.

U.S. Wealth Inequality: Top 10% Earn 40% of Income, Top 1% Hold Major Net Worth Share

The financial landscape in the U.S. showcases a stark divide. The top 10% earn 40% of the income within the country, creating an economic power imbalance. This is further emphasized by an individual remark, "This one guy has more than the bottom 90% combined," bringing home the disparity in wealth distribution. If the U.S. household net worth is hypothetically $163 trillion, the bottom 50% would collectively hold a minimal $2.50 of every $100, underlining their 2.5% share of the wealth.

Bottom 50% Holds 2.5% of Net Worth, Top 1% Controls Most Wealth

The disproportionate distribution of wealth is further highlighted when analyzing the control over net worth. The top 1% of the population holds sway over the majority of the wealth, contrasting starkly with the bottom 50% who control a meager 2.5% of the nation’s net worth.

Spending Power Gap: Upper vs. Lower/Middle Classes

Top 10% Pay More, Have More Discretionary Income Than Bottom 90%

The gap in financial resources goes beyond just net worth figures. Alex Hormozi touches on the concept of spe ...

Alex Hormozi illuminates the Pareto Principle, or the 80-20 rule, in the context of business revenue and customer profitability.

80-20 Rule: 20% of Customers Generate 80% of Revenue

Hormozi conveys how a small fraction of customers contribute the majority of a business's revenue, saying, "20% of customers created 80% of the revenue." He provides an insight that illustrates the financial impact of this minority, explaining that "This one guy is more than the bottom 90, but 69% of all the wealth is just in these 10 people."

Top 4% of Customers Generate 64% of Profits; Top 1% Yield Over 50%

Further dissecting the principle, Hormozi states that 64% of aggregate profit comes from just 4% of customers and astonishingly, 51% of the profit comes from the top 1%. This exemplifies the asymmetric distribution of profitability within a customer base.

High-Value Customers Drive Most Profits

Given that a minority of high-value customers are so critical to a business's success, Hormozi urges businesses to hone their focus.

Focus On Pricing and Offerings for High-Spending Customers

Hormozi identifies that the key to boosting business profitability is to cater to and nurture these high-value relationships. "They go where the money's at," he says, advisi ...

Alex Hormozi provides insights into creating pricing strategies that appeal to and capitalize on high-income customers, utilizing a tiered approach and psychological pricing techniques.

Tiered Pricing for High-Income Brackets

Hormozi employs a rule of thumb where each pricing level should generate as much revenue as the one before it, effectively doubling revenue with each tier. This model is designed to cater to different income levels, with Hormozi suggesting that the best service should be provided to the best customer at the highest possible price.

For example, he describes a scenario where 800 customers might pay $10 per month at a lower tier, whereas at higher tiers with fewer customers, rates are substantially more—which could be five to ten times the price of L1 or four times the price of L2. Although only a minority of customers may buy these high-priced offerings, their contribution to profitability is significant.

Hormozi emphasizes not selling to the bottom 50% of prospects until a business can serve them in an automated way due to their lower purchasing power. He recommends increasing prices successively and asserts that a person who pays $1k is likely to pay $5k to $10k on the next tier.

1 In 5 or 1 in 10 Expected to Buy High-Priced Offerings, Boosting Profitability

It's expected that only one in five or one in ten customers will agree to high-priced offerings. Hormozi shares his own experience: from an initial $500 service price point, he experimented with $6,000 and continued increasing with each call, generating $60,000 from one morning's calls. He criticizes pricing strategies that lack proper differentiation between tiers and stresses the importance of a substantial price leap.

Avoiding Underpricing Due to Psychological Biases or Lower-Income Catering

Hormozi advises against underpricing due to catering to lower-income customers or personal biases. He asserts that affluent customers inherently understand the appropriateness of a service for them based on its price. For example, a B2B service costing $1,500 per month may immediately signal to a high-income company that it is not targeted for their size. On the other hand, services priced between $20,000 and $50,000 are more fitting for their demographic.

Hormozi urges business owners not to sell from their own wallets and to recognize that wealthy clients view higher-priced offerings as a lower percentage of their wealth. Setting low prices may signal to these clients that the business may be inexperienced or aimed at the lower-income market.

Wealthy Customers Perceive Higher Prices As Higher Quality

Wealthy customers often associate higher prices with higher quality. Hormozi acknowledges this perspective and implies that when a service is too cheap, it can make customers skeptical about its effectiveness. He discusses the importance of pricing appropriately, suggesting that prices be increased incrementally until closing one out of three customers—this balance between price and close rate indicates proper pricing.

Positioning For Exclusivity and High-End Appeal to Attract Affluent Markets

Hormozi consid ...

Alex Hormozi highlights the importance of tailoring sales strategies to cater to the spending habits and expectations of wealthier individuals, advocating for pricing that considers the financial capabilities of high-net-worth customers.

Focus On Spending Power and Preferences of Top Income Brackets, Avoid Selling Based On Limited Financial Input

Wealthy Priorities: Expecting Quality & Willing to Pay

Hormozi encourages businesses to set prices appropriate for affluent customers, who are less impacted by higher price points due to their substantial wealth. He advises imagining that everyone is rich and thus focusing on customers in the top income brackets who view expensive offerings as a minor portion of their wealth. Hormozi emphasizes the importance of focusing marketing efforts on the upper class, even though it may mean a higher cost per lead, correlating with increased profitability instead of targeting a larger volume of lower-income customers.

By talking specifically to million-dollar-plus business owners, companies can achieve higher close rates, as these customers prioritize quality over price and will pay more for it. Hormozi notes that the top 10% of Americans, with a net worth of over one million dollars, are willing to pay for what they really want. He suggests adding a zero to current prices and considering what could be offered at that price point, which would be unaffordable for the poorest but within range for wealthier individuals.

Adjusting Strategies to Communicate Unique Value To Affluent Customers

Speed, Ease, and Guaranteed Results Drive High-End Customers

Moving further, Hormozi addresses the need to communicate unique value effectively to affluent customers. He hints that pricing products or services high enough might position them in a separate category from cheaper alternatives, enhancing their perceived uniqueness and value. Products and services should be made easier for rich customers, who prioritize speed, ease, and guarant ...