Speaker Alex Hormozi
fundamentally,
Learn how to craft a $100M offer using the value equation framework to maximize price and conversion in just 6 minutes.
Key Takeaways
- A valuable offer maximizes dream outcome and perceived likelihood while minimizing time delay and effort/sacrifice.
- Guarantees and bonuses are powerful tools to reduce risk and increase conversion without discounting.
- Understanding granular customer steps pre- and post-purchase allows for crafting irresistible offers.
- Scarcity and urgency create psychological triggers that boost sales velocity.
- A structured approach to offers can lead to exponential business growth by increasing price and close rates.
Summary
- The video explains the value equation framework for creating high-value offers based on dream outcome, perceived likelihood of achievement, time delay, and effort/sacrifice.
- Dream outcome defines the primary desire driving interest in the offer, such as status or ROI.
- Perceived likelihood of achievement influences willingness to pay a premium based on trust and credibility.
- Risk reduction strategies like guarantees increase perceived likelihood and reduce buyer hesitation.
- Time delay impacts value by shortening the wait between purchase and result, increasing offer attractiveness.
- Effort and sacrifice refer to what customers must start or stop doing, which can decrease offer appeal if not addressed.
- Breaking down all steps before and after purchase helps create solutions that reduce friction and increase value.
- Adding scarcity, urgency, guarantees, and bonuses enhances offer appeal and conversion rates without discounting.
- Sales teams can use bonus stacks to overcome objections and increase closing rates by adding value instead of lowering price.
- Post-purchase bonuses create surprise and delight, improving customer satisfaction and loyalty.
Full Transcript — Download SRT & Markdown
Speaker Alex Hormozi
you know, you think about like, are there supply constraint businesses or demand constraint businesses?
Speaker Alex Hormozi
And I like going into demand constraint businesses because that's what I'm good at.
Speaker Alex Hormozi
So, the core, if there was one framework in the book that it relates to, it's the value equation.
Speaker Alex Hormozi
Which is that you have to understand how to create value so that you can charge as much as possible, right?
Speaker Alex Hormozi
And obviously also convert as many people as humanly possible.
Speaker Alex Hormozi
And so there's four elements to that.
Speaker Alex Hormozi
One is the dream outcome.
Speaker Alex Hormozi
The second is the perceived likelihood of achievement.
Speaker Alex Hormozi
And then below that, so it's a fraction, so dream outcome times perceived likelihood of achievement.
Speaker Alex Hormozi
Below that, you have time delay.
Speaker Alex Hormozi
And then effort and sacrifice.
Speaker Alex Hormozi
And so the dream outcome is what I would say separates whether someone's even interested in your category of offer or not.
Speaker Alex Hormozi
So it's, you know, men in general probably want to make more money, women in general, in general, usually want to look better because both of those are more associated with status.
Speaker Alex Hormozi
So, okay, why is it that B2B offers tend to be more expensive than B2C offers?
Speaker Alex Hormozi
Because it's more closely tied to ROI.
Speaker Alex Hormozi
Great.
Speaker Alex Hormozi
So that's the category one.
Speaker Alex Hormozi
But within, let's say weight loss, given the example we're talking about, if you're B2C, how is it that you can have a $5 PDF and a $50,000 liposuction thing, but they both fundamentally solve the same problem, which is that they don't like the way their stomach looks, right?
Speaker Alex Hormozi
What's the other three variables?
Speaker Alex Hormozi
And so the next is perceived likelihood of achievement.
Speaker Alex Hormozi
So taking the liposuction example, if you're a surgeon, or you're a girl and you're you're thinking about getting liposuction, uh, and there's one surgeon that's uh, just fresh out of medical school, hasn't done a surgery yet, and there's another physician who's got 10,000, you know, five stars or surgeries under his belt, who do you go to?
Speaker Alex Hormozi
The guy with 10,000.
Speaker Alex Hormozi
Why?
Speaker Alex Hormozi
And the crazy thing is is that it's the same procedure, but the perceived likelihood of achievement that you're going to get what you want is significantly higher, and so you pay for that premium.
Speaker Alex Hormozi
The equal opposite of this is risk.
Speaker Alex Hormozi
Right?
Speaker Alex Hormozi
And so how do we decrease risk?
Speaker Alex Hormozi
So you have this dream outcome, and you want it to be absolutely certain that you're going to achieve it.
Speaker Alex Hormozi
And so it's the category, and then there's things you do in the offer, like that's where guarantees come into play, is how can I further decrease the risk associated with that?
Speaker Alex Hormozi
And then we have the bottom side of the equation, which is time delay, so how how far between when they buy and when they get?
Speaker Alex Hormozi
And so to use the example of personal training versus the liposuction, a personal training, you got to arm wrestle somebody for an hour to get them to buy a $2,000 package of of uh personal training.
Speaker Alex Hormozi
And the reason for that is because they might get their six-pack, you know, 12 to 18 months later, whereas if you do liposuction, you know, you're going to go to sleep and then you're going to wake up and you're going to be significantly thinner, so the time delay is so much shorter, and so because of that, it increases the value overall.
Speaker Alex Hormozi
And then finally, you have uh effort and sacrifice, which effort are things that you have to begin doing that you don't want to do as a result of a purchase.
Speaker Alex Hormozi
So in the personal training example, you got to wake up early.
Speaker Alex Hormozi
You got to be sore, that's the effort side.
Speaker Alex Hormozi
You have to stop, you know, well, sacrifice is the things you have to stop doing that you want to keep doing.
Speaker Alex Hormozi
So it's like you got to stop Taco Tuesday.
Speaker Alex Hormozi
You got to stop sleeping in because you got to do in the morning.
Speaker Alex Hormozi
So it's both sides of the same coin, effort and sacrifice, and when you itemize all the things that a customer has to do as a result of a purchase, what are all the things that they, what are the things that increase their risk, what are the things that make it take longer, what are the things that make them start doing things they hate, and what are the things that we have them stop doing that they love, and then you create solutions for each of those categories, then you create an incredibly valuable offer.
Speaker Alex Hormozi
And so from the weight loss perspective, many people think, oh, I'm going to help them lose weight, but it's like, well, they're going to have to go grocery shopping differently, they're going to have to learn how to prep food.
Speaker Alex Hormozi
And so it's really getting granular about all the little steps that has to occur in order for someone to get a result.
Speaker Alex Hormozi
And so looking at what happens immediately before and immediately post purchase, uh, all the little steps, and then trying to deconstruct each of those steps for them and then including those things in the offer, ultimately creates a much more valuable A offer and B a higher converting offer.
Speaker Alex Hormozi
And this is where you get these massive step-wise increases in terms of company value because all of a sudden we can double the price or triple the price for offer and close at a higher percentage.
Speaker Alex Hormozi
And so that's when these crazy kind of like Lollapalooza effects occur in the business where they go from 2 million to 10 in a year, changing nothing but what the core offer of what they said was.
Speaker Alex Hormozi
And then we do these little enhancers that I'll add on, which is like, you've got scarcity, which is limiting number of units.
Speaker Alex Hormozi
You've got urgency, which is limit number of time.
Speaker Alex Hormozi
You have um guarantees, which is things that we do to reverse risk, they have there's four types of guarantees, you can do unconditional, conditional, zero guarantee, and then performance, right?
Speaker Alex Hormozi
So performance what I call an implied guarantee.
Speaker Alex Hormozi
Like if, you know, if you don't make money, I don't make money.
Speaker Alex Hormozi
Anti-guarantees, you lean into the fact that you don't have a guarantee, for this type of person needs a guarantee, this isn't for you, conditional is like, I'll guarantee it if you do X, Y and Z, and then unconditional is it's unconditional.
Speaker Alex Hormozi
Like I'll I'll give you your money back if you ask for it.
Speaker Alex Hormozi
Then you have uh bonuses, which are things that drive action in the short term.
Speaker Alex Hormozi
Um, buying decisions.
Speaker Alex Hormozi
And so a lot of those things that you can make an irresistible offer or a grand slam offer from the book is by looking at each of those problems and creating kind of a bonus stack that solves each of them.
Speaker Alex Hormozi
And so from a selling perspective, hand-to-hand, the salesman doesn't need to say all seven of the things that you have, and so the idea is that you make the ask on the initial offer, if they say no, you figure out what the constraint is, and then you plug that bonus in, and then maybe you need to put three bonuses in in order to get them over the edge.
Speaker Alex Hormozi
This also allows the sales team to stop doing discounts in order to close people, we just add value rather than taking away price.
Speaker Alex Hormozi
And then post purchase, in order to make sure that ops is all the same, you then give them a surprise and delight with the remaining four.
Speaker Alex Hormozi
You say, by the way, since you did buy, I want to give you these other things.
Speaker Alex Hormozi
And so if you get the fast buyer that doesn't need the bonuses, you just give them the bonuses and they love you.
Speaker Alex Hormozi
And if you got to somebody who needs all seven, then you give them the seven bonuses on the sales calls.
Speaker Alex Hormozi
And that's kind of how
Speaker Alex Hormozi
you can just get increased close rates without giving away discounts.
Speaker Sam Parr
God damn.
Speaker Shaan Puri
Yeah.
Speaker Shaan Puri
Highly useful.
Speaker Sam Parr
I feel pumped up, brother.
Speaker Sam Parr
I need to go read, I need to go read the blue and the purple one.
Speaker Alex Hormozi
Yeah.
Speaker Shaan Puri
All right, if you like that clip, there's a full conversation.
Speaker Shaan Puri
With a lot more just like that.
Speaker Shaan Puri
Just follow my finger.
Speaker Shaan Puri
It is right here.
Topics:value equationoffer creationsales strategycustomer conversionguaranteesscarcityurgencybonusesbusiness growthpricing strategy
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