Alex Hormozi: 6 Ways Small Businesses Beat Big(ger) Competitors...

Last updated: Jun 16, 2023

The video discusses six ways that small businesses can beat bigger competitors by increasing the value of their customers, including raising prices, decreasing the cost of goods, increasing purchase frequency, cross-selling, upselling, and down-selling.

This video by Alex Hormozi was published on Mar 23, 2022.
Video length: 11:46.

In this video, Alex Hormozi discusses six ways that small businesses can beat their bigger competitors by increasing the value of their customers.

He explains that the two fundamental ways to grow a business are to get more customers or to make them worth more, and then goes on to detail six specific strategies for increasing customer value, including raising prices, decreasing the cost of goods, increasing purchase frequency, cross-selling, upselling, and downselling.

Hormozi provides examples of each strategy and emphasizes the importance of thinking creatively about how to make customers more valuable.

  • Alex Hormozi discusses six ways small businesses can beat bigger competitors by increasing the value of their customers.
  • The two fundamental ways to grow a business are getting more customers and making them worth more.
  • The six ways to increase customer value are raising prices, decreasing the cost of goods, increasing purchase frequency, cross-selling, upselling, and down-selling.
  • Examples of cross-selling, upselling, and down-selling are given.
  • Customers are fractal, meaning 80% of revenue comes from 20% of customers.
  • Downselling can be effective for disqualified or under qualified leads and on the back end.
  • Tracking and customer requirements are important for effective downselling.

6 Ways Small Businesses Beat Big(ger) Competitors... - YouTube

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Introduction

  • Alex Hormozi is an entrepreneur, investor, and CEO of Acquisition.com.
  • He discusses six ways that small businesses can beat bigger competitors by increasing the value of their customers.
  • The six ways are raising prices, decreasing the cost of goods, increasing purchase frequency, cross-selling, upselling, and down-selling.
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Two Ways to Grow a Business

  • There are two ways to grow a business: get more customers or make them worth more.
  • The two fundamental ways to grow a business are getting more customers and making them worth more.
  • These are the mental frameworks that can be used to attack a business in terms of trying to figure out how to grow it.
  • When talking to new companies, Alex uses these mental frameworks to determine if he wants to invest time and money into them.
  • These frameworks can be applied to all types of businesses, including service-based businesses and coaching businesses.
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Six Ways to Increase Customer Value

  • The six ways to increase customer value are raising prices, decreasing the cost of goods, increasing purchase frequency, cross-selling, upselling, and down-selling.
  • Raising prices is an obvious way to make more money, but many people don't do it.
  • Lowering the cost of goods can be done by outsourcing a component of the service or increasing the ratio between coaches and clients.
  • Increasing purchase frequency can be done by decreasing churn and getting people to stay and pay longer.
  • Cross-selling is when customers buy something and then buy a different thing as an add-on.
  • Upselling is when customers are offered an additional level of service for an extra cost.
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6 Ways Small Businesses Beat Big(ger) Competitors... - YouTube

Examples of Cross-Selling, Upselling, and Down-Selling

  • Cross-selling can be done by identifying bottlenecks in the execution of the core business and offering add-on services to help with those bottlenecks.
  • Upselling can be done by offering an additional level of service for an extra cost.
  • Down-selling is when customers are offered a lower level of service for a lower cost.
  • Offering a lower level of service can be a way to keep customers who may not be able to afford the higher level of service.
  • Down-selling can also be a way to get customers in the door and then upsell them later.
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Increasing Customer Value

  • Raise prices
  • Decrease cost of goods
  • Increase purchase frequency
  • Cross-selling
  • Upselling
  • Down-selling
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Fractal Customers and Lifetime Value

  • Customers are fractal, meaning 80% of revenue comes from 20% of customers
  • Offering a significantly more expensive version to 20% of customers can double lifetime value
  • Each increment of 80/20 split usually has people with significantly higher spending power
  • Offering a semi-private component or small group can be 4-5 times as expensive
  • Increasing lifetime value can be a good way to offset cost of acquisition
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Downselling

  • Effective for disqualified or under qualified leads
  • Offer something significantly lower touch or ideally no touch at all
  • Track percentage of people buying core offer before implementing downsell
  • Customers who meet requirements for core offer should never be presented with downsell
  • Effective for offsetting cost of acquisition and getting more customers
  • Information declines in value over time, making downselling effective on the back end
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Conclusion

  • Increasing customer value is key for small businesses to beat bigger competitors
  • Offering more expensive versions to fractal customers can significantly increase lifetime value
  • Downselling can be effective for disqualified or under qualified leads and on the back end
  • Tracking and customer requirements are important for effective downselling
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Increasing Customer Value in Small Businesses

  • Small businesses can beat bigger competitors by increasing the value of their customers.
  • Six ways to increase customer value include raising prices, decreasing the cost of goods, increasing purchase frequency, cross-selling, upselling, and down-selling.
  • Attacking churn is important by realizing how people consume value through the services offered.
  • Value declines precipitously in e-learning services, so having a down-sell component on the back end is important.
  • Community access and troubleshooting/support are things that are consumable and can keep customers paying even if they don't need the information anymore.
  • Increasing customer value is important to increase LTV per customer and spend to get more customers on the front end.

Watch the video on YouTube:
6 Ways Small Businesses Beat Big(ger) Competitors... - YouTube

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