https://www.youtube.com/watch?v=BZQtuK-ucDM

1 00:00:00.000 --\> 00:01:00.000 boop one decision five million dollars
a year i lost as a result of this i want to tell you about one of the
scariest decisions i've ever made my entire life which was when i had my
gyms i was selling a boot camp at the time this is before i knew a lot
about pricing and i was charging 99 a month and i uh got really fed up
at one point and i was like i don't think i'm helping people i want to
have semi-private because this is where people are really going to
transform their bodies and i want to sell with conviction right so just
keynote sidenote pro tip life hack if you can sell something that you
truly believe in you'll make a lot more money and so i had gotten to the
point where i didn't really believe in boot camp as a vehicle for for
personal transformation in terms of body wise and so i was so convicted
about our summer private program because clients were getting way better
results there that i wanted to switch all my clients over that now i
couldn't do that at 99 a month and so i sent a mass letter out to my
customers that said we were going to go from 99 a month to 299 per month
so i was going to triple my prices

2 00:01:00.000 --\> 00:02:00.000 add more value but i was going to
triple my prices all right and at the end of this video i'll tell you
what happened when i sent that email out now what i want to do is tell
you a secondary story of a similar situation that happened later on in
my business career all right and it was we were we were selling our uh
program at 42 000 per year all right um at the time and that was being
billed at 800 bucks a week roughly all right and i uh wanted to decrease
our churn and so i've been i was trying to figure out a way to decrease
our turn so we could extend you know increase our lifetime value per
customer and i kept you know all my my team and all that stuff they're
like we have to lower our price we have to lower our price and i hate i
hate lowering prices i don't like lowering prices it just generally
doesn't mean you make more money after a long time i said you know what
fine we're going to add more and we're going to go to 600 per week all
right that's what we're gonna do all right which if you're doing the
math it's like 31k that's what i decided to do let me tell you what
happened in each

3 00:02:00.000 --\> 00:03:00.000 of these scenarios as soon as i made
this change right here all right so what i did was i did this big
announcement i said we're going to roll out this new additional services
program and i did this huge presentation in this huge pitch i stacked it
and stacked it and stacked it and i was like and you're going to get all
this stuff and you're all going to get a discount and that's what i said
and everyone was like yay i actually did have one person complain to me
um they said why are you doing this now you should have been discounting
us before which just goes to show you that no one will ever be happy
with what you're doing i was literally saying that they can pay less and
i got somebody upset with me and so anyways i decreased the price and so
this is what ended up happening my churn remained completely unchanged
and i lost five million dollars per year in profit boop one decision
five million dollars a year i lost as a result of this and so i can tell
you firsthand most times when you lower your prices you make a lot less
money and so what happened to me is that my overhead

4 00:03:00.000 --\> 00:04:00.000 stayed the same it actually went up a
little bit so i added about 100k a month in in overhead to my business
so that i could add for this this new service all right and then i
decreased my price by 25 so imagine cutting top line by 25 which is
literally what i did and by making this little beautiful combination so
i increased my cost by 1 million dollars and i decreased my my top line
by 400 000 per month at the time for that business it sucked because
here's the beautiful thing i thought hey if i decrease this price if i
can cut our churn by half right which is what i thought i was going to
be able to do if i could cut my churn in half let's say from 10 to 5 i
would still 2x ltv so i'd rather decrease by 25 percent but then 2xl tv
i'll take that trade every time right aha but that's not what happened
turns stayed the same and i just lost 25 of top line which if we were
running a 50 margin business right i just lost half my profit which

5 00:04:00.000 --\> 00:05:00.000 we weren't we were actually running a
70 margin business at the time right and so i actually cut my income by
a third which sucked for that business it was not fun i highly recommend
not doing it and so that was the first thing that happened so let me
tell you the story that i started with this puppy all right where i had
my clients and i told them all hey this is what we're gonna do i'm gonna
give you two weeks for free so i did have to front this labor two weeks
free of this new service it's much better you're gonna get way more
personalized attention you're gonna be lifting weights you're gonna
learn form all this type of stuff and i said after those two weeks
you're gonna automatically all be enrolled at 299 per month let me know
if this is going to materially affect your life and you won't be able to
buy groceries as a result of this decision so here's what happened one
third of my customers left they said alex you suck i can't believe
you're raising prices on us blah blah blah two-thirds of them stayed at
three times the price what happened

6 00:05:00.000 --\> 00:06:00.000 i 2xed the revenue of my business and i
serviced only two-thirds of my customers which means my cost of
fulfillment went down and my revenue went up excellent combination and
so by doing that one thing i was able to more than 2x the profit of my
business and so i tell both of these cautionary tales as i was petrified
to make both of these decisions one of them dramatically increased the
profit of my business the other one dramatically decreased the profit of
my business in most cases providing more value and charging a higher
price in order to provide the higher value will make you more money
because you will service fewer people at higher prices the reverse of
trying to service more people at lower prices by also providing more
things most times will make you less money especially in a service-based
business and so i tell this cautionary tale because it makes me sick to
think about it but hopefully

7 00:06:00.000 --\> 00:07:00.000 it uh it makes you sick to think about
it and if you're contemplating what should i do with my prices because i
would like to increase my ltv the ltv can be increased in six ways all
right number one you increase your price number two you decrease your
costs and then number three four five six are resales get people to buy
more times upsells get them to buy more of the stuff they're currently
buying cross sells get them to buy different things down sells get
people who are not going to buy to buy something all right so this is
you're buying burgers once a week now i want you to buy burgers twice a
week this is you go from a small burger to a big burger this is would
you like fries with your burger this is would you like a junior burger
instead of your current burger so that you buy more or buy something
instead of buying nothing so these are the six ways that you increase

8 00:07:00.000 --\> 00:08:00.000 ltv you'll notice what i was trying to
do was get more people to do this and i cut this and i lost and so i
tell this story to hopefully get more people to not make the terrible
mistake that i did and i have learned that painstakingly and most times
i would say 99 times out of 100 when you lower the price you make less
money sometimes you make more but the vast majority of time you make
less so and i'll tell you one final thing to illustrate this concept
that i think everyone should understand so let's say you've got a 100
thing here and let's say your profit is 40 bucks if you decrease your
price to 80 bucks right on this product you would have to sell two times
as many people at this lower price because you have half the profit
right say this is cost most times if you make this kind of change you're
not going to two extra sales but you will make half the money so make
sure that

9 00:08:00.000 --\> 00:09:00.000 when you're making these changes and
here's the flip side if you were to take this and go to 150 right now
you're making let's say we're now making ninety dollars so we more than
2x our profit you probably won't sell half as many customers you might
just sell three quarters as many customers and make two times the money
which means more than what you're making now small tweaks big changes
lots of impact think through these decisions my name is alex mozy own
acquisition.com we have a portfolio company of 85 million dollars in
revenue yearly and i have absolutely nothing to sell you my goal is that
for everybody in this channel there's a lot of people who are broken i
don't want you to be one of them if you enjoyed this you found value in
this in your own business hit the subscribe button so we can give you
more vids like this and if you did not i love you either way keeping
awesome and i'll catch you guys next vid bye
