Transcription
This is a complete summary of Alex Hermoszy's recent book, 100 Million Money Models. It sold over 2.7 million copies in its first 24 hours, setting a Guinness World Record for the fastest selling non-fiction book.
If you have a business, this book will help you make more money from it. If you don't, it'll teach you how to build one that attracts customers from day one. The book is split into four parts, each packed with practical strategies you can apply right away. So, let us start with part one, attraction offers.
Attraction offers mean you first attract people by offering something for free or something very cheap. After that, they will buy more expensive items from you. There are five different types of attraction offers. Let's go through them one by one.
Attraction offer number one, giveaways. Alex once asked the owner of a fitness certification business, how did he attract people to his business? The owner said, "Easy. We run a giveaway to win a scholarship to our program. People apply with their contact info and answer questions like, why should we pick you?" We pick one winner. But here's the trick. For others who apply but don't win, we give them a discounted price to join our program. So, there's one grand prize for which the winner will be announced publicly, and the rest will be called to be informed that they got a discounted price if they join within 7 days. They're excited and most buy the program right away.
So, how can you apply this to your business? First, pick your most expensive thing. Make that the grand prize. For example, a $5,000 coaching program, and the winner gets it for free. Second, set a killer discount for those who joined the giveaway but didn't win the grand prize, like 50% off, valid for one week only. Third, add urgency, only 50 entries accepted, or giveaway closes in 3 days. Here's an example. Dentist offer, grand prize, invisible braces for $6,000. Promotional offer, $2,000 discount, valid for one week only.
Here's an important reminder. If your giveaway doesn't work, that means your grand prize wasn't grand enough. For example, one of Alex's portfolio companies ran a giveaway that barely got interest. Their grand prize, a ticket to their event, not compelling enough. When they changed it to something better that was also related to their business, they finally got a lot of people to join their giveaways.
Attraction offer number two, decoy offer. John owned tanning salons. He offered the five-day tanning pass for $5. Here's how John explained it. The beauty of the 5-day pass is everyone thinks they can get tan in 5 days. And they can, but it's never as tanned as they want to be. And if they try to speed things up, they'll burn. So when someone comes in with a pass, we ask them how tan they want to get. As soon as they say they want to get a few shades darker, we give them the turkey talk. So, what's the turkey talk? If a turkey takes three hours to cook, we can't just get it done in half the time by doubling the heat. You'll burn it. Same with tanning. So, after the turkey talk, John offers unlimited access for $20 per month, but only if they sign up for one year, and the $5 pass will be converted into a discount for the first month. Most customers immediately see the value in this offer and take the membership. And the reason is simple. They came to get tan. When they realized the cheap option wouldn't give them the result they actually wanted, they were ready to pay for more.
So, here's how you can apply this. First, offer your customers something free or discounted as a decoy offer. Second, when they engage, show your premium offer. Put your decoy offer and premium offer side by side so people can see how much more valuable your premium is. Here's an example. Decoy offer, one free session at the gym with the trainer. Premium offer, unlimited workouts, a personalized nutrition plan, and one-on-one coaching at the gym for $399. When you talk about the premium offer, focus more on the benefits, the dream outcome, like getting more tanned, getting more ripped, or earning your first $1,000 online. Present it as much better than the decoy offer, because it is. Your excitement motivates people to take the premium offer that will give them the most value.
Attraction offer number three, buy X, get Y free. There's a boot store with a big neon sign that says, "Buy one pair, get two free." At first, Alex thought the offer was dumb. How could they give away so much stuff and stay in business? So, he went in and grabbed a boot. And here's what he saw. The price of one pair was $600. So, what's their trick? That $600 is actually the price for three pairs of boots. It's $200 per pair, but everyone who comes must spend $600 because the deal is buy one, get two free. The store had gotten much bigger since the last time Alex saw it. So, the offer clearly worked. The word free you put on the door makes people pay more attention to what you're offering. And the word free is better than a discount. If you sell only one product and give a discount, you rely on holidays for sales to get more customers, like Christmas sales, New Year sales, then you go hungry. To fix this, just sell more than one thing at once and reframe the price. Let me show you this. Buy three shirts for $30 or buy one shirt for $30, get two free. It's the same price, but see the difference?
So, how do you apply this? For physical product offers, raise the price of your one product, then add another product as free, just like what the boot factory did. For service, let's say you have a yearly membership for access to your spa. You can say, "Buy 10 months, get two months free, but what they're actually paying for is 12 months of service." Or you can say, "Buy 9 months, get 9 months free." Or, "Buy six months, get six months free." Look, the option with the most free stuff, six months free, is the most compelling. Same goes for product. Buy one, get two free is more compelling than buy two, get one free. And here's another trick. Free things can also be different from paid things. Instead of buying one shirt, get one shirt free, you can also make an offer like, "Buy one shirt and get two free socks." You can mix and match whatever you want, but make sure the value of the different free stuff makes the offer compelling.
Attraction offer number four, win your money back. There was a gym owner named Danny. He shared his experience on how to get more customers to buy gym memberships. One day, a prospect came to his gym. He needed a training program, but he needed more accountability. So, he pitched his own idea. I'll give you $600 and you train me for six weeks. If I hit my goal, I get my money back, but in return, you can use my before and after photos to market your business. Fair enough. Danny agreed to that suggestion. And here's what happened. The man hit his goal. So, he should have received his $600 back. And you might think Danny didn't make any profit, but nope. Danny got even more. But how? That guy used the $600 back to buy more training programs from Danny and his transformation pictures that he promised. Danny used it for marketing and brought in 13 new clients. He said, "I offer this to everyone now. The results are way better and people love the offer. The before and after photos they post attract their friends and family to join the gym, too. I'm making more money than ever."
So, how can you implement this? You set a goal for the customer and tell them how to reach it. They pay you for accountability. They can get their money back if they reach their goal, like losing 5 kg in one month or making $1,000 online in a month. Now, here's the problem you might think of. What if everyone gets their money back? How can you make a profit? Then Alex gives two guarantees. First, many won't qualify even with realistic conditions. Second, those who do qualify often stay as customers, but they can only stay if they have something else to buy. So, have an upsell ready, which we'll discuss later. One important note, only do this offer if you feel okay with giving money back. If your marketing is good, a lot of people will get excited to join. You will make a lot of profit, and this outweighs the refund. From data collected from thousands of gyms, about 10% of customers will ask for their money back. If you can't stomach it, don't do it.
Attraction offer number five, pay less now or pay more later. Alex once saw an ad, double your reading speed in 3 hours or it's free. And he signed up. And here's what the registration page said. Option one, pay $97 right now and you'll get the event recording, which won't be for sale anywhere else. Option two, you can put your credit card down for $0 and if your reading speed doubles after the event, you'll be billed for $297. If it doesn't, email us and we'll cancel the charge, but you must attend in order to be eligible. So that is a pay less now or pay more later offer. This offer works so well because it removes all risk from the customer. They pay the full amount later only if they like it.
Now back to that event. So Alex chose the second option. He wanted to see if his reading speed doubled before paying for anything. During the training, he was expecting them to sell more stuff, but they simply provided the value. After 2 hours using their tactics, his reading speed really doubled. Truly impressive. So, Alex paid $297. Only after that, the trainer talked about how people could learn to read even faster with his 8-week training program. Since Alex was satisfied with his result, he chose not to take the upsell. Look, almost anyone will agree to pay later if they are satisfied.
Now, here are some rules. If you want to apply this offer, number one, promise a clear yes/no result. Then, make sure you deliver within your time frame. If you don't, your customer will ask not to be billed, like the speed reading event that Alex attended. Your speed reading doubles after the event. Number two, make a condition. For example, Alex had to show up to the reading training to qualify to cancel the charge. Make the condition what people need to do to get the most value from your product, like showing up for training. Whether they choose to pay now or later, you've got customers. But to take advantage of this offer, have something else to sell. So, always have something more, something better, or something newer to offer when the time is right. We'll discuss more on upsells in the next section.
All right, let's recap all five attraction offers. First, giveaways. Run a contest with one grand prize winner and give everyone else who enters a promotional discount. Like, win a free $5,000 coaching program for the grand prize. And everyone else who joins the giveaway gets 50% off if they pay within 7 days. Limit entries based on how much you can give away without sacrificing your profit. Second, decoy offer. Offer something cheap or free to get people in the door. Then present your premium offer like the $5 tanning pass that leads to the yearly membership for $20 per month with unlimited access. Put the offers side by side so people can see the value. Third, buy X, get Y free. Buy one pair of boots, get two free. The word free gets more attention and traffic. Fourth, win your money back. Set a goal for customers and they pay you for accountability. Remember the six-week gym training? They get their money back if they hit the goal. And fifth, pay less now or pay more later. Give customers two options. Pay a small amount now for the basic version or pay nothing now but pay more later if they get results.
Part number two, upsell offers. Think about McDonald's. You only want a burger, but then they ask, "Do you want fries with that?" And then do you want to add a drink? Which makes it a meal. If you want to win, figure out your version of "do you want fries with that?" Upsells tend to offer more of what they just got. Think quantity. Why have one burger when you can have two? Better versions of it. Think quality. Why have meat when you can have tenderloin. New or complimentary stuff? Think different. Do you want fries and a soda with that burger? Let me show you four examples of upsell offers.
Upsell offer number one, menu upsells. Back in 2013, Alex couldn't sell his supplements no matter what he tried. Then a rich lady with a big diamond ring came in for a consultation. Alex got so nervous that he forgot his sales script, so he just asked. "You've got a protein shake for breakfast. Do you like chocolate or vanilla?" "Which one's your favorite?" she asked. Chocolate. Great. I'll take one of those. That was it. He didn't talk about benefits or anything. He just asked what she wanted and she told him. So, he moved to the next item. Do you want kiwi or strawberry lemonade for pre-workout? And he continued, "I like strawberry lemonade." The lady smiled and said, "Great. I'll take that one." Alex had more products, but selling two that day was a record, and he didn't want to scare her away. So, he went straight to payment. "You just want to use the card we have on file." She said yes.
So, here's how you can apply this technique. Ask your customer which product they prefer, A or B, not whether they want it or not. Now, here's another trick. Before you ask A or B, start by putting all your products on the table. Then cross out what your customer doesn't need. Let me explain. Alex had several supplements on the table during the consultation. Then he asked this one customer, a lady, "You're not trying to gain weight, right?" That lady said, "No." So he crossed out the weight gainer shake and said, "Okay, great. You won't be needing this." Then he continued, "You aren't trying to boost your testosterone, right?" She laughed and said, "No, haha. Great. You won't be needing this either." He crossed the testosterone supplement out. Then he made a suggestion from what he had left on the table. "Okay, so you're going to need to take this and this," and he went on. That lady loved it because it seemed like Alex wasn't ripping her off by selling everything, but instead helping her only with what she needed. Alex calls this technique "unselling." He puts products on the table just to cross them out. He tells customers what they don't need so that he can emphasize what they do need and get them excited about it. Then for each product, he asks A or B, which flavor. So let's combine this into a formula. First, unsell. Present your products and cross out what your customers don't need. Second, prescribe what they do need. Third, ask your customers' preferences, A or B. Last, make payment easy. Since this is an upsell, it means they have purchased something from you before, so you can ask if they want to use the card on file. Here's an example. Let's say you sell a course on how to sell online. First step, unsell. You don't need the advanced course yet on how to set up Facebook ads. Second, prescribe. You just need to set up your e-commerce website first and put all the products on the website. So, you need to take the course on setting up a Shopify website. Third, A or B. Would you rather take the basic by learning it on your own or the advanced where there's group support and you set up the website together with a coach and other students? Last, make payment easy for them.
Upsell offer number two, anchor upsells. Years ago, Alex walked into a shop to buy a suit. He budgeted $500 for that. The owner of the shop took his measurements, then grabbed two suits off the rack. Alex put the first one on. Then he asked, "How does it look? How do you feel?" Alex smiled. He felt cool, like a rich guy. At that time, his friend was telling him to buy a suit since he was now a businessman. But then when he flipped the price tag over, he saw $16,000. His face turned red. He kept his head down, trying to hide how shocked he was. But the owner already saw it, so he asked, "Do you care much about the designer?" Alex replied, "Not at all." The owner went around the shop and found another suit. This one was priced at $2,200. Still more than Alex planned, but compared to $16,000, it felt cheap. Then Alex bought it. The owner even sold him some socks, a handkerchief, and a shirt to go with it. All in another $300. But after seeing the $16,000 price tag on the first suit, everything else seemed cheap. And Alex had spent five times more than he had budgeted for, and he felt okay about it. He later realized the owner had used a tactic called price anchor.
So, what's an anchor upsell? In an anchor upsell, you present a more expensive offer before you show the less expensive offer. Against a $16,000 suit, the $2,000 suit looks super affordable. If you just show the $2,000 first, people with a $500 budget most likely won't buy it. But that $2,000 suddenly feels cheap because they first see that $16,000. If you want to apply this, here are the steps. Number one, present the anchor, the really expensive thing. Number two, get them shocked. Expect the customer to freak out about the cost. Number three, come to the rescue. Ask if they care about what makes it premium. Number four, present your main offer. Expect the customer to feel relieved and see a better deal.
Upsell offer number three, rollover upsells. Remember the "win your money back" in the attraction offer? Alex once sold his $600 fitness program where members could win their money back if they hit a goal. Then when they received that $600 back, they could buy three months of gym membership. This offer worked really well. Alex sold tons of them. But there was a problem. Alex didn't get money from them after their 3-month gym membership ended and he had to start all over again finding new customers. They paid $600, stayed for 6 weeks, then for 3 months, then they were gone. It was stressful. Then he saw how his friend Justin handled the same offer, but he used a different approach. Justin offered the same $600 for the six-week challenge. But after the customers hit the goal and were entitled to receive their $600, he didn't offer the 3-month gym membership like Alex did. Instead, he spread that $600 as $50 a month off for 12 months. For the customers to be entitled to that $50 a month off, they had to buy the one-year gym membership. So, while Alex's customers stayed for three months, Justin's stayed for 12 months. And that's a rollover upsell.
To do this, you don't always have to start with a "win your money back" attraction. You can rollover upsell any previous purchase from a customer toward your next offer. Here are some examples. Let's say you're a chiropractor who offers physiotherapy sessions. Your previous customer paid $300 for a basic package session several months ago. You can call them back and offer another more expensive premium package. You can say, "The $300 you paid previously will be transferred as a $300 discount for this premium package." Another example, let's say you're a dentist offering a whitening session for $200. However, after the session, your patient is not happy with the result. He wants his teeth to be whiter. So, you can offer him another teeth whitening package that is more expensive, which includes multiple sessions and an at-home kit, and tell him the $200 he paid earlier will be applied as a discount for that package.
Here are some important notes if you want to apply this one. One, spread the credit across months or into a bigger package. Two, the next thing that you offer must be something better, something new, or something different. Three, and make sure to add urgency. For example, this offer is only valid today, and it's a one-time offer. So, if they want the discount, they've got to take it now. If not, pay full price later.
Upsell offer number four, the classic upsell. Alex once rented a car. When he was about to pick it up, the rental agent told him that they didn't have the car he had reserved, so she offered something else. "You're a big guy. Would you prefer a roomier pickup truck instead?" "Yeah, that sounds nice," Alex said. Then she asked another question. "Would you like a late return so you can turn in the vehicle at any time during the day without worrying about the late fees?" Alex said, "Yeah, we have an evening flight, so that sounds good." The agent then asked if Alex wanted to take better insurance that would cover all damage, including bumps and scratches. And Alex said, "No." But the agent didn't stop there. "Do you want us to take care of the fuel so that before you return it, you don't have to worry about filling it up?" Since what they charged per gallon was cheaper than at the gas station, Alex said yes. Alex walked away, glanced at the receipt, and laughed. He had come in for a $19 a day car and walked out paying $100 a day. Five times more. Even though Alex had to pay more, he was happy with it because it solved all the problems he might have had while using the car.
Notice how the offers were stacked. Offer number one, upgrade the car. Offer number two, late return. Offer number three, insurance. Offer number four, prepaid gas. You offer a solution to the customer's next problem the moment they become aware of it. It's like you can't have X without Y. So to apply this, find your why. For example, if you sell a course on losing weight, your X is the main course. Your Y could be an additional nutrition course. Tell your customer exercise won't work if you don't take care of what you eat. And if you have a supplement, go on, sell it, too. Upsell as many times as it makes sense to, just like the car rental agency. Don't be shy to offer as many solutions as there are problems that you can solve. The second worst thing that happens is they say no. The worst thing is they would have said yes, but you never asked.
All right, let's recap all four upsell offers. First, menu offer. Show your products. Tell your customers what they don't need and cross that out. And then prescribe what they do need followed by A or B. Just like Alex put all the products on the table and said, "You don't need this, you don't need that, but you need this." Now, A or B. Second, anchor offer. Show your expensive price first before you show your main offer so that your customer thinks it's worth it to buy even though it's more than their budget. Like the expensive suit story, show the $16,000 first before you show the $2,000 suit. Suddenly, the $2,000 feels cheap, even though Alex's budget was $500. Third, rollover offer. Take your previous customer's purchase and apply it toward the next purchase. Like Justin, who rolled over his $600 training session into $50 per month off for a 12-month membership. Fourth, classic offer. You can't have X without Y. You can't have a bike without a helmet. Prepare your next Y product early on. So upselling is about selling something more. But what if your customer couldn't afford it? That I will explain in part three.
Downsell offers. Never ever lower your price, but make a better offer with a downsell. Here's why. Imagine you agree to buy a car from the salesman and then he tries to sell you insurance for $5,000. You think it's too expensive, so you say no. Then he lowers the price to, let's say, $4,000. You still say no. He keeps lowering it again and again until that same $5,000 insurance is now only $400. Now, would you take it? If the same insurance can drop from $5,000 to $400, what else can he rip you off with? You won't trust him anymore. You might even cancel buying the car from him. Look, that's the danger of bad downselling. Lowering the price of the same thing kills trust. What you can do is offer something different for less. If he offers different insurance for less rather than the same insurance for less, he probably keeps your trust and closes the sale. Alex says no doesn't mean never. It just means no to this offer. Just because they rejected your offer doesn't mean they rejected you. You have to find out what works better at that time to make a profit from it. There are two rules in downselling. You change how they pay or you change what they get. Let me show you how you can apply this.
Downsell offer number one, payment plan downells. Back in 2013, Alex had just opened his first gym. That was his first real month in business. He had one month's rent left in savings, so he needed to make good sales to keep the lights on. So, one time a woman came in for a training session. He gave this pitch, but then she said, "I can't afford it." Normally, Alex would have just given up, but as he really needed money at the time, he continued talking. "Okay, when do you get paid?" "The first." So, Alex offered, "Pay half now and half then." But the lady still couldn't afford it. Alex asked again, "Do you really want to do this program?" She said, "Yes." So, Alex offered to spread the payment to three times. Just pay the first third today. But she still couldn't afford it. Finally, she said she could pay for the whole thing on the first. And Alex's rent was due on the 5th. Bingo. So, what Alex was offering is called a payment plan downsell. You don't cut your price. You simply change how they pay. There are seven steps on how you can do this. Step one, always begin with the full price. Only start downselling if they say no. Step two, offer third-party financing, credit card, and layaway options. Layaway means customers can make as many installments as they want. They only get the product after they've paid in full. If that doesn't work, move to step three. Offer two payments. Start by asking, "When's the next time you get paid?" And then ask, "What's the most you can put down today?" When they offer an amount, take that down today and put the rest when they get paid. If they still can't, move to step four. Now, check if they really want to buy. No payment plan works if a customer doesn't want it. So, ask on a scale of 1 to 10, how much do you want this? If it's eight or higher, keep working with them. If the answer is seven or below, ask why not 10. Get their answer and try to sell something different. We'll talk about this in feature downsell later. Step five. Now, if they still say no, offer to split into three payments. A third now and a third for the second and third payment. Step six, if they still can't, offer evenly spread payments. For example, Alex's offer was 16 weeks long, so the customer paid 16 times, once a week. Step seven, last resort, offer a free trial. Take a card on file and let them try your product first. We'll cover free trials in the next section. So, for these seven steps, the key here is start high and work your way down. And to get fewer declined payments, make sure you schedule payment on your customer's paycheck day.
Now, if someone refuses to pay anything, offer them downsell offer number two, free trial, but with a condition. In 2018, Alex's business, Gym Launch, was scaling fast. With 100 employees and more, his wife, Leila, needed a better HR software to manage it all. After months of sales calls with HR companies, he found one she liked. The system was the same as other companies, but that company did something different. They offered a free trial, but that free trial came with a condition. Ila had to attend the training set by the company on how to use the software. They took her credit card up front, so if she didn't attend, she would be charged for it. And here's how that company made the sale with Ila. During the training, she learned how to use the software. Now that she'd learned how to use it, switching to another software felt like too much trouble. She decided to just stick with that software. So, she bought it. The offer that the HR software company was using is called trial with a condition. But here's the truth. Most free trials fail. You see people sign up but never use the product. They just drift away. But with trial with condition, it fixes that. The condition that you set must be to get them to really use the product or service and see how good it is. Let's see some examples. For gym training, it could be free training with the trainer. For software, complete the training. Here's an important note. Always have them leave a card. This is to make sure they will be charged if they don't meet the condition. For Ila, she would be charged if she didn't attend the training.
Downsell offer number three, feature downells. In 2019, Alex was talking to a business owner. The guy told him that his new downsell had tripled his close rate from 25% to 75% last quarter. At first, Alex thought the trick was offering a payment plan or discount. But it was neither of those. Payment plans take so long. Discounts devalue his product. What he did was he lowered the price but he justified it by cutting the features. So that is a feature downsell. You lower the price by changing what they get. You take something away like less quantity or lower quality then lower the price. For example, for product quality, think of lower quality material. Instead of leather seats for your couch, we can do leather-look fabric. How does that sound? For service quantity downsell, instead of four sessions per month, how about two? Or if you offer a money-back guarantee, you can downsell by removing that feature. The guarantee costs nothing to the seller, but the moment you remove it, your customer starts to see its value.
All right, let's recap all these three downsell offers. Number one, payment plan. Give your customers options on how they can pay. Offer multiple payments. Number two, trial with a condition. Offer them a free trial, but with a condition. That condition is set for them to really use your product or service. If they fail the condition, they have to pay. For example, Ila had to attend the training on how to use the HR software. If she didn't attend, she had to pay. That condition forced her to show up, learn the software, and finally fall in love with it, then decide to buy. Number three, feature downells. You lower the price by changing what they get, like less quantity or lower quality or cutting some features like a money-back guarantee.
So, we've learned attraction offers to get customers to buy once. We've learned upsell offers to get them to buy the next thing. And we've learned downsell offers to turn no into yes. And now let's get into the last offer. It's about how to keep them buying again and again from you.
Part four, continuity offers. The smartest businesses don't just sell once. They create a way for customers to keep paying over and over. Think about subscriptions, gym memberships, and your phone bill. Continuity offers build a steady cash flow into your business. There are three types of continuity offers. Let's go one by one.
Continuity offer number one, bonus offers. Back in 2019, while Alex was coaching gym owners, some gyms were crushing it with the six-week challenges, but others they couldn't get people to stick around afterward. Then Alex saw one small gym suddenly beating everyone else's numbers. Curious, he asked, "Dude, your numbers are insane. How do you convert so many members?" The owner said, "Apart from doing the six-week challenge, I also give them another option." Here's what he did. He pitched the challenge like normal. Once they said they were interested, he asked, "Want to get it for free?" Of course, they said yes. That's when he explained, "Become a member and you'll not only get the challenge, but also perks like better class times, access to the tanning booth, and VIP events." People loved it. Once they joined, his team asked, "Want to save even more?" Then they upsold a prepaid six-month membership at a discount. That's a continuity bonus offer. You sell something like a yearly membership so that people pay you every month. To make it more attractive, give them a bonus or a discount. For the gym example just now, the bonuses are better class times, access to the tanning booth, and VIP events. On top of that, if they pay 6 months upfront, they get a discount. Another example, let's say you sell pet food. If people sign up to buy monthly dog food for $69 per month, give them a bonus like free vitamins together with the dog food. And if they pay for six months in advance, give them a discount. For example, $59 per month and a new dog toy every month.
Here are some important notes if you want to apply this. Number one, your bonuses should be something you already have and do and are super high value. That way, you don't have to create new products. Number two, add more bonuses to get more people to join. Say, "On top of that, when you become a member, you'll get amazing thing one, amazing thing two, and amazing thing three." Mention the dollar values for each. Give real numbers. If you give fake numbers, you will lose trust.
Continuity offer number two, continuity discount offers. There was one time Alex and his wife had just moved into a fancy neighborhood. He met a neighbor who owned a Ferrari and he told him that he was in the trash business. He started with just a truck. He went to all the big apartments and said, "I'll do your trash for a whole year free, but then you have to take my service for the next 5 years." And it worked well enough. At first, his family thought he was crazy. For one year, there's no money coming in. But after that, cash came flooding in. And after a few years of using that plan, he sold his business for a fortune. So that's a continuity discount offer. You give products or services for free, but with a condition. They have to commit to buying more products and services over time. You've seen this before. Think internet. First, one month free, then monthly payments as usual.
Now, if you want to apply this, you need two rules. One, how you will apply the discount, and two, your cancellation policy. You don't want them to cancel after you give them free service. So, for how you apply the discounts, there are four ways. Number one, upfront. You can say to your customer, "If you take my service for 12 months, I will give you an additional 3 months for free in the beginning. You only start paying every month after the three free months end." Number two, at the end. If you take my service for 12 months, I'll give you an additional 3 months free after that. Number three, after the first two payments, you can say, "If you take my service for 12 months, I will give you three months free after your second month. Then for the remaining 7 months, you'll have to pay like usual." Number four, spread over time. Instead of giving three free months, you spread that same discount over a whole year. Let's say your service is $200 per month. So 3 months worth of discount equals $600. Spread over time. You spread this $600 over 12 months. That makes it $50 off per month.
Look, now for all these four discount offers, what if after you give them free months or a discount, they cancel? That's why you need a cancellation policy. Alex says just make the cancellation fee equal to the discount they agreed to get. So, if they get $600 in discounts by committing, then if they want to cancel, they have to pay $600. And it doesn't matter if they want to cancel early or almost at the end, the amount is the same. And when a customer cancels, ask for an exit interview. Propose that you'll waive the cancellation fee if they agree to attend. From that conversation, you understand what went wrong so you can improve. You might have a chance to upsell different products or downsell from that.
Continuity offer number three, waved fee offer. Alex once met a legend who always makes big money selling an expensive yearly membership. This guy aimed to work as little as possible. He didn't build some massive empire. He has zero employees, but he still makes a million bucks a year. He just collects monthly payments and chills. And to do that, he needs to apply a trick to avoid customers cancelling at any time by making quitting expensive. Here's how he does it. He gives his customers two options. Option A, pay $5,000 as a one-time fee plus $1,000 every month. They can quit anytime, but they lose $5,000 if they quit. Option B, to waive that $5,000 one-time fee, commit to 12 months upfront for $1,000 per month. If they want to quit, they have to pay $5,000 anyway. And that's the waived fee offer. Most people choose option B to avoid the big $5,000 fee, so they commit immediately to 12 months, and you get yourself a steady cash flow. Cancelling means paying $5,000, so they better stay. This offer works especially well with services that take a longer time to work, like SEO, investing, weight loss, and more. It keeps people committed even when they get emotional.
All right, here's a recap for continuity offers. Number one, continuity bonus offer. Give your customer bonuses when they commit long-term. For example, instead of selling your online course for a one-time fee, offer a yearly membership. Members get weekly group coaching for accountability and free access to past courses. If they pay six months upfront, give them a discount like $20 off per month. Number two, continuity discount offer. Give them discounts when they commit for a longer term. Like the trash business, they commit for 5 years, so he gave one year free in the beginning. Think of internet providers. Commit for 12 months and they give you the first one month free. Number three, waived fee offer. Give customers two options. Pay a big upfront fee or commit long-term to waive that fee.
Look, there are a lot of tricks in this video, but you won't know which one really works for your business until you try it. Test one, see what happens. If it works, do more. If it doesn't, try another until you find something that works. Now, if you're still not sure how to start with your offer, you can also watch the video you see on the screen. It's another book by Alex that I've summarized before, $100 Million Offers. It shows you how to offer a product or service that people can't resist. Thanks for watching and I hope it was useful.