Alex Hormozi: The first product you must sell in a new business...

The video discusses the importance of simplifying a business's product offering and introducing a second product line to maximize revenue per customer, with a focus on payment terms and upfront payments to increase stickiness and extend contract value.

This video by Alex Hormozi was published on Nov 12, 2021.
Video length: 08:46.

In this video, Alex Hormozi discusses the importance of simplifying a business's product offering in order to maximize revenue per customer.

He suggests that instead of offering a large number of products and services, businesses should focus on selling two things - a front-end and a back-end product - and use payment terms to accommodate different buying thresholds. Hormozi also shares a wealth hack for extending contract value and increasing customer stickiness.

He argues that simplifying a business's product offering can reduce operational complexity and improve employee focus.

• Maximizing revenue per customer is a goal of any business.
• Simplifying the product offering can help employees better understand what is being sold and improve customer understanding.
• Introducing a second product line can help reach the maximum buying threshold per prospect.
• Upfront payments can increase stickiness and extend contract value.
• The decision to simplify the product offering was made to improve employee focus and customer understanding.

The first product you must sell in a new business... - YouTube

The Importance of Simplifying Product Offerings

• Maximizing revenue per customer is a goal of any business.
• Offering too many products and services can create operational complexity and distract employees.
• Simplifying the product offering can help employees better understand what is being sold and improve customer understanding.
• Changing payment terms can help reach the maximum buying threshold per prospect.
• Monthly expense is more important to customers than total contract value.

The Two-Product Strategy

• Introducing a second product line can help reach the maximum buying threshold per prospect.
• Having two products or services simplifies the product offering.
• A front-end and back-end product can be offered to customers.
• Payment terms can be changed to increase stickiness and extend contract value.
• Getting customers to pay upfront can help extend contract value and cover upfront costs.

The Importance of Upfront Payments

• Upfront payments can increase stickiness and extend contract value.
• Customers are more likely to focus on monthly expense than total contract value.
• Using upfront payments can help liquidate ad costs, cover commissions, and cover upfront fulfillment and onboarding costs.
• Structuring pricing can help get customers to stick longer.
• High gross margins can allow for lower costs as long as the customer stays for a long time.

The first product you must sell in a new business... - YouTube

The Decision to Simplify Product Offerings

• A decision was made to simplify the product offering in one of the portfolio companies.
• Having three products was suggested, but it was decided to stick with two.
• Offering a low and high product was chosen instead of a low, medium, and high product.
• The two-product strategy has been successful in other businesses owned by the speaker.
• The decision to simplify the product offering was made to improve employee focus and customer understanding.

The Importance of Simplifying Your Product Offering

• Having too many products can confuse salespeople and customers.
• It's more effective to give salespeople one main product to sell.
• The product should solve the customer's main problem.
• Having one product makes it easier for the salesperson to convince the customer.
• Offering too many options can lead to a confused mind and no purchase.

The Benefits of Offering Multiple Payment Options

• Offering more payment options increases conversions.
• More payment options can lead to lower cash flow, but higher overall revenue.
• Payment plans can be adjusted based on the customer's budget.
• Focus on selling the product first, then discuss payment options.
• Structured offers with high gross margins allow for flexibility in payment plans.
• Prepaid customers can be more easily upsold to a second product.

Watch the video on YouTube:
The first product you must sell in a new business... - YouTube