Pricing: The Commodity Problem

Question 1

What saying is a core tenant at Alex’s companies?

Answer 1

“Grow or die.” (Maintenance is a myth.)

Question 2

The _____ ______ grows 9% a year. If you aren’t at least doing the same, you are _______ _______.

Answer 2

stock market;
falling behind

Question 3

If you’re in a growing market, you may have to grow __ or___ a year to keep up or risk falling behind

Answer 3

20 or 30%

Question 4

What 3 things does it take to grow any company?

Answer 4

1. Get more customers
2. Increase their average purchase value
3. Get them to purchase more times

Question 5

If you want to grow you either have to

Answer 5

sell more clients a month (with suitable margin) or have them be worth more (by increasing the profit per purchase or the number of times they buy)

Question 6

What is Gross Profit

Answer 6

revenue minus direct cost of service or fulfillment

ex:
If you sell lotion for $10 and it costs you $2, your gross profit is $8 or 80 percent.

Question 7

Lifetime Value

Answer 7

The gross profit accrued over the entire lifetime of a customer.

gross profit x the number of purchases an average customer will make over their lifetime

Question 8

LTV example and breakdown

Answer 8

if customer stays 5 months, and they pay $1000/mo and it costs me $100/mo to fulfill (90% gross) then their LTV is $4500.

Revenue: ($1000/mo * 90% Gross Margin * 5 months) = $4500 LTV

Question 9

some calculate total revenue, we calculate

Answer 9

gross profit

Question 10

Having a _____ _____ _____ makes it almost impossible to _______.

Why?

Answer 10

grand slam offer;
lose

Because it helps with all three requirements for growth: getting more customers, getting them to pay more, and getting them to do it more times

Question 11

a GSO allows you to differentiate yourself and sell your product based on ______ not on _____.

Answer 11

value;
price

Question 12

Commoditized =

Answer 12

price-driven purchases (race to the bottom)

Question 13

Differentiated =

Answer 13

value-driven purchases (sell in a category of one with no comparison)

Question 14

a commodity is a product available in ____ ______.

Answer 14

many places

Question 15

if all products are “equal” then the _________ one is the most _______ by _______.

Answer 15

cheapest;
valuable;
default

Question 16

“being commoditized” is a huge problem for entrepreneurs becaused

Answer 16

commodities are valued at the point of “market efficiency.”

Question 17

“market efficiency” means

Answer 17

people drive prices down through competition until the margins are “just enough” to keep the lights on.

Question 18

Define Grand Slam Offer

Answer 18

An offer you present to the marketplace that cannot be compared to any other product or service available,

combining an attractive promotion, an unmatchable value proposition, a premium price, and an unbeatable guarantee

with a money model (payment terms) that allow you to get paid to get new customers . . . forever removing the cash constraint on business growth.

Question 19

In other words, a GSO allows you to

Answer 19

sell in a “category of one” or “sell in a vacuum.”

Question 20

The resulting purchasing decision is now between ____ ________ and _________.

Answer 20

your product;
nothing

Question 21

As a result you’ll get more __________ at higher _______ _______ for less _______.

Answer 21

customers;
ticket prices;
money

Question 22

In fancy marketing terms it breaks down to

Answer 22

1. increased response rates (clicks)
2. increased conversions (sales)
3. premium prices (charging a lot of money)

Question 23

What’s the key takeaway from this?

Answer 23

a business does the same work in both cases (commoditized or GSO). The fulfillment is the same. But the GSO makes the business appear as if it has a totally different product.

Question 24

if you have a “__________” offer you will compete on _____.

Answer 24

commoditized;
price

Question 25

Your GSO forces a prospect to

Answer 25

stop and think differently to assess the value of your differentiated product

Question 26

Your GSO establishes you as your own ________, which means:

Answer 26

category;

it’s too difficult to compare prices, which means you re-calibrate the prospect’s value meter.

Question 27

If the offer is easily _________, it’s subject to __________.

Answer 27

duplicated;
commoditization

Question 28

unless you switch to a GSO,

Answer 28

your prices will continually be beaten down

Question 29

We want to make an offer that is so _________ that you can skip the _________ __________ of why your product is ____________ and instead:

Answer 29

different;
awkward explanation;
different;

just have the offer do that work for you.

Question 30

If you play the _______ _______ everyone else does,

Answer 30

same game;

you’ll get the same results

Question 31

a GSO given to the wrong audience or market will

Answer 31

fall on deaf ears