I was invited to talk at a dinner the other night. It was for a mixed age range audience of entrepreneurs (both startups and established companies).
I don’t usually do these kinds of things, primarily because I wasn’t getting paid for it, it was a pain in the ass to get to, it was on a night I had already made plans for, oh yes, and did I mention that I wasn’t getting paid for it?
But it was for one of my coaching clients who I have become friends with over the past couple of years and he has put close to $30,000 in my pocket so I felt obliged to attend.
So here I am in a room full of people all in small to medium-sized businesses. I knew a couple of faces and there were also a couple of my other coaching clients there too.
Now I had planned to talk about email marketing and how to craft emails that get opened and read, but I thought I would get to know my audience a little so that I could personalize it to them.
“So, what do you do?” I asked one guy at the front. “I sell discount lamb online.”
“Just lamb?” I asked, he said “No, I sell cheese and other farm produce cheaper than most people online.”
I asked how business was and he said it covers costs… interesting…
The next guy I asked ran a martial arts studio that offered unlimited lessons and access to his training center for £15 a month. I also asked how he was doing and he said that he couldn’t take on any more customers because the place was too busy.
I said excellent, but he didn’t look too pleased.
He went on to say that with the rent rates, staff costs, and the fact that he was working 6 days a week he was now losing money on the place but for some reason was also looking to open up a second center so he could take on more people.
Now I don’t want to bore you here with stories but that night I asked about ten people what they did and they all had something in common.
Discounts.
They were all basing their businesses on being the cheapest, which is the fastest route to nothing you can take.
Now I understand why people do this, we have just been through one of our longest recessions (and after brexit I am pretty much sure that the UK is swiftly heading into another one), you want to price for the market.
But that is exactly the problem. You are in the wrong market. There has never been a greater time to sell to the wealthy than today.
There are 34 million millionaires in the world, 15 million of those live in the US.
7% of the American population earn $100,000 or more, and 17% of all US households bring in $100,000 or more combined.
Now $100,000 may no longer be the ‘ideal number’ it once was in terms of satisfaction with their income, but those people still have plenty of disposable cash to pay for the finer things in life or to upgrade their experience.
Now I singled out those two businesses above for a reason. Let’s take a look at the martial arts center.
I have a client in the exact same businesses. He is a mixed martial arts instructor qualified in just about everything.
His first job when he was a kid was a caddy at a local golf club. He then took lessons and finally became an instructor where he had his first taste of success taking on private clients.
His passion though was martial arts, and had been involved in one form or another since the age of 4.
At the grand old age of 32 he quit golf and decided to start up a martial arts school and sunk every penny he earned into that business, it lasted just over a year.
Why?
For the exact same reason as the other guy — plenty of customers who were paying too little.
He charged £5 a lesson, and half that for kids under 12.
This is to be taught by a guy who had spent 28 years of his life mastering his craft, building his skills, and becoming an absolute expert in his field.
So why was he charging so little?
Because everyone else was.
And that’s why I have included the Zig Ziglar quote at the top of the article as a reminder of one of the most important lessons you can learn.
So anyhoo, I met this guy at one of the San Diego events Ed and I ran a few years back, he actually lived not too far from me back in the UK, and he became one of my early group of clients.
He decided he wanted to have another go at making this work.
Now I am no health freak, I don’t do martial arts, but I do know about the business.
A friend of mine pays £20 for a lesson with 20 other people for his training. that’s £400 for an hour and a half of work.
That’s way better than what my friend was earning when he was charging £5 and £2.50 for kids.
I also know another martial arts teacher who is in a Platinum mastermind which I am part of, and he has shared with our group a lot of how his business worked so we put together a plan.
First off was location.
His first center was set up in a relatively poor area with a lot of competition in the cheap price range.
Now we all know the affluent areas around us, and we looked at half a dozen places and tallied the martial arts clubs and grabbed their pricing.
One place stood out, it was a wealthy area, had a very high priced gym, a rather expensive school, and just one martial arts club charging peanuts.
Perfect.
Next was pricing, and just like a gym membership, he set up a monthly subscription where you could attend 1, 2, 4, or unlimited lessons a month.
You could go for 1 trial lesson only and that was free to see if it was for you, but only one, and you couldn’t pay for individual lessons if you decided you wanted more than your subscription, you had to upgrade.
He also offered exclusive lessons, either individually, or in groups of no more than three.
Right from day one this was positioned as high-end.
He also made one big change. In the past, he would teach a variety of martial arts adding more and more skills as customers asked for it… diluting his core teaching.
He taught just two things, Muay Thai, and street fighting.
He also hired a full-time sales guy who had been a member of his previous club.
is was the best decision he had made.
He had resisted this at first because he thought his uber-friendly style would get people to signup but he was an awful salesman who didn’t like to put people under pressure.
So like I said, this was premium right from the beginning, from the meet and greets and the trial sessions which he would do without a load of other more advanced students in the room (it intimidates people), to the marketing information, follow-up welcome calls to stop buyer remorse. He built an instant concierge-style relationship with his customers.
Most of his customers started either on the two-session a month plan for £40 a month or his unlimited sessions for £90.
His numbers showed that after three months over half the two-session group had upgraded to four sessions or gone to unlimited.
Not so surprising was the fact that the unlimited users rarely came to more than three sessions. *they paid more because it was an option*.
Now, where his business really took off was his ‘exclusive’ sessions. £200 got you one-on-one with him, and £100 for up to a group of three.
A lot of his exclusive customers were businessmen who wanted to learn street skills, a fair few footballers who wanted to learn Muay Thai, and once they started talking, his unlimited sessions subscriptions were taken up by their kids.
Great customer service generated amazing word of mouth and he has built a great business around this.
Not once in the entire start-up time did he offer a discount.
A lot of gym’s go, “If you sign-up today at your trial session then you get 25% off!” etc. He didn’t need to do that. Instead, he used one simple trick.
He bought a huge 60-inch T.V. and put it right in the entrance it showed the number of spots available. Scarcity at its best.
After a few months, he had filled the spots. He expanded into the building next door and took on two more instructors, now the sign shows each instructor and how many spots they have available.
It’s almost three years on now since he started, and I went to meet him a month ago, that sign has three zero’s on it and he has a waiting list of over a hundred names.
Now that is exclusivity.
One final point is his retention rate. He loses just 2% of his members a month, and those are usually in the first three months. He has managed to attract the type of customer that doesn’t mind spending £90 a month even if they don’t use it every month (remember this is not just a hobby, it’s not a fitness class, they are paying to learn a skill).
Finally, I just wanted to say he has added to his income by selling high-end sports gear and equipment and has now set up a specialist studio which films from multiple angles so he can use it with his high-end customers to show them how they are doing, and where they can improve. These sessions cost £500 for two hours and he does at least five of these a week.
Now I want to share with you one more case study.
Two years ago I was at a wedding of a friend and met a guy who was working there slicing ham. Nothing unusual I hear you say. But what if I told you he earns up to £2,000 a day slicing that ham?
I shit you not.
This was his full-time job. Once or twice a week he would attend a wedding or corporate event and slice ham.
Now, this is not your usual ham, and he is far from the average server. The ham he slices is probably the best ham in the world. It is ibérico de bellota, which comes from a pure breed pig fed on acorns.
When I lived in Madrid I was addicted to the stuff.
So why does he get paid so well?
Slicing the ham so thinly and in small inch square pieces is an art form and the actual ham doesn’t come cheap and he was using was the best I had ever tasted.
Which is why I got speaking to him. I wanted to know where he got it from.
Boy did he take some persuading. I basically harassed him for several hours until he gave in and gave me his supplier's name.
Now ever since coming back from Madrid, I have bought one of these hams every year for Christmas, they usually cost me around £300, but they are still never as good as the ham I used to buy over there.
So I contacted the guy and it turns out his business is based in Liverpool, we got chatting and he invited me over to come and pick one up and an unlikely friendship was born.
His name is Grange and he is a scouser through and through, and he runs a food importing business which only normally sells to the trade.
What’s interesting about Grange is that he got started by buying truffles. He was at 25, a trained car mechanic who wanted a change in career. He wanted to work for himself but not as a mechanic, he wanted something he could go big on.
The question he asked himself is “What is the most expensive thing I can buy with the money I have that I can sell over and over again?”
is was six years ago, four years before I met him.
He did some Googling on the most expensive foods and came up with truffles and Wasabi. Wasabi pound for pound is one of the most expensive crops in the world, but he was naturally drawn to truffles.
So he did his research, took his money, and drove to France.
For about three weeks he drove around France meeting people, finding suppliers, farmers, casual truffle hunters in the area and at the end of his trip bought and came back with a small box of truffles worth about £4,000 at retail value, he paid around £2,500.
But what he did next would be the real start of his business, he took those truffles the same day around every top London hotel, asked to see the Chef, and sold them all…
… for more than retail value, over £5,000 to be precise.
He had bought the best truffles at the very start of the season, and Chefs loved them. A valuable lesson in quality was learned.
What he did next will come as no surprise. He went down his list of expensive foods, saw the ham, and went on a trip to Spain.
Now the ham I bought from him and have continued to buy from him is without a doubt the best quality money can buy. It costs around £500. I still don’t know how much he pays for them but I do know he sells around 50 a week to hotels and restaurants.
That's a pretty good income, and I am sure he is making a decent margin. He does lots of expensive food now too.
The point here is that he doesn’t have to negotiate price, he has good quality products and customers who will pay for that. He started with the right frame of mind…
What is the most expensive thing that I can sell?
If you like this article and want to read more like it then take a look at The Raine Report.
