Uber And NetFlix’s Empire Building Secret

In this article, you’re going to discover the critical factor Uber and Netflix used to destroy industry leaders… and how you can use it to dominate your industry.

Netflix and Uber have created some of the most irresistible offers in the world.

An irresistible offer is a core component of a successful and profitable funnel.

A great offer can easily double the conversions.  A mind-blowing offer can build an empire.

Here’s a few examples of historic irresistible offers (keep in mind that as the market evolves, what was irresistible is now ordinary):

  1. Columbia House Records — get 9 CDs for 1 penny.  Built a massive subscription service that made hundreds of millions for years.

a22. Domino’s Pizza — Delivery in 30 Minutes Or It’s FREE.  No one had ever done that before with delivered pizza.  It was a fantastic “can’t lose” offer.  You either get the pizza quickly or you don’t pay a cent.  Perfect combination of risk removal and friction reduction.  Now it’s the norm.

a33. NETFLIX — Get hundreds of movies and shows — streaming in your home 24/7 for only $7.99/month.  And you can try it for 30 days. It was so powerful that it destroyed the previous business model (video stores like Blockbuster).

a4

The formula of an irresistible offer is:

MASSIVE VALUE = 50%

CORE VALUE (25%) + PRICE TO VALUE RATIO (25%)

+

FRICTION REDUCTION = 35%

FASTER (15%) + EASIER (15%) + INVISIBILITY (5%)

+

RISK REMOVAL = 15%

STRONGER GUARANTEE & WARRANTIES OR PAY FOR RESULTS

= 100% IRRESISTIBLE OFFER.

Massive value is far more important than risk removal.  You can completely remove the risk on an offer that people don’t want and the offer will bomb.  

The final booster of an making an offer irresistible is the removal or reduction of the friction of completing the transaction.  I will elaborate on each one.

Please take the numbers inside the formulas with a grain of salt.  They are NOT written in stone.  They’re ballpark ranges designed to help you create great offers.  I put that together after analyzing thousands of offers, marketing experiments and tests.

They are designed to help you focus on the RIGHT AREAS that will have the most impact.

Irresistible Offer Factor #1: Massive Value

Massive value is where the leverage is.  

Take for an example Netflix.  They offer you movies and TV shows that would cost thousands of dollars in rental fees a month for $7.99.  If you were to rent every movie using traditional ways (or even iTunes), it would cost you thousands of dollars.

Obviously the streaming component reduces friction significantly because you don’t have to get in your car to drive to a store and drive back to return the DVDs.  That saves you dozens of hours a year, not to mention the cost of the gas.

Apple Music and Spotify give you tens of thousands of dollars worth of music for only $9.95 a month.

UBER has completely disrupted the taxi market because they are cheaper than taxIs, and they’ve completely removed all the friction, which I will elaborate on in a minute.

Increasing The Core Value

There are a lot of ways to increase the VALUE of an offer, which we’ll discuss in a moment.  However, there’s no escaping nailing the CORE VALUE of your offer.

The core value is defined inside your prospect’s mind by the following questions:

Core Value Question #1: What am I going to get out of this transaction?   

This includes every type of benefit, including: emotional, functional, spiritual, physical, time-saving, financial (saving money or making more money), more security.

The core value appeals to people’s desires.

Core Value Question #2: How is my life going to change or improve?  

John Carlton calls this “The benefit of the benefit” and it’s a great copywriting technique.  

For an example, “using Uber saves me time and money” is what people get out of the transaction.  “How is my life going to change?”  No more waiting on a street corner in the rain… no more giving cash or figuring out tips… Price haggling (which is common in some countries like Panama).

Ultimately — people need to believe that your products and services will improve their lives.  That’s the CORE VALUE of your offer in their eyes.

Raising The Value Bar

One business strategy that will NEVER DIE because it’s a LAW OF BUSINESS is: raising the value bar.  

Business keeps making the world a better place over years, decades and centuries by raising the a5value bar.  Business evolves by increasing the value it creates.

Think back a few centuries ago — having a “feast” was reserved for Royalty.  Now we can go to dozens of all you can eats, including buffets that offer 10X more options than the most gluttonous King had available.

Think back 100 years ago, when there were no commercial flights…

Think back 40 years ago, when there were no desktop computers…

The computing power inside your phone would have costed tens of millions a couple of decades ago.

Business makes the world a better place by RAISING THE VALUE BAR.

The most effective way to outcompete another company is to bring more value than they do.

Cirque Du Soleil raised the value bar of entertainment — and built a multi-billion dollar brand.  They made the old circus model all but obsolete.

Yelp has raised the bar of finding restaurants and services and has made the yellow pages all but obsolete.

Facebook raised the value bar by dramatically reducing the friction of networking and by making it easier than ever to connect with friends and family.

NETFLIX has 100X the value of watching movies and shows and destroyed the video rental business.

Another word for “raising the value bar” is DISRUPTION.  When something is so clearly better than their competitors and already established solutions it DISRUPTS the industry.  As the CEO of OgilvyOne, Brian Fetherstonhaugh said recently at a private presentation, “Disruption is normal.”

Irresistible Offers For Each Niche

The key to creating great offers is to understand your niche better than anyone else — and make them an irresistible offer.

In the guitar market, we’ve tested many things that had POLAR OPPOSITE results with the beginners and the advanced players.

Each niche and nano-niche has different CORE VALUES.  

If I just started playing football, I have different needs and desires than if I’m in College and I’m hoping to go pro.

This is why the ultimate edge in marketing comes from understanding your market better than your competitors.

The Price To Value Ratio

It’s important to separate 3 different value oriented groups:

  1. The lowest price group.

a6They simply want the lowest price possible.  This is why Walmart and Amazon are some of the biggest corporations in the world.  They sell things at the lowest price.

Unless you have a significant manufacturing or cost-effective distribution advantage — it’s best to stay away from this group. This is the realm of price wars.

It’s very challenging to build a profitable business without healthy margins.

The CORE VALUE of this group is: SAVING MONEY.

2. The highest value group

Most people who have have more disposable income or more “money consciousness” prefer buying what they believe will give them the highest LONG TERM value possible.

For example: if a serious camper thinks they can get 10 years out of $500 tent ($50/year) compared to 2 years out of $120 tent ($60/year) — the serious “value oriented” camper will choose the more expensive tent.

This is why warranties can be a big conversion booster for this group because it can increase the “value over time” factor significantly.  Saddleback Leather is a perfect example with their 100 year warranty.  It helps justify the premium price.

The CORE VALUE of this group is: MAXIMUM VALUE.

3. Luxury group: They want THE BEST

There’s another group that bypasses all “financial” logic when it comes to most of their purchases because: THEY CAN AFFORD TO!

They want the ABSOLUTE best.  They don’t care if it’s only 10% better functionality and quality and 100% more expensive — they want it.

A key note about this group is — they often want to be SEEN WITH WHAT IS PERCEIVED TO BE THE MOST EXPENSIVE.

Louis Vuitton’s success can be directly attributed to this.  Most people know that Louis Vuitton purses are $3,000 to $5,000.  Being seen with it creates a certain perception.  

The same goes for luxury cars.  All cars get us from point A to point B.  Yes, luxury cars have better motors and finer interiors — but ultimately people are buying the PERCEIVED STATUS.

If your product or service is for this group — then consider pushing the price as high as you can. There’s an inverse price-to-value ratio with this group.  Many people feel PRIDE when they pay THE MOST (and others know about it).

The CORE VALUE of this group is: ACKNOWLEDGEMENT OF THEIR WEALTH.

The Halo Offer:  The Effect Of Luxury Lines

a7I was having breakfast with Jonathan Drew, founder of Drew Estates (one of the biggest cigar companies in the world) and he explained that “We make the bulk of our profits with our lower end lines like Acid, however the higher priced lines give a halo effect to the entire Drew Estates lineup”.

Car companies have embraced the Halo effect also by creating ultra-high end versions of their vehicles.

Part of the power of the halo effect is that it makes the lower priced lines look VERY INEXPENSIVE (relative to the high end line).

POWER-QUESTION:  What would be the ultimate Halo offer for your business?

Maximizing Perceived Value: Bonuses

One of the easiest ways to increase the perceived value is to create the right bonuses for your offer.

Bonus Strategy #1: Too Many Bonuses vs. The Perfect Bonuses

For years, many info-marketers would add as many bonuses as possible.  The belief was: MORE BONUSES = HIGHER CONVERSIONS.

Recent tests have shown this can be the opposite.

What maximizes conversions is the PERFECT BONUS that has a STRONG perceived value.

Here’s the ACID TEST: If you can’t sell the bonus on its own — it has VERY LITTLE PERCEIVED VALUE and won’t do much for boosting conversions.

And you should test REMOVING most of your bonuses.  It’s quite possible that will increase conversions.

A solid strategy for increasing perceived value (without spending too much) is to offer DIGITAL BONUSES (ebooks, audio recordings, videos) that come with your hard goods.

It’s also a great strategy for taking offline leads and bringing them into your digital funnels.

If you’re selling a product in stores, you can offer a powerful exclusive offer they can download if they go to your site.  This can dramatically increase the long term value of those clients.

Bonus Strategy #2: A Hidden Profit Booster: Improve the EXPERIENCE Of The Customer

It’s a BIG mistake to only focus on PERCEIVED VALUE.  To maximize profits, you should also boost the REAL VALUE of your products.

This leads to more profits in 2 ways:

  1. Reduces refunds
  2. Increases long term sales because people got value and want to continue doing business with you in the future.

Any bonus that helps educate and motivate people to USE your product or service is a POWER-MOVE.

Here’s an example that helped reduce refunds by over 40% in one of our businesses.

We created a digitally delivered 30 day coaching program that educated and motivated prospects to use the information.

First of all: it shows them you care.

Second: you’re helping them maximize the value of their purchase.

Third: you’re becoming a “valued ally” in their minds by constantly reappearing.

Bonus Strategy #3: Unadvertised Bonuses That Surprise And Delight

Another powerful strategy is to SURPRISE people by giving them more value than they expected.  

This can go a long way for maximizing lifetime customer value.

Irresistible Offer Factor #2: Friction Reduction

a8I wrote an article about reducing friction in your personal life to increase your quality of life.

Friction reduction is an underrated, often ignored process that can dramatically increase conversions and even build empires.  It is the KEY that Uber and Netflix used to become the market leaders.

What creates friction in transactions?

  1. Effort completing transactions
  2. Longer time completing transactions
  3. Visibly experiencing the cost of transactions

Friction Removal Tactic #1: Remove the effort in completing the transaction

Imagine if you had to fill out 3 forms and fax them in order to buy a candy bar.  How often would you buy candy bars ?  Probably only a couple of times a year.

I remember the first time I bought electronics in Panama.  It was a 3 step process that shocked me.  First, I had to tell the salesman what I wanted.  Second, I had to go pay at the cashier.  Third, I had to bring the receipt to another guy who gets my merchandise.  

Evidently,I do my best to not make purchases there.  

The easiest way to complete a transaction is to simply PUSH A BUTTON.

The world is moving to PUSH BUTTON SOLUTIONS.  Push a button to get an Uber vehicle.  Push a button to buy whatever you want from Amazon.  Push a button and download your favourite music, movies and apps.

POWER QUESTION: How can you make your services and products — a PUSH BUTTON SOLUTION?

Friction Removal Tactic #2:  Reduce the time in completing the transaction

Closely related to the effort of completely a transaction is the TIME it takes to complete it.

a9If you go to a supermarket and it takes 20 minutes in line to get to the cashier, you’ll probably do your best to avoid that supermarket in the future.

Speed is king when it comes to transactions.

One of the things that sucks about living in Panama: things are painfully slow at the checkout counter.

I’m always pleasantly amazed when I go to the USA and experience ultra-fast transactions.   I was recently in Austin and ordered a burger and they had it set up where:

  1. Someone makes sure you’re clear about your order before you make it to the cashier.
  2. You pay at the cashier
  3. Someone brings you your food

It was one of the best fast food transactions ever.  And it removed the pain of waiting for them to finish my burger at the counter.  I went to my table with my friends and we relaxed as they prepared the food. The burgers arrived a couple of minutes after.

One of the best examples of all time for reducing the time is: 1 click purchases.  I’ve personally probably bought TWICE the amount of stuff because of the 1-click.  

Apple has done it with apps and “Touch Pay”.  Just use finger print and you’re done.

Friction Removal Tactic #3: Make the visual experience of the cost of the transaction INVISIBLE

In the book Predictably Irrational, Dan Ariely explains how there’s an emotional pain every time someone has to take out their wallet.  This would explain why some people NEVER want to take out their wallets.

The more you can “hide” the transaction, the more friction you remove.

Some perfect examples of this that have helped build industries are casinos, Uber and credit cards.

Casinos figured out a long time ago that if they make clients use chips instead of cash, the patrons will devalue the money in their minds.

Some casinos even have $100,000 chips.  If you’re playing $100,000 baccarat hands, you’re only using ONE CHIP.  It’s a lot less psychological resistance than putting $100,000 in cash on the table for 1 bet.  The chips helps reduce the visibility of the cost of the transaction.

Another one of the reasons Uber is so successful is because they completely removed the financial exchange from cab rides. No more figuring out the tip. No need to pull out the cash.

Credit cards is perhaps the best all time example.

Credit cards are so effective at removing the visibility of cost that the majority of people end up tens of thousands (even hundreds of thousands) of dollars in credit card debt.

POWER QUESTION:  How can you reduce the visibility of the cost of your transactions?

Friction Removal Tactic #4: Payment Plans

Payment plans are another method that can reduce the financial friction for people.  

Some people don’t like to part with a big chunk of money all at once.  Some people don’t have the funds to pay it all upfront.

Payment plans can increase conversions.

POWER QUESTIONS:

How can you increase the value of your offer?

How can you create an offer that crushes everyone else’s?

Those are 2 power-questions to cogitate and marinate on…

Irresistible Offer Factor #3: Risk Removal

Risk removal is a great strategy to boost the effectiveness of your offers.

Some methods include: guarantees, warranties, and pay for performance structures.

Risk Removal Tactic #1: Longer guarantees

a10There’s nothing special about “30 day” or “60 day” guarantees.  It’s about as special as “gravity”. If you want your guarantee to have an impact, I suggest going with longer guarantees like: 90 days, 180 days or 365 days.

Risk Removal Tactic #2: Conditional double or triple your money back guarantees

Another strategy is to offer a double your money back or triple your money back guarantee, conditional that they do certain things, such as: take before and after pictures, print business cards, send you a video etc…

For an example: I offered a triple your money back guarantee on a skin care product.  They had to take pictures before and after.

If you offer a business product, you can do something similar by asking for proof that they: started a business, printed business cards and/or built a website or studied the entire course (which is trackable online).

Do not let the fear stop you from using this strategy.  Less than 0.1% of orders will attempt to take advantage of it if you structure it properly.

Risk Removal Tactic #3: Longer more extensive warranties

I bought a $4000 water machine a few years back and I felt a lot more confident with the purchase knowing there was a 5 year warranty.

Saddleback Leather offers a 100 year warranty on their suitcases and luggage products.

Screenshot 2016-08-01 14.49.17

Car companies sweeten the deal by offering longer and more extensive warranties.

Risk Removal Tactic #4: Pay For Performance Deals

If you’re do services that have measurable results — you can increase your income by multiples and increase your conversion rate by offering pay for performance deals.

This is especially true in the business world.  I make a lot more money than most consultants because most of the optimization deals I make are PAY FOR PERFORMANCE deals.  This removes most of the risk for the client because they only pay if results were delivered.

This is one of the most powerful ways to separate yourself in a market saturated with consultants and competition.

You can also ask for a small fee upfront so your clients have a bit of skin in the game with the bulk of your revenue coming from the pay for performance structure.

This is also a great way to work with employees within your business.  Everyone has interest alignment.

To sum up this article, first focus on creating massive value by knowing what your audience’s core values are and hitting it.  Second, figure out which financial tier you want to appear to and create the appropriate “price to value ratio”.

Next, aim to reduce the friction in your business by making things faster, easier and minimizing the visibility of the pain associated with the transactions.

Finally, remove all the risk by creating your industry’s strongest guarantees and warranties.

This is how you create a world-class irresistible offer.

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Meet the Author

Matt Gallant

Matt Gallant is a serial entrepreneur who’s collected over 7 million leads in various industries, scientifically tested well over 10,000 different marketing ideas, generate tens of millions of dollars online and built his dream international lifestyle. Matt currently resides in Panama with his beautiful wife.

2 comments… add one
  • Bo Lais Aug 2, 2016, 10:59 pm

    Matt –

    Great article. I was turned onto this article from Dan Martell and it was worth the read. I am in the process of putting together a very strong guarantee for my startup with my attorneys. It makes me a bit uneasy but if the attorney’s help me structure it correctly I believe it will improve our value proposition greatly. I look forward to reading more of your articles.

    • Matt Gallant Aug 5, 2016, 10:10 pm

      Thanks Bo,

      Doing that should give you a big edge over the other bland offers of your competition.

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