Pricing Strategies For Any Business

Welcome back to the Magnetic Marketing Podcast. I'm so excited for you to hear this episode. Dan Kennedy has brought together a panelist to discuss the real pain points in commoditization competition, AKA your pricing strategy. And as part of the roundtable today, you're going to also be able to hear from Jason Mars, who is the co-author of Dan Kennedy's book, No BS Price Strategy. Now this group of experts is going to be talking about how to make sure that your pricing strategy is correct, because very often it's easy to put ourselves in a race to the bottom because we feel like it's the easiest way to be able to get customers through the door and keep them. However, this is the number one way to destroy your longevity and your margins. We're going to ensure that your pricing strategy fits your business so your business lasts and your customers keep returning.

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Welcome to the Magnetic Marketing Podcast with your host, Dan Kennedy.

Good afternoon, everybody. Welcome to another Diamond Call. We are going to be talking about price today. And I have 3 really smart GKIC members all dealing with price issues and commoditization issues and competitive issues who I think will give you some very good viewpoints on on the big questions of price. And so I'm going to let Bill and Jeff and Jason each do their own little thumbnail introductions and tell you what they would like you to know about them, which probably does not include their cell phone number or follow-up questions, but might include a website. So why don't we just go in that order? Bill, why don't you go first?

OK, thanks, Stan. Glad to be here. Thanks for asking me to come on. My name is Bill Gough. That's G-O-U-G-H, Gough with a G. And my career path has been that of an Allstate insurance agent since 1984. And if you've been around for a while, if you remember going into the Sears store years and years ago, we were there. And that's what I started at as an Allstate agent, just a single guy. Selling insurance, policy peddler. And I discovered the— came to the Dan Kennedy world somewhere around 2004 and started reading the GOAT newsletter. And I've ascended all the way up to where I worked with Bill Glazer in Peak Performers and then into Bill's InfoMastermind group. And now I've been in Dan's for a while. Because in 2008, what I did was I wanted to start a a marketing, an info marketing business to help other Allstate Insurance Agency owners grow their businesses like we were able to do it. I had started, I did pretty well. We had a great career with Allstate, and basically we had a good career with Allstate because we basically did, I just followed around what the very best guys were doing. I just tried to get in front of them as much as I can and basically swipe and deploy their processes and systems. Long story short. So I was pretty good at that and pretty good at putting stuff into action, because as we all know, action is the key. And so we had a good career, so I just wanted to go teach these guys what we did. And that's basically it.

All right, Jeff?

All right, well, thanks, Dan. Humbled to be on the call with everybody today. So Jeff Genachovo, co-owner of Gardner's Mattress and More in Lancaster, Pennsylvania. We help couples who have the most adverse sleeping conditions wake up happy and pain-free. Even if you have to deal with a spouse that snores louder than a Mack truck, we can help with things like that. So we're an all-inclusive, high-end sleep shop, kind of in a boutique setting. We focus a lot on the consumer experience and consumer education, teaching them how to consume our product, our solution, which is a mattress. We sell mattresses at 5 to 8 times the national average on a very regular basis. Actually, as I speak, one of my guys is wrapping up a sale for an $8,000 adjustable Tempur-Pedic set, and that puts today's total at about $14,000. And that's for just a run-of-the-mill Thursday in April.

Thank you, sir. And Jason?

Hey, Dan, thanks for having me. Good to be talking with you again. My name is Jason Mars. I'm the CEO of Strategic Pricing Center. I guess most of the people with GKIC that might know me would be from the book that we co-authored, No BS Price Strategy. Cool.

All right, guys. So what I want to do for people is really sort of go around the table with just the big issues of price, which I think are commoditization, competition and protection of price and profit margin and so forth. So we'll start with the commoditization problem, and I'm going to go to Bill first because I think probably of any of you, he and all of the Allstate insurance agents he works with are getting beat over the head by this daily as much or more than anybody, particularly with the, you know, the base products—auto insurance, home insurance, property and casualty, and so forth. So, and I think it's significant that a recognized brand like an Allstate has—many people would think it's all positive, but it is like all coins, has two sides, a heads and a tail. And so, Bill, give me what your, what your counter-commoditization strategies are that you used and teach, and what you tell the Allstate guys about Allstate and Progressive and the online marketers and so forth. Did I lose you, Bill? All right, well, while we wait for Bill Let's leap over to Jason then, and pretty much the same question. I mean, we'll pick up where you left off. You really are, are dealing with the ultimate commoditization, which is a service that everybody is being told is free. So, so what do you do in that business? And as your role as a price coach, what do you tell people in generally about, about commoditized environments?

You know, you touched on it just a little bit when you were talking about bill. Everything has two sides. You know, it's not necessarily a good thing or a bad thing. So when you look at free, you think, okay, this is impossible to overcome until you really look at it. Nothing's really free. There's costs there. You've got, you know, to go through the government system, one, you have to go through a government system, have your name in there. You've got to wade through all this red tape. They're going to make the choice of the therapist they give to you, which is They don't have the same rules that you have out in private practice. In private practice, you have to have a certain level of skill and ability, and within the government programs, they don't, which is sort of a messed up thing, but the people don't know that unless you tell them. So that's kind of a big cost when you're going to somebody like that. You've got this timeframe, so your kid is going along, not getting any better because nobody's there to help him because he's still wading through the red tape. Then he gets somebody who's not any good, Well, if you really put it to people that way and they can pull the money out of their pocket and pay for it, they can get going a lot faster and get the problem fixed a lot faster and probably cheaper when you start looking at the time constraint than had they gone through the so-called free system. So, you know, I think that's a big thing to people. Go ahead.

So as a broader application then with all of the people that you advise about price, What I hear are two things. One, that regardless of the commoditization of a product or a service, there is a person who would rather pay or pay more if they're shown differential in quality or time or convenience or whatever. And too often there is differential. People allow themselves to be commoditized when they don't have to be because there is differential.

Absolutely. Particularly with anything that has any kind of a service and one-on-one relationship type piece to it, there's an easy and obvious differential that can be expounded on. But even beyond that, you can get into how you present your marketing. You know, if you're not dealing with people one-on-one, one-on-one, how you present yourself in your marketing or your company in your marketing, and really how you innovate and change things and lead the field, so to speak, and be that innovator and that person who's defining the conversation really plays a big role in making the competition, for the most part, irrelevant in many respects.

See, you know, and a point I'm going to make to people, and I'm betting you would agree, is that This is not just about better sales presentation, better marketing, even different— actual differential in features or benefits, 10-year warranty instead of a 5-year warranty. This is a lot about who you go after as a customer and aim your marketing at. I would assume in the case of the therapy business, there's some profound biases you found in the parent who would choose you versus waiting in line down at the free window? Yeah, absolutely.

There's huge differences and there are different buyer types. You know, when you look at it from a price perspective, there is the price buyer and then there's the value buyer and then there's the relationship buyer. And as you move up the chain, the more valuable they become and really You know, I think there should be a fourth one which is the value of relationships. They see the value of what you do and how you've differentiated what you do to them in a way that appeals to them, plus you build a relationship with them. You know, it's the reason you have people stick around for a long time. They feel like they have this connection to you. And so they hang around and they pay big prices to be on your private side in order to maintain the connection and to get the value that you provide. That's a way bigger— what is it— iron cage around the herd than you get from just being like everybody else and being wishy-washy.

All right, uh, has Bill rejoined us?

Hey Dan, I'm back.

That's good, terrific.

So, uh, so I did hear the question. Yeah, thank you, thank you. I did hear your question a while ago. Okay, all right. And so, um, jump right into it if you'd like.

Yes, please.

Okay, well, you're so correct. I mean, with the insurance, especially automobile insurance, has been— GEICO and Progressive have done a wonderful job in the last, I don't know, decade and a half of turning auto insurance pretty much into a commodity. I mean, pretty much you ask— you walk up to anybody on the street, you ask them to fill in the sentence, give me 15 minutes and I'll save you. 15%. I mean, they could just about quote that for a while. With Flo, who has established herself as a prima donna salesperson on TV for Progressive, and of course, the crazy caveman guys for GEICO. I was just fortunate being at Allstate that we came up with Dennis Haysberg about a decade ago when he was playing the President of the United States on the most popular TV show in the country at that time, 24, and he has just turned out to be great for us. And of course, Mayhem now is too. But again, this all gets into— it's all talking about brand. For the small business owner, for the small business owner like me that operates here on Walnut Street here in Florence, Alabama, my biggest advantage that I have is the relationships that I have with my customers, prospects, and centers of influence. And a lot of that is done by personality. Of course, we've learned how to do this to full advantage when we came into the GKIC world in 2004. I was like a kid in a candy store when I learned some of this stuff. We were already doing some of it before GKIC, but when I came to GKIC, I thought, oh man, this is great. So we started doing some really cool stuff. You just about can't turn on the TV these days without seeing an ad on TV about automobile insurance, and every one of them have the same message. We save you money. Even Allstate has those ads. State Farm has those ads. They all have those ads. None of them can possibly, all of them, do that. But so that's the challenge that we're faced with here. The other challenge that we're faced with as small business owners is letting the brand do the work for us. And Allstate does a very good job of convincing their agents to do that. But guess what? They have to. That's their biggest advantage as a corporate person. But for me, and probably most of the people listening on this call, as small business owners and entrepreneurs, We have to figure a way around that. One of the best strategies that we use to fight this, and this is something that I learned, actually I learned this statement from the number one guy in the country, one of our coaching members. He's the number one Allstate agent in the country last year. His statement is, you might want to write this one down, "When value exceeds price, people buy." Those six words, those five words are pretty good. When value exceeds price, people buy. It's so important it happens every time no matter what. Everything that any of us have ever bought, value has always exceeded price. That's why we bought. I mean, Josh and I, we were traveling on a trip here recently. We needed some batteries for something. We're forced to buy the $8 batteries at the airport, and when we get to the other place at the hotel, they're only $4. But if we'd have bought them at the Walmart, we could have paid $2 for them. But we needed them at the time, therefore we paid $8. I mean, It goes into everything. So we build process and systems all around that and try to show that we're more valuable. Our agency is so much different than the rest. And I mean, it's all in— I think Jason said it— it's all in how you present yourself. And we have to present ourselves doing it this way or we're totally dead. We're just robot price-giver outers and we hope that somebody calls that's not happy with their current carrier and if we get close, we get them. But if you do it the right way, really, really pretty cool things, pretty cool things happen.

So, you know, in my youth, direct sales in the home of encyclopedia and vacuum cleaners and cookware and so forth was a much bigger thing than it is today, although all but the encyclopedia industry does live on. And over the years, I've had very I've had very good friends who were and are in the vac business. And for many years they were selling a $600 to an $800 vacuum cleaner in the home. And the same with cookware, the business Zig Ziglar came out of, $600 to $800 sets of pots and pans. And always, even today, if you, just baldly say to somebody a price like that. Oh, what did you pay for those pots and pans? $800. The immediate reaction is, you know, you're a lunatic, and nobody would pay $800 for a set of pots and pans. Or Cutco knives, $600 for a set of knives. And however, Lots and lots and lots and lots of people do. And it is largely because of the formula you just enunciated. It's because somebody was able to successfully decommoditize those commoditized products. I mean, if you want pots and pans and you walk into a Target store, you got a vast array of pots and pans for a whole lot less than $600 to $800 a set. Same with knives. But somebody was successfully able to decommoditize those items. And create a sense of value for their particular product that exceeded its price. I wanted to ask you about something else. So I have an assumption, and I don't think I've ever asked you about it, so I don't know that it's true or not, but my assumption is that when you see all the price-driven advertising in your business, the GEICO and now State Farm and— as you say, Allstate's in the game and they own somebody that's in that game. Is it Esure or— Esurance. Some company. Yes, Esurance, yeah. Esurance. My assumption is, is that those companies are largely passing around the same buyer who's somewhat like a flea hopping from dog to dog. Is moving around almost in a continuous circle, and there are other buyers who are— sort of ignore the whole thing. Is that, is that fair or not fair?

You're, you're spot on, spot on.

And it actually— years ago, back in about 2003, about 10 years ago or so, we started buying what's known out there in the insurance industry among agents is something called internet leads or net leads. And there's other industries that get them as well, of course. But that was pretty profitable back then, but they have gotten to where they have just— the quality of that prospect has really gone way downhill. And when you start measuring retention of that segment of the business, they are jumping around. And so it gets back to exactly what you said, Juan. Just a minute ago, what you always say is, you know, who you really going after. You got to have a real clear target on who you want to go after.

Yeah, yeah. See, my point I make to people is that, so the best, as Jason said, the best glue is relationship, right? And so I can never really tell by me, but I think, so like I see those commercials the same as everybody else does,— and I spend a fair amount on insurance. I mean, I've got 5 cars insured. I've got 2 homes insured and so forth. But I would never dream of responding to any of them to get a price quote. I've got an insurance guy. He's my go-to guy. We have a relationship. And if I had a price question any more than a coverage question, I'd call him. And so I tell people all the time that all the relationship marketing stuff, which is the right thing to do, is wasted on the wrong customer. And so you've got to be clever about who you get as a customer or client in the first place if you hope to maintain them through a relationship. I'll bet in your agency— so how long were you— how long did you run your agency? Uh, 27 years. I'll bet you've got customers that date almost that long. Oh yeah. Yeah. And see, they're not calling GEICO to get a price quote. I mean, you don't really have to fear them calling GEICO to get a price quote because they're not going to call GEICO. And, and that's really That's sort of the illusion of price commoditization is it affects other customers. It doesn't necessarily have to affect yours. Jeff, I want to give you a whack at this. Okay. As you said, you guys are selling at 500%, 800%, maybe more than the average, and you are basically selling a product that in mass advertising and in the many consumers' minds is a commodity. Oh, absolutely. You know, a mattress is a mattress is a mattress, right? Absolutely. So, and so what's your take on the, on the commodity commoditization issue?

Yeah, well, you know, in, in the furniture and mattress business, it permeates all levels. So I just got back from a week-long trade show where it's all about price. I mean, every day they publish a daily trade journal at the show, and it's all about price. That's just all it is. So it's— so I want to almost give these guys a pass because it's what they're being told. But, you know, you also don't have to listen. I think the big takeaway that I wrote down from just listening in thus far is it's— and you just kind of touched on it, Dan— it's, it's who you're pointing your advertising at. Is big, that relationship person won't respond to the 15 minutes or less call or 15% in 15 minutes or less. So it's all about who the target is. So as an anecdote, here's an example. So a customer that I worked with, which is rare anymore, but did and actually happy I did, came in and spouted off, I want a $1,000 firm king-size bed from Simmons with a 25-year warranty. What do you have? And I said, okay, what is it about the 25-year warranty you're looking at? Well, that's what I want. Well, why? And we just basically— we went through— I'm not going to bore everybody with all the details, but one by one, those 4 points— the warranty, the price, the brand, and coil count was the other one— I just one by one picked those apart. And the reason she was asking for it is because she saw advertisements that said a $300 bed will fix the problem. She felt she was doing herself and the store a favor by buying something 3 times that price, which turned out it wouldn't have been at all what they wanted. So she ended up leaving our store with a $3,500 king-size adjustable bed set, one of our lower-end offerings of memory foam, but still something very nice that suited their needs. Come to find out, they just redid their bedroom. They love watching movies in bed. The kids are now out of the house, and they plan on spending a lot of time hanging out in the bedroom reading books and watching movies. So once I found out what their actual need was, the price, it wasn't even an issue. I sold them 3.5 times what the other 6 or 7 stores were happy to take. I boosted by 3.5 times. So it's, it's who you're pointed at and how you're communicating your value is how we get out of that whole commodity business.

Well, the big thing you pointed out is understanding what their actual needs are and fitting them, which is a huge, huge piece from my perspective in the businesses that I've dealt with on this.

Well, yeah, I mean, I think so even in a product or a service category that can be viewed as commoditization. As soon as you inject expertise and expert diagnosis in it, things change, right?

Absolutely. Yeah. I mean, our best customers go through a process, and that's, you know, they find us usually, you know, now we're now approaching the 70% number of referral word of mouth market share number. You know, I know you're the guys to go to. So we're approaching that 70% number, which means we can turn off the more costly advertising. But so they find us, then they get our book, whether it's download or hard copy. They visit our store, they'll spend anywhere from an hour to 3. They do the Dream Room and then they buy. And that's the process. So we're focusing everything we can to get people into that funnel, get them to take those steps. And, you know, once we book that—

I want to hit the Dream Room in a second because I want to go— and I'll stay with you out of the gate, although everybody is welcome as Jason just did to chime in at any point. But I'll go from commoditization now to competition because people's attitudes about their competition and their belief systems about how consumers deal with competition, I think suppresses their their pricing a lot. It makes them unnecessarily timid about price. So commoditization is one thing. It is that an apple is an apple is an apple is an apple. Competition is another in that whether an apple is an apple or an apple is an orange, there are businesses in the same category, in your case in the same geographic space, who are advertising in the same places. And competing for the attention and interest and dollars of the same customers. So in order to gain some sort of competitive advantage, what is it that you guys have done that you think is like the best thing you've done? And I'll stay with you, Jeff, to start with.

Okay, yeah, for— I mean, for us, it's The most tangible thing, most visual thing, and experiential thing is the Dream Room. So for those that aren't aware on the call, the Dream Room is like a hotel suite in our store. And what we do is upon spending that time with you on the floor, we'll move that mattress into this Dream Room, and you get to experience the bed in private. You know, watch TV, read a book, take a nap. You know, we just let everybody know, don't do anything that you don't want mom to see in here.. And, you know, basically that gives them the chance to really try out the bed, relax without the noise of the store, without people looking at them, which is the number one concern for women, is the dirty old sales guy looking up her dress as she lays down. We just take all that out. And so that's the number one experience that we deliver. We've had one competitor attempt to copy it. It was like one of those things where we just kind of said, oh, look how cute, and moved on. We didn't put any more thought to it. But for us, that's the one thing that we really kind of dominate our competition with, and it's not on price at all. It's about experience, and it's about guarantee because once a customer does that, we guarantee their purchase that they'll be satisfied with it for a year. Which, on another note, is that guarantee rate is less than what a lot of our competition is saying, which we overcome by saying, look, anybody can print anything on a piece of newspaper or on a website. Those are just words. But for us, the actions that we take through the Dream Room and through that process, those are what matters. And once we say it that way, customers, they get it.

And they like the experience. Now you told me, is it still holding up? You're at 100%? Mm-hmm. Yep. Yep. So 100% of the people who spend time in the Dream Room on a mattress they have chosen off the store floor to then go sample, they buy?

They buy. Yep. Yep. And also, I'll preface that they may not buy that exact day. And the only reason they don't is because they go in there— the biggest reason they don't is they go in there thinking that they came into the store spending $2,000 or $3,000 and they come out of the Dream Room looking at an $8,000, $10,000 bill. So it's more about, you know, just reconsidering the purchase. But we are batting 1,000% on that. And the longest delay we've had I think has been 2 weeks, maybe 3. But we're 1,000%. It's something— it's a tally we keep score of.

It's measured. Very good. So Bill, let's go to you next. So obviously the competition's intense. The competition is heavy. The competition is ever-present. So— and you have two things to be concerned about in your business, right? Acquisition of the new customer and you have retention of the customer you've already got. So what do the— what are the best competition combat things that you've discovered, did, do, and teach? Well, we try to be—

you mentioned apples to apples. We try to be the big fat juicy orange. Whenever we— We love to hear the words apples-to-apples comparison from time to time, because what we do is we combat that. Well, you know, I appreciate that. We hear that a lot. But, you know, what if your apple's got a bite out of it? Or what if it's got a— worse than that— what if it's got a worm in it? And then we go and then we talk about the things that we do, you know, the value that we provide here at our agencies that we don't— that makes us so much different from everybody else. Now a lot of them do, and very few of them have anything to do with features and benefits of the— now we do offer a couple of features and benefits, but we throw those in at the end. But when we do, we're always— everybody is scripted in the fact that they— now what this means to you is this, Mr. and Mrs. Customer. We explain to them what it means to them rather than— because I guarantee you, if you pick up the phone and you'll just call any insurance agent for a quote. They might not even ask what your name is. They're interested, okay, what kind of cars you got, how many tickets you had. They're like robots. That's how our industry has gotten to. So we try to do so many different things for that. We engage the customer, and we have specialists in our agency. We try to have the right person in the right seat. For example, We have a claims specialist. In the event, Dan, that you have to file a claim, we got Jill in here that's going to hold your hand through that process and make sure that you understand everything that's going through. The same thing, Dan, if you ever have a question about your account, about your bill, anything to do with that, we do a thorough job of explaining this. Nobody ever does this. Communication is a big part of it, and we do that through all the stuff that you guys teach with newsletter, email drips, book. We've— you know, Wendy has written a book too. And then we do several customer appreciation events a year as well. But one of the things that we do is that we actually offer a 5-point guarantee, including a money-back guarantee on their insurance if they're not satisfied. So we— and it's a little tricky, and a little play on words.. But basically we're stating the company's policy right in the form of a guarantee, which I've never seen it done outside of here or who we teach. It's just some different little things like that. We just try to show them with a big fat juicy orange compared to the other guys out there.

Do you deal with— in the agency that now Wendy runs, it was yours, or— or the agencies that you coach, are you dealing with a lot of attempts to cancel?

Absolutely. That's, uh— So what does that look like? Okay, we try to get ahead of those with being proactive with what we call insurance reviews or policy reviews. And so 60 days prior to renewal, We teach a process where we communicate with them with 4 different media, starting with voice broadcast, direct mail piece, which is usually a postcard, email if we have their email address, and typically our members have— 75% of them do, which is way above average. And then the final piece, of course, is outbound calls. So we talk with them, and if there has been— The main reasons for cancel is big rate increase over prior year. And we teach that to get proactive about that. Anytime that somebody calls into the— what we teach is anytime a call just comes straight into the office and says, hey, I need to cancel my policy, that person is turned over to— well, let's just call her saving Sarah. We turn her over to the closer, or Wicked Wendy, that, you know, that we're gonna— the person that's gonna get on the phone is gonna find every way possible to keep that person. So that's— it's really proactive about the process.

It's a big mistake made in a lot of businesses, a lot of small businesses, is— I mean, you've just enunciated an organizational principle that people really need to get. It goes on in private practices all the time. Where any call is handled by anybody who's not doing anything else at the time. And so they constantly have people ill-equipped taking and dealing with calls, whether it's new prospect or cancellation or anything in between. And business owners have got to get a grip on that. I mean, what you said, the right person in the right seat, I mean, that's exactly what has to happen. Jason, I'm going to jump to you on this. And so competition in general and competition specific to your business.

Sure. Obviously we've heard some great things with getting rid of uncertainty as Bill was talking about and really walking people through things to make them feel comfortable in the dream room, which is a really awesome name that Jeff uses, which I would guess that also triggers a little reciprocity in there somewhere, walking people through that type of commitment in the step. So dealing with competition specifically, one of the things I really like to do, which I think I said earlier, is innovate. Wasn't Ray Kroc that said, "I innovate faster than they can knock it off," along those lines? It's close, yep. Yeah, yeah. So we really try to do that, and in doing that, coming back to this whole idea of really understanding what it is that your particular customer, client, or patient, what their needs are, what their— how they're really defined as a person, what keeps them up at night, the better you can align with that and understand that, the better you can innovate. You know, so once you're innovating, then you're the one defining the conversation that everybody else is knocking you off and trying to commoditize you. Now the next piece that really goes to that is when you go into, you know, whether it's my business or going into somebody else's, is trying to structure the economics of it So when you run some print advertising that gets out there in front of everybody, that if they try to knock it off, they're going to feel the pain. You know, if you come into things that I've structured, the way I do it is like Proactiv does, we take that loss up front. So, you know, we run, okay, XYZ program this month. Well, next month there's going to be 40 of those in the magazines. But they're going to go broke because they don't understand how the backend works with all the different marketing pieces that go into it to make sure that these people don't get away and that they come in and that they get to hear the story said the way that we want to say it. You know, and kind of going along with that, to keep things a little quieter and not get out to the competition quite as quickly is working your own house list because if you know your market really well and you've got your list, you can kind of filter them out to some degree in your marketing when you're doing direct mail. And so you can get out there and start building these things up and building the reputation of it so you're getting the referrals off of it before you even get into something as broad-reaching as print or radio or TV or whatever else. You know, so those things I find work quite well.

The— so sort of the last thing I want to go around on now is price itself. I mean, the temptation, I think, to compete on price to feel pressured to compete on price. It's intense in some fields. It's incredibly intense. I always feel badly when I see a company destroying their profitability by doing so. Right now, the mid-range restaurant category is just brutal. I don't envy anybody who is there, and my prediction is the company Darden that owns Red Lobster and Olive Garden and so forth, I think they're gonna find themselves in real trouble if they continue on the path they are on. The most recent Olive Garden promotion is $12.95, you get a full dinner in the restaurant.— so salad, breadsticks, entrée, beverage, and you get a second entrée to take home, you know, to eat for lunch tomorrow. So if you think about that price, that's $13 divided by 2, which is $6.50, which is $1.50 more than a sub sandwich at Subway. In a paper sack. So Olive Garden is sitting you down, they have a waitperson waiting on you, they are serving you on dishes that have to be washed, they're serving you a salad, bread, and a full entree, and a beverage, and Subway is serving you a sandwich made by one employee and stuffed in a sack for a buck and a half less. Now admittedly, Olive Garden can sell booze, but It's still a real tough road to hoe. My assumption is now there's no profit in the food at all. The first profit is in the dessert or the booze, and these businesses keep pushing their profits further and further back. And if people emulate that example, they can get themselves in real trouble in a hurry. But the temptation is there when you see advertisers all around you in your category doing it. We even have it in, you know, Jason, you mentioned people stay around me and pay premium price to do so. I mean, we even have it in the info marketing industry where you have this sort of race to the bottom now. There's somebody actually pitching a $7 a month coaching program, which is— yeah, I mean, it's laughable on its surface. But so, your footlong from the month of coaching? Well, exactly. Yeah, exactly. So, so what I really want to talk about last here is, is how you guys feel about an approach, a price price elasticity, premium price, preservation of profit, how you like stay okay with being 5 times, 8 times higher, 2 times higher. There's no percentage above free higher, but, you know, substantially higher. How you resist the temptation not to try and compete on price. And, you know, And I guess, Jeff, why don't you go first?

Okay. So for us, you know, that resistance is actually pretty easy to overcome or the struggle to advertise and price is easy to overcome when I simply look at the number of costs to acquire. It's just too damn high to try to advertise on low price. To the Olive Garden profit example, I mean, you know, my average cost to acquire is in the $350 to $400 range, depends on, how they find me. But I can't advertise a $399 mattress with hard cost at about 50% of that price and make money. And yet that's how the whole industry does it. So for me, I just don't— I don't do it. And about half a dozen times I was asleep at the wheel and did it, I was less than impressed anyway. And that was just— that was the worst one, was when I took out a full-page double-truck ad on Black Friday and got a whole bunch of people in my door that I just didn't like at all. I don't know what I was thinking, but, you know, hey, I guess we're all entitled to make a mistake once. But I just don't do it because it's too costly for me to acquire. I had a vendor at this trade show I was at last week want to show me all their wonderful new low-price stuff. That they need that only serves them to put volume through their factory but does nothing for me on the end of the spectrum that I want to work with them on. And, you know, I really needed to spend time with them focusing on products that are more profitable for me because they're kind of lagging right now. And really all they did was frankly shoot themselves in the foot, and now they're on the chopping block. Because there was nothing there that they had to show me that's going to reinvigorate their offering. And so their floor space is too costly to maintain.

We may need to move on.

To the question of maintaining profit, it's in the process for us the minute they're greeted in the store. So rather than us telling them all about what we can sell them, which is pretty much what we say. We, we ask the question of if they're open to a conversation, to sit down and discover what they need in a new mattress to help tomorrow morning feel amazing. And no one turns that down. And once that conversation is had, we're setting up all the parts of the sleep system— the mattress, the box spring, the frame, the sheets, the protector, the pillows, the Dream Room process, which gets you the 1-year comfort guarantee, all of those things. If we can drive them into that eventual dream room visit and add on all of the additional products, that's where we maintain our profitability. I mean, well, it's nothing for us to sell a $1,000 mattress at the lower end of our spectrum, but to add on $500, $600, $700 worth of accessories, we do that on a very regular basis, and that's where the profit comes from. On those kinds of sales because the profit on that $700 extra is at 73, 68 points as opposed to, you know, 48 to 53 on the mattress itself. And not doing that and leaving that money on the table is the quickest way for my employees to get on my hit list. It's bad when I see a mattress go out the door without any any add-on sales. So that's where we keep our profitability is in things like that.

I want to back up to something you said and I'm going to tell you how most people would react to it. When our price is in part governed by the fact that it— to do the advertising you want to do, the customers that come from advertising as opposed to from referrals are costing you $350 give or take. So what most people would say— well, first of all, most people will blanch at the idea of $350 for a customer in a retail store. But then what most would say would be, well, so really you're just spending too much to get a customer. Why don't you just do things that get a customer at $35 instead of $350? Why don't you just make a Facebook post? Yeah, that's free.

Yeah, there you go.

Sorry, couldn't help it. I mean, well, but, but I mean seriously, that's what's happening. Yeah, I mean that, that would be a very common reaction is you're just doing things that are too expensive and you ought to do things that are cheaper to get a customer.

So like, what's your reaction?

Well, do things to get a cheaper customer, you get a cheaper customer. You know, the Black Friday customers I told you about, they came in, I didn't like them. You know, the whole statement of firing your worst customers— I mean, fire the worst customers you want to acquire, right? I mean, just don't acquire them. Yeah, they— it's all the same cost for me to service them. Someone who buys a $300 mattress versus a $3,000 Tempur-Pedic I don't get a discount on my fuel. My employees don't take a discount on pay to deliver and set up that bed. So for me, it's all about at the, at the end of the day, you know, the real metric is how many deliveries, the least amount of deliveries I can make at the highest price. I mean, that's in a nutshell, that's the path to success in this business here. You know, when my truck goes out for the day, most days it has 5 to 8 times more value on it than my competition's truck does. So shouldn't I be able to spend 5 to 8 times more to acquire? I mean, that just to me is common sense at this point. So— good answer. And when those— right, and to one other note, when the customer accidentally finds us, That's the discount shopper. So, you know, we're across from the major shopping hub in the county and, you know, so they're out this way looking for a mattress because they just— and we've had this, people say they just knew a mattress store had to be here. So they get into our world and they quickly feel uncomfortable because we're not speaking their language of discount coupons and, you know, 50% off sales and free this and free that. They are the ones who are almost apologetic that they're wasting our time because they realize they're in the wrong place. Now it's our job to, you know, turn that around, make them feel welcome and present that value equation. If you can. If we can, and we do. Like the woman who wanted the $1,000 king set I highlighted earlier. That's a prime example of someone who felt very uncomfortable when I gave her my response to her question she rattled off. But I was able to nurse that through and make the sale.

Okay, good. Jason, you want to take the same point?

Refresh my mind of the question. I kind of wandered around a little bit.

The whole how do you resist the temptation, the pressure to start competing on price.

Yeah, I mean for us it's— I'm contrarian by nature, so I'm just not really wired to succumb to it. It's— when you look at other businesses though, I mean, they do get really hung up on that and getting them past it is just a nightmare. You know, what does the old Earl Nightingale lead the field do? What everybody else is doing, do the opposite. You know, that, like you, it resonated with me a great deal. And once you can get somebody over to that line of thinking, it really changes the game for them when it comes to price. The biggest hangup. And the biggest thing that keeps people from being able to get higher prices and higher profit margins is this hangup of, "Oh, what's everybody else going to think?" Because for the most part, most people are very wired to be a part of the group and to not deviate from the herd. But there's a lot of money to be made not being the same as everybody else. If you're doing the same as everybody else, you'll get what they get, which is eventual bankruptcy within— what is it, like 75% within the first 5 years and another 75% 5%. Those numbers dwindle pretty quick. Which group do you want to be in, really? There's really two choices if you think about it. You have a choice to innovate or to be a commodity. Because there's the group that really innovates everything and they're constantly churning out new things and appealing to this certain subset. And there can be a bunch of different subsets that they all serve quite well together. Then there's the people below them that are trying to knock them off and do it cheaper that aren't very good at knocking them off and doing it cheaper, so they're kind of stagnating in the middle. Then you get down to the bottom, you got somebody who's knocking them off but is also very innovative in how they're cutting costs that's just slaughtering everybody that's in the middle. So those are really your choices in where you decide to go. For me and for the businesses, the way I try to direct them is to be on that top position where you're innovating. It's not as hard to me. My mind doesn't really work in— How can we cut these costs out? That's not where I'm strong. I'm strong in changing this perception and how we look at this thing and push the market forward. We've got, in my opinion, far too many businesses that are racing to the bottom trying to gut the system when they should be going to the top, pulling more money out of the pockets of people that have it, giving them a compelling reason to separate with it as opposed to making them feel bad about, oh, you spent $95,000 on that crocodile skin t-shirt, which there's one of those that actually exist. They shouldn't be made to feel bad about it. We should celebrate when they do it because that money is now moving, which, you know, our economy needs at the moment.

Very good. Bill, you want in on this, and then we're going to let people into play.

Sure, sure. I will tell you, for, you know, in our little businesses, insurance agencies and probably other mom-and-pop small business, the biggest issue we have is our employees. Is because typically, think about who works in these offices. They're bombarded with price stuff. Everybody's bombarded with price stuff every day. So it's how we coach, lead, and train our employees. And I could tell by, you know, Jeff's comments a while ago, obviously he's got them coached up really well. And I imagine the training is incredible. We teach, you know, we try— in Wendy's office still, in our office when we still had our agency, we trained every day. We role-played every day. I mean, here in Alabama, you know, we play college football at a pretty good level. And so with what— and Saban's working on national championships every day. He's got those kids working on championships every day. So if you want to go for excellence, then you've got to practice every day. And you practice, you play like you practice. So you practice with effort. You correct your mistakes. You critique everything. And then when it comes game time, and game time for us is when that customer comes in or is referred in and we're in front of them, we take them through our sales process and we do it the right way. And we tell them right up front, there's a pretty good— when we try to put them in the sales box, is that there's about a 75% chance that we're going to be higher than what you're paying right now. And do you have a problem with that? And if we do, we try to get that addressed right away. So as far as profit, increasing profit, there's all kinds of ways to do it in every business. But with us, we have built-in continuity in our offices, renewals. And so we try to improve that retention by all the— communication that we do. And then of course there's the referrals, the upsells, policy, you know, cross-sales, more business per client. And then of course the all-important life and financial part, which could be a separate— which is a separate business within the business at Allstate. It can be if done at the highest levels. So that's the rundown of how it's done in an insurance agency.

The whole training coach every day is a biggie. You know, I always tell people, if you must have them, them, humans, then you got to do things to make them productive and profitable to have. And training is not something that gets done. That's why it has an -ing on it, not an -ed on it. I mean, they don't get trained. Training is what we do every single day. You're right. I do notice, by the way, that You boys from Alabama, I never hear anybody using an analogy of like the Jeopardy winner, or it's always that football analogy.

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