Show notes
A plane only makes money when in the air, but needs tons of systems in place on the ground to support it. Get your plane in the air more easily with a second pricing tier…
What have airplanes got to do with creating a successful funnel?
I really DON’T know that much about airplanes, but last week, on my way back from some consulting in Hollywood, my brain started running hard... and all these epiphanies started popping up.
I was walking through the airport with the most ridiculously painful pair of shoes just killing my feet. (I hate those shoes, I'll never wear them again)....
Coulton was with me, and I was like, “Hey, Coulton, hold on, I can't talk. I have to write these ideas in Trello, or I'm gonna forget them!”
Here’s what was goin’ on in my noggin…
AIRPLANES & PRICING STRATEGIES
The airport was virtually empty, and as we were walking out to the actual gate, I could see all these airplanes just sat there. I thought, “Well, that's funny. The airport's empty and all this inventory is sitting right here on the tarmac.”
When got to the terminal, I started building a members area and putting together some cool stuff for OfferLab. I was still thinking about all these empty planes when I remembered a teacher in college who had us study airline pricing strategies.
For example:
- How much money each airline lost for every seat that was NOT filled.
- How many seats needed to fill just to break even on their costs.
It was fascinating... and I started thinking about the similarities between how air travel and ClickFunnels are based on similar pricing models.
DO YOU OFFER FIRST CLASS?
If you look at ClickFunnels, 20% - 30% of the users are on the full $297 version, (if you're not, I strongly recommend you do. It’s very much worth it).
At the time of writing this, there are about 70,000 monthly ClickFunnels users. (Russell talked about the numbers publicly recently, so I'm cool to say this.)
That 30% revenue from the top $297 tier is about the exact same amount as the other 70 - 80% that comes from the lower tier.
Did you hear what I just said? There's a HUGE lesson here.
What does this have to do with airplanes? Follow me for a second…
I was sitting looking out at all these planes, and I started running the numbers.
I was like, “Huh, okay... these airplanes reserve 20 to 30% of their capacity for first class buyers, and then everybody else, in the back is economy with tiny upsells here and there.”
SuddenIy, it hit me, and I realized how clever it is to have a two-tier pricing model.
Thinking about the ClickFunnels space, thinking about airplanes, thinking about my own products, I realized, “Oh my gosh, the same model's true. It's about 80/ 20.”
About 20% of customers take my really expensive $35,000 to $50,000 option where they fly to me, or I fly to them to design everything out.
Everybody else takes the cheaper stuff, and that's fine…
Again, what's funny is that:
The 80% in revenue is almost the exact same amount as the 20% revenue that comes in from the top tier.
Which means that...
Just by having a MORE expensive option, you actually can DOUBLE your entire business.
SELLING STATUS
I don't remember what book it was, but it was talking about (I know there are varying beliefs on this) how having more than two, maybe three pricing options inside your company creates customer overwhelm.
So you have the:
- Major Price
- Really Expensive Price.
So I was sat thinking about these airplanes, and I was like, “Huh, that's gotta be why they have first class right at the front of the plane. It's totally a status thing.”
You pay extra NOT to get to the same freaking location as everybody else. I have nothing against that. I love first class, it's awesome.
The 20% who fly first class create as much revenue as 80% of people in the rest of the plane.
I was like, “Whoa, I need to make sure that I've got two tiers of pricing in EVERYTHING that I'm selling.”
I don't care if you sell a book at $7.95, you need to add that extra tier. You could have $7.95 for a softcover and $21 for the hardcover.
This is literally the reason why order bumps and upsells work. You don't need everyone to buy... and in fact, most won’t.
If you have a 20% uptake rate on your OTO or your upsell, that's really freaking high.
You can take the average cart values from $7.95... and double, triple, quadruple,10X and beyond, with upsells.
HOW DO AIRLINES MAKE MONEY?
I was thinking about airlines, and how the 20% of first class customers create just as much revenue as the other 80% of customers... and I was like, “Can an airline make money when they’re:
….? The answer is obviously, NO!
An airline only makes money when a plane is in the air. That's it.
NOT preparing to launch, NOT double checking or triple checking…
Those are all important things, but the airline only makes money when that thing is in the sky.
However, when you compare a plane's time in the air with the amount of time a plane’s on the ground doing preparation, maintenance, onboarding, offboarding, safety checks, fueling, baggage, all that stuff.
A plane’s not actually in the air nearly as much as it is on the ground.
I'm getting to some very important principles here... Keep following me on this.
80/20
T...
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