What To Do When Your Pricing Model Doesn't Match Your Avatar | Ep 839
episodePreviously titled “What To Do When Your Pricing Model Doesn't Match Your Avatar | Ep 865” — renamed by the publisher on Aug 2, 2026
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What to do when your pricing model doesn't match your avatar?
It becomes very dissatisfying because your team gets burnt out because they're like, I feel like all we're doing is onboarding new customers all the time. And they're just walking out the back door between three and four months later. And if you're listening to this and being like, oh my God, this is my life.
Why do businesses struggle to keep customers?
It's probably because the model you have, the services you deliver and the prices that you charge do not match the avatar that you are selling to. Does your model match your avatar? That's what I want to talk about on today's episode of the game. I have been doing these deep dives into kind of like growth sins. And obviously I talk to a lot of business owners on a regular basis, and there are very common themes that come up for why there might be, let's call it structural difficulties to growing the business.
How can your model align with your customer avatar?
And there are a lot of different forms of this, but today I want to talk about this one because I think it affects a lot of small businesses, which is that the business has trouble scaling because you sell the wrong type of service to the wrong type of avatar. And this often comes up when you want to do everything for everyone. And this isn't a, you know, you need to be narrow on your avatar, which I cover at length in other podcasts. But this is more a difficulty with how you deliver times how you price times how many people you have to do it for. All right. So let me let me explain.
What are the pitfalls of serving the wrong customer type?
So if you have a low-end customer, so let's call it prosumers or small business owners as a customer, for example, that's going to be a VSMB, so very small business owner. And the problem with VSMBs is that they have inherent volatility. Meaning because they are small, they will go up and down on a regular basis. They have good months and bad months. And on bad months, they will take a real hard look at their expenses, sometimes including your business, and decide to cut. Right. And the same thing happens on the business consumer business. But the issue is that most of these businesses who sell to these customers would be significantly better served. Basically, there's a fork in the road.
How to determine the right pricing strategy for your service?
So either you sell more templatized, higher volume, more scalable products and services. or you go up market in pricing and avatar to sell more customized solutions. The problem is most people kind of end up somewhere in the middle. And this is the very painful no man's land where these customers, because you offered customization, but you don't have scalability built into it, end up getting upset with you that they're paying $20 and don't have it entirely custom, whatever it is that you deliver. And so it's like they have unrealistic expectations. And since you didn't start with, I'll call it a tech first approach, it just makes it a very painful business to run. And every year, the difficulty is that it's very easy to acquire these customers because these customers, there's a lot, you know, boatloads of them. The problem is that they're very hard to keep.
What can we learn from the Shopify customer retention model?
And so you end up getting into this kind of hamster wheel of getting lots and lots of customers, but then falling out the other side. And you bang your head against the wall because you're like, I need to look at these turn tactics. I need to look at these revenue retention metrics and activation points. And the thing is, is all that stuff is the correct thing to do. But you might just be missing the big obvious one, which is that these people aren't going to stay. And as tough as that is to hear, it's just the reality of it. And so I'm going to give you two very different examples I've done the right way, and then I'll give you some examples I've done the wrong way. One of the best prosumer businesses or VSMB businesses out there is Shopify, right?
How can a low-cost service model succeed?
They're considered gold standard for providing a great product for small business owners. But they keep, on average, like 50% at month 12. I have to double check, but it's between 50% and 60%, which is considered best in class. So that means that they lose half of their new customers every year. Now, after that point, they get people to stick, and then it becomes really valuable, right?
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Chapters
8 chapters
1
What to do when your pricing model doesn't match your avatar?
0:01–0:13
2
Why do businesses struggle to keep customers?
0:13–0:48
3
How can your model align with your customer avatar?
0:48–1:24
4
What are the pitfalls of serving the wrong customer type?
1:24–2:06
5
How to determine the right pricing strategy for your service?
2:06–3:02
6
What can we learn from the Shopify customer retention model?
3:02–3:39
7
How can a low-cost service model succeed?
3:39–4:45
8
What strategies can mitigate customer churn in small businesses?
4:45–14:34
Speakers
1 identifiedMore from The Game with Alex Hormozi
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