“I have been working on doubling company revenues for over 4 years. I seem to be at an impenetrable plateau.”

I looked at Alwin, the CEO of an international SAAS company.

I’d spent more than 3 weeks analyzing his business. Gratefully, I had a solution for him. It was a relatively simple solution that I knew would bring rapid revenues with large profit margins.

To know why the solution Alwin and I implemented worked so well, let’s take a look at buyer psychology and how it overlaps with the Pareto Principle.

Safe Harbors 

All human beings operate within a “safe harbor”. This is a set of behaviors instilled in each of us from birth that we recognize as “safe”.

“Safe” essentially means we can do it, live it, consume it, buy it, etc… and still stay at 98.6 degrees and breathing. We each have a prime directive to stay alive and the “safe harbor” database ensures that our odds of living to an old age are fairly high.

Every human has a number of general items listed in their “safe harbor”… with a great deal of items that are unique to them.

For example, I love creamed spinach but am not so sure about eating cockroaches… even if they are 85% protein and super healthy.

This “safe harbor” applies to buyer behavior as well.

Horizontal Buyers

When I was the finance director for a US Senate race in Montana, I discovered a very interesting fact.

We did a direct mail fundraising campaign and asked for a donation of $20.  A core group of donors would contribute $20 just about every time we asked for it.

So, I decided to ask for $80, since most of them had already given well over $100… speed up the process and save on postage, right?

An interesting thing happened… they didn’t donate. Some complained that we were asking too much of them.

So, the next letter, I dropped it back down to $20… and once again they donated.

A single donation of $20 was within their “safe harbor”. But $80 was not. Even though over time, many of them would donate close to $1,000 in small $20 and $30 increments.

I call these “horizontal buyers”, meaning, they will buy within a flat dollar amount range and not exceed that amount in a single purchase.

As a freelance copywriter, I found this to be true with my clients as well.

Some clients would not spend over $5,000 on any one contract. I could do 2 or 3 or 4 contracts with them in a month and make $15,000 or $20,000.

But they never would accept a single contract worth $20,000 from me. “That’s outside of our budget”, they would say.

I discovered that the opposite was true as well.

Vertical Buyers 

Some donors on the US Senate Campaign wanted to immediately jump to the max donation and then put more money in PAC’s.

I had freelance clients like this as well. First contract: $5,000… Second contract: $10,000… Third contract $40,000.

I call these “vertical buyers”. They tend to move up the price spectrum instead of across it.

This “vertical” and “horizontal” buyer behavior is extremely relevant for every company, especially when creating offerings and pricing those offerings.

The wise CEO will see in this an opportunity to increase revenues.

Before I show you how you capitalize on this opportunity, let’s overlay the Pareto Principle on this.

As a reminder, the Pareto Principle states that 80% of our results come from just 20% of our efforts.

This imbalance of results also exists among buyers.

Namely, in most cases, 80% of your buyers will be “horizontal buyers”, while 20% will be “vertical buyers”.

Here’s a way you can use that to your advantage and double or triple your revenues in a very short period of time…

Pyramid Price Stacking

We created a strategy called Pyramid Price Stacking to capitalize on this behavior.

It looks like this:

What to do:

  1. Define your core buyers, analyzing frequency, recency and average purchase. (Offer 1)
  2. Create an offering that is 10X more expensive than your base offer. (Offer 2)
  3. Create another offer that is 10X more expensive than your second offer. (Offer 3)
  4. Build an email nurture sequence that tells your audience about the new offers.

When you do this, you will activate your “vertical” buyer group.

The results will look something like this:

  1. 20% of your base buyers will buy Offer 2. This will give you roughly the same revenue as Offer 1.
  2. 20% of Offer 2 buyers will purchase Offer 3, again giving you about the same revenue as Offer 1.

This is exactly what we did for Alwin. In his case he offered a piece of hardware that had huge margins. Within a very short period of time, he was well on his way to doubling his revenue.

Later we added a few other top-end offers that doubled revenues again.

Three final points…

First, you can increase sustained revenues right now, today by simply adding new pricing levels that cater to your vertical and horizontal buyers. They have the money and the propensity to spend when an offer gives them value and is within their “safe harbor”.

Second, most of the companies I work with already have resources, systems, or products they can use to make these additional offers. It usually requires little or no additional overhead.

Third, creating new offers in this way not only maximizes existing customers, but also creates new markets as it appeals to a new level of buyers previously not in your ecosystem.

A beautiful example of this is Apple.

Notice how the price and quality of their offers have shifted over the years. With each addition, they grab up more and more market share and increase their profits.

You can do the same.