Waived Fee Offer Model
Make it cost more to leave than to stay — waive the setup fee only if they commit long-term.
Present two options: (A) pay month-to-month with a large startup fee (3-5x monthly rate), or (B) commit to 12+ months and the fee is waived. If they cancel early under option B, they pay the fee. In the beginning, it costs a LOT to quit. As they stay longer, the cost to cancel approaches the cost to stay, so they just stick it out. The fee gets them to START (they join to avoid the fee) and STICK (they stay to continue avoiding the fee). If you want more upfront cash, make the fee SMALLER so more people choose month-to-month and pay the fee upfront.
- Justify the fee: 'It costs us money to get you started'
- If more than 5% want to cancel early, investigate product quality
- Drop the fee completely after the customer fulfills the full commitment
- Smaller fees mean more upfront cash (more people choose month-to-month)
- Best for commitments of one year and longer
- Set Your Fee at 3-5x Monthly RatePrice the setup fee at 3-5x your monthly rate. This creates enough pain to make the long-term commitment feel like a much better deal. Justify it with real costs: onboarding, setup, training, materials.Pro tipIf you want more upfront cash, use a smaller fee (1.5-3x). More people will choose month-to-month and pay the fee upfront.WarningIf more than 5% of committed customers want to cancel early, the problem is your product quality, not your pricing.
- Present Both OptionsOption A: Pay the full setup fee plus first month, then month-to-month with cancel anytime. Option B: Commit to 12+ months, fee is waived, but you owe the fee if you break the commitment early.Pro tipMost people choose the commitment to avoid the fee — the fee does the selling for you.
- Drop the Fee After Full CommitmentOnce the customer has fulfilled the entire commitment period, formally drop the fee. They earned it. This creates a moment of celebration and reinforces the value of long-term loyalty.Pro tipCreative twist: ask what cause they hate. If they cancel early, their fee gets donated to that cause. Two reasons to stay.WarningThe fee should nudge, not handcuff. If it feels punitive rather than fair, customers will resent it.
Option A: $5,000 one-time fee plus $1,000 first month, then $1,000/month with cancel anytime. Option B: Waive the $5,000, pay $1,000/month for 12 months, only pay $5,000 if you break the commitment early.
Hormozi observed that setup fees served dual purposes: they covered real costs of onboarding new customers while also creating a commitment device. By making the fee waivable upon commitment, the same fee that could deter sign-ups became the reason people chose longer commitments.