What is a value ladder (and why your business needs one)

Heard people raving about using a value ladder in their business and have no idea what a value ladder is? Don’t worry because I’m here to help you out. Keep on reading to find out exactly what a value ladder is and why your business needs one.

 

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WHAT IS A VALUE LADDER?

A value ladder is a range of products or services that are planned with the purpose of increasing in value and price.

 

WHY ARE VALUE LADDERS BENEFICIAL FOR BUSINESSES?

Customer acquisition (the process of getting a new customer) can be time-consuming and/or costly. All successful businesses need customers, but most businesses appreciate that it is much cheaper to sell to a previous customer than it is to acquire a new customer. However, in order to be able to turn a one-time customer into a repeat customer (the dream!), you’ll need to have something suitable to offer.

The point of using a value ladder in your business is to ensure that once someone has bought from you once you have a suitable follow-up offering for them. These follow-up offerings will be specifically designed by taking into consideration what the previous purchase is and ensuring that it meets the customers new needs (having bought the previous product or service), whilst also having a higher price point.

Essentially a value ladder enables you to maximise the lifetime customer value (that’s a good thing!).

 

 

HOW TO USE A VALUE LADDER IN AN ONLINE BUSINESS

Value ladders are very popular with online businesses, especially those that use sales funnels. In fact, I was introduced to the idea of a ‘Value Ladder’ by the sales funnel lover Russell Brunson (Co-Founder of ClickFunnels) in his book Dot Com Secrets (Check out my review of Dot Com Secrets here). Russell loves the value ladder because it allows business owners, himself included, to spend more on customer acquisition.

A message that Russell is always trying to get into business owners’ minds is that “Ultimately, the business that can spend the most to acquire a customer wins”. As I mentioned earlier acquiring a customer can be expensive and depending on what you are selling it maybe that increasing your marketing budget drastically reduces your profit margin.

When you have a value ladder you are able to spend more money to acquire a customer because you aren’t thinking about the initial product or service they are purchasing. Instead, you can have a marketing and advertising budget that is based around the customer lifetime value instead. Now obviously not everyone is going to make it to the top of the ladder, but even with 20% getting to the next level and 10% to the level about that it can dramatically increase your marketing budget.

 

Here is an example of how Russell uses a value ladder around The DotCom Secrets Book.

 

In this example, as is common in online businesses, the first step actually is free. Instead of wanting people to make a small purchase, Russell wants people to sign up for something that requires them to provide an email address. He is the able to make an offer in follow-up emails.

The first paid offer in this ladder is a Free Book (Plus Shipping). Russell is a big fan of the Free Book + Shipping model and he has a good reason to be. You can read about how when I wanted to buy the Expert Secrets book (Check out my review here) Russell managed to turn a $14.95 purchase into a $98.95 purchase. Read about how I got sucked into Russell Brunson’s sales funnel here.

This is then followed by three more offerings. All of them are chosen specifically to ensure that the person is getting more and more value and that Russell can also charge more. At the top of the ladder you’ll see the Inner Circle. This was Russell Brunson’s mastermind group and he charged $25,000 per year. That is a big difference from the $14.95 someone pays for the DotCom Secrets book.

 

HOW TO USE A VALUE LADDER IN A COACHING BUSINESS

Another industry that has heavily embraced the value ladder is the coaching industry.

Here is an example of a very common value ladder for a coach. This could be a mindset coach, life coach, business coach…. add any word you want before the word coach.

 

Offer 1: E-Book
The first offer is an e-book. This can be delivered automatically and electronically meaning there is absolutely no involvement for the coach (aka passive income). An e-book is likely to cost less than £10 and will be an introduction to the area that they specialise in.

Offer 2: Online Course
The second offer is an online course. Again, this can be delivered automatically and electronically. However, the online course will go into more detail than the book. Also, an online course will often have different formats involved (videos, audios, workbooks etc). This all helps to increase the perceived value from a customer perspective.

Offer 3: Group Coaching
The third offer is group coaching. At this stage the coach will be actively involved. This active involvement will justify part of the price. With the coach present the customer will usually have a chance to ask questions and get answers in a way they can’t with a book or online course. The pricing of this programme will often depend on the size of the group. The more intimate the group the more you can charge.

Offer 4: 1:1 Coaching
The fourth and final offer is 1:1 coaching. This is where you get direct access to the coach. As a result, this is the most expensive offer. However, people are willing to pay it because it is also the most personalised amongst all of the options.

Hopefully you’ll have noticed some trends whilst going through those offerings.

Coach Involvement – In the beginning the coach had no involvement and by the end the coach was directly involved on a 1:1 basis. Coach involvement increases as the price increases.

Customer/Client Support – In the beginning the customer will be reading a book by themselves and have no option to get additional support. The online course may offer some support. By the time they are in the group coaching they’d expect to ask individual questions and get some feedback. Finally in 1:1 coaching they are fully support and receive full personalised feedback.

 

OVER TO YOU… HOW CAN A VALUE LADDER WORK IN YOUR BUSINESS?

Hopefully by now you know what a value ladder is and why a value ladder would be beneficial in your business. So it is time to take action and map out your own value ladder.

If you would like some help creating a value ladder for your business, book an Intensive Strategy Day and I’ll help you decide what to offer, how much to charge and how to get marketing your offerings.