You’re ready to start your own business, but how do you set a price point that will attract customers while making a profit? A value ladder is a simple tool that allows you to recognize where your target customer is on the ladder of needs and wants. When you understand this, it’s easy to see how far away they are from being ready to buy and what you can do to move them up the ladder. Check out this article for more details.
1. What is the value ladder, and how does it work?
The value ladder is a framework for positioning a range of products or services in the marketplace. It helps many online business owners understand the value their product/service provides to their customers and how they can communicate that value effectively to their target market. Your customers are interested, but they don’t know where to go next. The value ladder helps to identify where your customer might land so they can quickly and easily find what they need.
The free or low-cost value offer at the bottom of your value ladder will attract more prospects into your sales process. Doing this will significantly boost your profit margins as more people will climb higher up the value ladder once they find that the product at the bottom has brought them to value. Therefore it’s worth them paying for a higher value product so they can get even more value.
2. How do you use the value ladder to improve your business’ pricing strategy?
When communicating your value, think about how your customers might compare your product to or discover new ways to communicate your products and services’ benefits. In addition, it should fit with your values:
And with all that out of the way, let’s take a look at exactly why value ladders are so critical for any developed sales process by asking these questions.
- What’s most important to you to set up a reasonable price?
- Are your customers willing to pay a reasonable price for what you provide?
- Do you need to change how you provide your product or service to attract a different customer base?
- How can you make your offering more attractive to attract your ideal customer?
Now that we’ve explored the importance of positioning and why superior positioning is a must for long-term sustainable success, let’s discuss some examples of valuable partnerships by focusing on the value they bring to each company involved.
We’ve discussed the value of positioning, but the value of partnerships varies significantly. Here are some examples of how it can work for you: Leverage your partnerships to establish recurring revenue for your business leading to war-time-ready cash flow.
Think about the value ladder this way: the higher up the ladder the customer goes, the more you’re selling, and the less you’re giving away. The lower the ladder the customer goes, the less you’re making, but the more you’re delivering.
In a service-based business model, if we compare apples to apples, most transactional stuff happens above the 7-tier or 8-tier mark: booking, promotions, contact forms, etc.
The biggest challenge encountered by startups is getting customers to the point where they would pay additional upsells on the products and services they are already using. To do this, you need a napkin’s worth of upsells. Anyone sitting on a beach reading this article should, at a minimum, know what it’s like to be on the edge of the value ladder and appreciate the value of upsells.
2.) Why your business needs a Value Ladder proposition
So why does your business need a value ladder?
Because you are competing for potential client’s attention, so when potential customers look to buy your product or service, they have two things on their minds:
It’s the same thing as being at a party. You were interested in going to the party, but now that you’re here and talking to people, you realize opportunities to meet more potential friends.
If you’re talking with one potential friend and another potential friend walks up, you’re going to stick around for a bit longer so that you can meet this new potential friend as well.
It’s the same concept when building value ladders: prospective customers are interested in what your business has to offer, but as they get to know you better, potential customers are going to have a chance to meet other potential friends… aka other potential products offering more value.
Value ladders are vital because they give potential customers a reason to climb higher and engage with your company. For example, if your product can answer all customer questions, they will climb up your well-thought-out value ladder and buy more premium services or products.
It’s easy to see why value ladders are important for startups or businesses to grow sales once you grasp the concept. Customers will be more likely to buy your more premium product if they climb the value ladder.
Whether you have a physical or digital product, customer desire can be nurtured and turned into sales.
3.) How to create a value ladder
Focusing on the upsells and downsells within your value ladder, it’s important to recognize that a lot of what you’re doing is communicating the need for the services that are higher on the ladder.
The main idea outlined in Russell Brunson is defining why someone would pay more for something already proving itself valuable. It’s a great way of thinking about upselling and positioning your services to be more valuable.
Step #1 – Your No-brainer Offer
Your customer is not even required to do any work or provide you with their credit card information. It is a no-brainer, high-reward offer that opens the door to the rest of your value ladder.
When you’re starting, it’s important to give people every reason to start using your product or service and not let them jump off the ladder right away.
Most companies offer a free trial. For some eCommerce businesses, it is a free or $0.01 credit card transaction.
In other business models, you’ll have to think of a way to make your customers feel comfortable enough to make their next purchase.
In this phase of the ladder concept, one should father the email address of prospective buyers. It is valuable customer information that can serve you in the future as you climb up the value ladder.
The customer might not be ready to purchase now, but they may get back in touch with you when they’re ready.
Step #2 Intro Offer
The prospect has some experience of using your experience and has climbed up the customer journey cycle. In this part of the ladder model, They should be presented with your initial offering. The customer should know that your product can solve their pain.
Again the customer is encouraged to commit, with the hope of giving them a quick and clear answer for one or more problems. You have not simply given them a solution but also shown them how your offering solves their pain.
For example:
- A customer has just subscribed to your email list, and they might be interested in reading blog posts or buying a book from you.
- A customer has downloaded your app to their phone. They might be ready for an upgrade, like signing up for the premium version of your app with more advanced features and functionalities.
Maybe Your first offer was a one-hour online course, and your second was a five-hour online course. After an email consultation, you might offer a phone consultation.
When customers reach this level, you’ve built trust with them. The value ladder occurs gradually, which is why tiering your product or service is essential.
Step #3 – Your first Upsell
You’re now asking customers to pay more. Then you present them with an alternative to your first product offering.
(what the customer gains) If these benefits are greater than what the customer originally bought from you, it will entice them to keep climbing up the value ladder and therefore making more financial commitment
At this stage, customers will be wondering, “Are these more premium products and services essential?” Yes, they should if you are doing your job right.
You have to show how customer’s greatest desires can be satisfied with the new offering. The customer who has climbed up your value ladder should feel that they have received value for the amount of money they have already spent.
“I want this, but I am not sure if it is necessary right now,” the customer thinks. After the customer buys your product at this stage, they will be happy that they decided to do so.
To effectively sell upsells, customers should know the difference between the initial product or service and this new offering.
BONUS (Step #5): The ultimate upsell
This part of the ladder model is where the most premium products or services lie. In this part of the customer journey, the customer is satisfied with what you offer. Then, however, they are ready for something more advanced.
The ultimate offer, otherwise known as the best of the best of what you have to offer to your customers. This phase of the customer journey cycle could be an all-inclusive vacation or a Mastermind Group session with the most notable experts in your niche.
If you provide marketing services and previously offered email, phone, and video consultations, a customer may pay you to develop a complete marketing plan for them.
This customer journey tool should help you effectively sell your products and services to customers. When done correctly, you can always expect to make more and more from your customer base than before.
3. Inspiring Value Ladder Examples
Dentist
If you’re a dentist, you can use the value ladder. Start from the bottom and work to the end. You must lead your customers through each tier. For example, they may start from dental exams, teeth cleaning, and teeth whitening (all these can be lower). If they\re is happy with your service, you can offer them more advanced options like braces or veneers or any other expensive treatments they can afford. It all depends on the clients budget and your service category, but you must have at least three tiers for a customer to climb up.
Financial adviser
A person looking for help with managing their money wisely should start at the $60/month range and work their way up from there according to what they want. This monthly, per-hour or even per-service rate depends on the requested services to better tailor this budget.
If you invest in stocks or mutual funds, you can increase your investing experience by searching for a financial advisor willing to work with your budget. The more money you can spend on your advice, the better customer service they will provide. This is a great example of how providing great value in the initial offering will make your customer climb higher up the ranks.
This concept can also use this ladder for customer retention. For example, if the customer is happy with your service, you can offer customers better deals as customer loyalty bonuses, and they might choose to stay with you instead of going to other advisers or advisors or customers.
Gym membership
A gym membership can be a good example of a value ladder. You can start from a basic package, and if your prospects are happy with your service and equipment, you can offer to buy additional supplements or meal plans. You may also have a personal trainer who will help you achieve your goals.
If they’ve reached the pinnacle of their fitness journey, they will have spent a significant amount of money on your gym membership.
This system is great if you only have a limited amount of time to train. The ultimate offer would be daily training, meals delivered by a personal chef, and access to all gyms in the city.
The 5-step Value Ladder Methodology is a great tool to help you figure out the best way to sell your products and services. It starts at the bottom with an introductory offer, then gradually increases in value as customer loyalty increases. You’ll start by offering what’s most affordable for your customers while still providing them with excellent service and quality products or services. Then, if they’re happy with your initial product or service offerings, it doesn’t hurt to ask if they want more advanced options! The ultimate goal of this system is to increase sales without spending too much time on any one person – which means higher profits for you!
One of the most important things to remember when implementing a 5-step value ladder is maintaining quality.
I hope you’ve enjoyed this article, and if you have any comments, questions, or concerns, please leave them in the comment section below!