Then settle down for a few minutes and read about how you can maximize the spend of every client that has already bought from you.
In this post, we’ll look at a highly effective technique that makes it simple to sell, namely the value ladder.
With no further ado, let’s take a look at what the value ladder is, how you can apply it – with examples.
What is a Value Ladder?
A value ladder is a method through which you offer your product/ service in ascending order of value and price.
Accordingly, you start with the cheapest product/ service and then work your way up to your most expensive one.
Why Use a Value Ladder?
A value ladder is a highly effective marketing tool. So, let’s say that you start with a low-value or even a free product. The idea is to use a product that’s irresistible. It doesn’t have to be something expensive, but it must have some form of value.
Say, for example, that you give away an e-book. Most people will take up the offer because it’s free. You’ll send the book and also an offer for the next product on the tier. This might be an e-book on a related subject. Only this time you will charge $5 for it.
If the client decides to purchase it, you’ll offer them the next product. Perhaps this time it’s a bundle of e-books for $15. You’ll keep repeating these steps until the client declines an offer, or you’ve sold your premium item.
So it looks like this: free offer–> purchase –> cheap offer –> purchase –> more expensive offer –> purchase, and so on and so forth.
Why is a Value Ladder Effective?
A value ladder is effective because you’re offering the customer a great deal to start off with. That gets your foot in the door.
By increasing the value of the offering incrementally, you’re avoiding sticker shock. Say, for example, that your premium product is an online growth hacking course costing $495.
Without a value ladder, the sales process would likely go along these lines:
- Client buys low-value or free offer
- You offer them a course costing $495
- They decline
What went wrong in the example above was the huge leap in price. Someone who’s signing up for a free or low-value offer is not necessarily in the market to spend a wad of cash. Hit them with the $495 offer, and they’ll head for the hills.
That said, you’ve got no idea of how much the person might be willing to spend. They might have $10 or $10,000 in their accounts. With a value ladder in place, you’re providing increasing levels of value.
The person with $10 in his bank account might just buy the related e-book. The person with the $10,000 in the bank could possibly buy your premium item and all the others along the way.
By providing them with the e-book for free, they get an idea of the quality of your products. They might also feel a little indebted to you. After all, you gave them a great book for free. The better the value of the initial offer, the more likely they are to consider the next offer in the tier.
Even if your client doesn’t make it all the way to the end of the tier, you’ve made more sales than you would have if you’d tried to sell the course outright. Let’s say that your client decides to stop at the bundle of e-books. You’ve just made $20 effortlessly.
With and Without a Value Ladder
Let’s look at an example of a value ladder in action.
You’ve got three clients in the store. They’ve come in to get the outstanding deal on light bulbs. You’re selling them at cost price to lure people into the shop.
Without a value ladder:
- Client A just has the $5 for a bulb.
- Client B has $40 with him. He’s here to get the globes too. Let’s assume that he spends $20 in your store.
- Client C has $200. He’s well able to afford your premium smart bulbs priced at $50.
- Overall, you’ve received $75. That sounds quite good, but you’re leaving a lot of money on the table.
With a value ladder:
- Client A purchases the bulb; he hasn’t got money for anything else. He spends $5.
- Client B has his $40. He comes in to buy the bulbs, but you upsell a light dimming switch. He spends $40 in total.
- Client C comes into the store to check out the $5 globe. You upsell the light dimming switch. Let’s say that costs $10. You then speak to him about smart globes at $50. Then, you tell him about other smart items to complement his purchase. Finally, you offer him a smart home hub. In all, he’s now spent his whole $200.
- Overall, you’ve received $245 without expending much effort.
Structuring Your Value Ladder Correctly
To be successful here, you have to structure your ladder correctly. In the examples above, we assumed that the ladder was perfectly designed. In reality, it’s not quite that simple. What you need is to create a series of offers that logically follow on from another.
Here’s how to get started.
Your Low-Value Offer
Finding the perfect low-value offer can be challenging. You can’t, for example, offer something like a free consultation. Most consumers today understand that “free consultation” is code for, “I’m going to be a pushy salesperson.”
If possible, make your first offer free. Be sure that you choose a valuable product here. That way, the client will be blown away by the deal. They might not be able to believe that he struck it so lucky. They may even have come in because the deal seemed too good to be true. Imagine how they’ll feel when they find out that the deal is real.
You make a Tier Two offer. If your free deal was that good, how much better is the $5 deal you’re proposing now? Having seen the value of your first offer, they know they’re getting great value with the $5 deal. And they’ll probably reason that $5 is not that much in the grand scheme of things.
Keeping the Momentum Going
In the early stages, you might sell items at cost or even at a loss. However, this is worthwhile because your client won’t get that deal anywhere else. As you proceed up the ladder, you can increase your profit margins to cover those initial costs.
To get them to keep buying, you need to increase the price incrementally. The difference between $5 and $10 doesn’t seem that much. So, the client adds their item without giving it a lot of thought. Then they see an offer for $20. $20 is also not that far removed from $10.
At the back of their mind, they’ve got the $20 fixed. Actually, they’ve spent $35, but that incremental increase has made the overall amount spent fuzzier.
What if They Stop at Tier Two?
That’s a little disappointing, but all is not lost. By offering them the next tier up, you’ve planted the seed in their mind. They are likely to think about it more when they get home. You’ve probably made a good impression on them because you offered such great deals to start off with.
Examples to Inspire You
Here are some value ladder examples, drawn from the real world.
A Personal Trainer
- One free training session
- Client signs up for a month of training
- You offer them a nutrition plan
- They sign up for a year’s training at a great rate
- You then sell them a fitness retreat package
A Cybersecurity Business
- Start with a free trial
- Graduate to a basic paid plan
- Offer a great deal on your business software package
- Recommend plugins
- Offer a full system security audit to identify holes in the company’s cybersecurity
- Offer security awareness training to help employees recognize common tricks that hackers use to implant malware
- Offer a free mouth cleaning
- A great rate to fix minor issues like cavities
- Teeth whitening service
- Upgrade to a premier plan offering a set number of check-ups per annum
Value Ladder – Conclusion
A well thought out value ladder can make upselling a lot simpler.
From the Big 5 Tech to smaller companies, pretty much every kind of business can benefit from the value ladder method.
By offering an outstanding deal with your first tier, you’re luring the client in. They’ll probably also tell their friends and family.
Once you’ve hooked them, you have the opportunity to wow them all over again with the value of your offer. That way, when you move to a slightly more expensive option, they’re bound to think that they’ll get the same great value.
As the products get more expensive, you get to up your profit margin. The client gets great value, and you make some money.
In addition, the client is less likely to notice how much they’ve spent. Imagine if you tried to sell a client a globe, dimmer switch, and a smart globe in one go. Someone who came in to buy a globe would balk at the overall cost.
What’s more, if they didn’t have the money, they’d have to turn down the whole offer. By spreading the offer out into different stages, you’re making it easier for clients to spend more money.
So, why not take advantage of the opportunity value ladder offer?