What Is A Value Ladder? (And Why You Need One In Your Business!)

So you're looking at the title of this article and you're wondering to yourself, “why the heck is he writing about a value ladder? This site isn’t about construction tools?”

Well I’m glad you asked. As much as I love construction and the tools of that trade, today’s topic is more focused on ladders as they pertain to the online marketing world.

The brick-and-mortar world has figured out the true power of a value ladder. In fact, you may or may not realize it, but you've been involved with the value ladder in the physical world. I'll give you an example of that later.Image by kropekk_pl from Pixabay

In this article I will explain what a value ladder is. I will also illustrate the power a value ladder can give your online business. The use of a well-thought-out value ladder combined with a thoughtfully designed sales funnel can truly ramp up sales in your business.

Before I dive in…if you are not sure what a sales funnel is or how one works, you can check out my article about those over HERE.

The Basics

Let's begin with my definition of a value ladder.

Basically, a value ladder is where you gain a customer when they purchase an entry level, inexpensive product. Then as you build a relationship with that customer and gain their trust, you can then introduce more valuable and more expensive products.

It's a simple concept that, if mastered, can take your business to a completely different level.

The Components of a Value Ladder

Entry Level Products

Entry level products are low-cost products that introduce customers to your brand. The profit margins on these products are usually very small. And in some cases they may not make any money at all.

As it pertains to a value ladder, one of the goals of these products is simply to cover the cost of advertising. It takes time and/or money to acquire a customer. These entry-level products help cover those costs. From there, the idea is to move your customer up the ladder over time.Value Ladder

Though these products might be lower in cost, they should still provide high value to your customer or client. This is the beginning step of the process of building trust with your customers.

Your customers won't take one step higher up your ladder without seeing that you will provide them with great value right from the start.

Mid-Level Products

Once you have established a relationship with your customer and have gained their trust, they will be more receptive to your mid-level line of products.

Mid-level products are higher-priced items that fall somewhere in between your entry-level products and your high-end products. The profit margins on your mid-level products are generally much higher than your entry level products. If your entry-level products are covering your advertising costs, then any mid-level product your customer buys is almost all profit.

Obviously, this is better for the bottom line in your business and where you would like all your customers to go. But it doesn't have to stop there.

Top-of-the-Line Products

The top of the line products (the top of the ladder) are the highest value products. These are also the highest priced products in the product line.

This is where things get exciting! The profit margins of your top of the line products are usually very high.

Generally speaking, a customer does not go straight to your high-end products. Usually your customer has come through the entry and mid-level products first and has been familiar with your brand for some time.

But with that being said, the cost to acquire that customer was absorbed in the entry-level hopefully, and if not there, definitely in the mid-level product line. Therefore, when a customer purchases one of your high-end products, it's almost 100% profit.

Ultimately this is where you want your customers to go.

Additional Products and Services

Some other products you might offer may or may not be associated with any particular item of your product line. These can be stand-alone products or an “add-on” to one of the products that you are selling at any level.

These products can vary in price from low cost to high cost depending on what they are.

Recurring Services

Recurring services are another nice feature of the ladder that can supplement your product line as well as your bottom line.

These often take the form of subscription services. In the case of physical products, this might include protection plans or warranties. They are generally inexpensive, but given their recurring nature, the profits can really add up over time

A Real World Case Study

Apple has mastered and set the standard for creating and establishing a value ladder in their business. Not only do they have a diversified value ladder, they even have “mini-ladders” or a “ladder within the ladder” in many of the products in their line.Image by kropekk_pl from Pixabay

Let's take a closer look.

The Beginning

Apple's iPod Touch begins at $199 and goes up from there depending on how much storage you choose. It is relatively affordable and extremely easy to use. It has all the capabilities of the iPhone (less the cellular functionality) at 1/3 the price. It is truly a great value at a reasonable price.

The iPod allows the consumer to “sample” the quality and value of Apple's product line at a relatively low cost.

A brilliant nuance of this entry level product is the immediate introduction of a subscription offer. Many people purchase the iPod for music. Of course Apple offers a music subscription service to compliment the iPod. If you'd rather not have a subscription, you can order music “a la carte” through iTunes.

Furthermore, if you want to listen to music, you can either use your own headphones or Apple has you covered there as well. They have the EarPod wireless ear-buds available to compliment your iPod

The Apple Watch, priced from $199 ($299 if cellular capability is added), would also fall into the category of an entry level product.

Moving Up

Next we start to get into the mid-level products in the iPhone and the iPad. It is also here where we begin to see the “ladder within the ladder” emerge.an example of Apple's Value Ladder

The iPhone pricing starts at $699. But as you know, that's just the beginning. The price goes up depending on which model and also with increased storage space.

The same goes for the iPad. Apple has recently introduced the “New iPad” which is reasonably priced from $329. The iPad Air begins at $499, and iPad Pro starts at $799.

So you can see that even within their mid-level priced products, Apple has established a “mini value ladder.”

The Top Rungs of the Ladder

Next, we start to get into Apple's higher ticket items with the MacBook, iMac and Mac.

The MacBook line and their starting prices:

  • MacBook Air – $1100
  • MacBook Pro 13″ – $1300
  • MacBook Pro 15″ – $2400

Again, each can be higher priced depending on the specific components installed.

The iMac line consists of the following:

  • iMac 25″ – $1100
  • iMac 27″ – $1800
  • iMac Pro – $5000

The iMac's are a computer that is integrated into the monitor and comes with a keyboard.

Next comes the Mac. The Mac is just the computer itself; the keyboard and monitor are extra.

  • Mac Mini – $799
  • Mac Pro – $3000

In the Fall of 2019, Apple is introducing the New Mac Pro with a beginning price at a hefty $6000. They are also introducing a complimentary monitor in the Pro Display XDR. At the time I am writing this article I could not find any pricing information on the Pro Display, but I'm sure it will be priced accordingly.

But Wait, There's More

In addition to all the above mentioned, there are many additional supporting and stand along products.

  • Apple Care (protection service. One-time cost per item)
  • Accessories (EarPods, chargers, keyboards etc.)
  • Apple Music (either recurring subscription or one-time purchase of songs/albums via iTunes)
  • Movies (also available through iTunes for rental or purchase)
  • Apple TV (one-time cost)
  • Apple TV+ (coming Fall 2019. I believe will be a subscription service)

Furthermore, Apple has designed common software across each device to facilitate an easy transition from one product to the next.

So you can see how Apple has created a brilliantly intricate and powerful value ladder.

Phew! Let's Take a Breath

A quick disclaimer:

I think it's important to note here that I am not trying to sway your opinion of Apple one way or another. I only used Apple as an example to show you how a popular company has implemented and perfected a value ladder.

Let's carry on…

The Online Use of a Ladder

So let's talk about how a value ladder can be useful in the online world, specifically marketing.

A good strategy for the first rungs of your ladder would be to offer a low-cost or even free item to attract leads. Again, regardless of whether your entry-level offer is free or low-cost, it needs to be high quality. For your lead to turn into a customer they need to see that they are going to get the most for their money.

This very important first step will give you many indicators about your lead.another value ladder drawing

If they accept a free offer, that indicates they are definitely interested. Some marketers refer to this type of lead as a “warm lead.”

If they are willing to pay a small price in exchange for an entry-level product you have to offer, that indicates they are significantly more interested. These leads will more likely be willing to buy what you have to offer later on. Marketers often call these “qualified leads.” Most consider them customers at this point.

To retrieve your free or low-cost entry-level offer, your customer will need provide you with their name and email so you can send them the product or instructions on how to retrieve it.

Then through the use of email, you can nurture a business relationship with that customer. Later, as you build trust with your customer you can begin to introduce new products and move them up your value ladder.

Create Diversity

If you want to be able to upscale your online business, it's important for you too diversify your product line and create a value ladder within.

Whether you're into e-commerce, or affiliate marketing, you need to offer a wide range of products with a wide range of prices.

As an affiliate marketer, this might require you to promote several different companies or offers. Ideally, you can find one company that offers a value ladder of products all in one place.

The Human Factor

Your “lead” or “customer” may jump on your ladder at any level. They may jump off at anytime as well.

It is also important to remember that the “lead” or the “customer,” is a human looking for your help in some way. Don’t just sell, sell, sell. Help them get what they need. Help them solve their problem. When you do that, you will find yourself getting everything YOU need.

Takeaways

  • A Value Ladder can be a valuable strategy to scale your business
  • Diversify your product line with a wide price range of products
  • People buy from people they like and trust. So be yourself. Be honest. Run your business with integrity.

If you want to learn how to implement a value ladder in your business, click HERE

That's A Wrap!

I genuinely hope you found this article informative and valuable. Leave me a comment below and let me know what you think!

Do you have a Value Ladder implemented in your business?

Is your line of products or services diverse in price?

Let me know!

Until next time…always be of help to others!

jeff


 

Affiliate Disclaimer

There are affiliate links in this blog post. If you decide to make a purchase after clicking through one of these links, I earn a small commission for that. It does not change the price for you whatsoever. Prices do not change regardless of where you buy.

Any income claims, or claims of success are not necessarily true for everyone. Just like any other career or business venture, hard work and persistence is required. Many people succeed…and many fail as well. It is up to YOU to determine your fate.

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