The Value Ladder

The hidden framework to sell anything

Brian Bourque
June 10, 2023

Hello to every unicorn in the galaxy.

I recently came across this guy Russell Brunson. He’s founder of Clickfunnels, a marketing automation software platform.

He’s sold over 200K copies of his book, DotCom Secrets, by “giving it away” and charging $7.95 for shipping.

My copy is on its way.

I paid shipping for what he calls “Bait” - a free offer to establish trust with a new customer.

Brunson has scaled Clickfunnels to over $100M in revenue by mastering the Value Ladder.

It’s a concept that once you learn it, you’ll see it EVERYWHERE.

It’s one of those invisible laws of humankind, and we’ll look at the behavioral psychology principles behind it that explain why.

Despite its pervasiveness, I’d never heard it named and explained until a week ago.

But it could be one of the most valuable frameworks you ever learn.

So that’s what we’ll talk about today.

Today’s growth strategy is the Value Ladder.

Growth stage: Any

Difficulty level: Medium

“Would you like fries with that?”

- McDonald’s upsell script (value ladder)

What is a Value Ladder?

A value ladder is a sequence of offerings that increase in value and price. Value ladders are used to attract customers with a low-cost or free offer, and then gradually move them up the ladder towards more expensive, higher-value offers. The value you provide at each step increases, as does the price.

Value ladders as a term might be new to you, but you’ve been climbing them you’re whole life.

Even better news? ChatGPT is very familiar with them.

Here’s a prompt to get you started on what value ladders you can build into your own business:

PROMPT:

Act as if you are my startup growth advisor. I’m building a company that sells [product or service].  I need your help in devising a value ladder I can use to attract new customers and then have them invest in a deeper relationship with my offerings over time. Can you please suggest a value ladder for my business based on what you know about the primary motivations of customers of [product or service] and behavioral psychology? The suggestions should be practical and fairly easy to implement.

I gave this prompt a run-through, using the idea of a digital education business.

Here’s what we got:

Free content (Awareness stage): Provide free, high-quality content to attract potential customers. This can be in the form of blog posts, social media content, eBooks, educational videos, or webinars. The main principle here is reciprocity – people are more likely to do something for you (like make a purchase) if you've already provided something of value to them for free.
Lead magnet (Interest stage): This should be a product of slightly higher value than the free content that you offer in exchange for contact information (typically an email address). For instance, a detailed guide, a free course, or a trial subscription to your platform. The lead magnet appeals to the principle of commitment. Once a person has committed to something (like giving their email address), they are more likely to follow through on related, larger tasks (like making a purchase).
Low-cost product (Consideration stage): This could be a basic course, a short-term subscription, or a toolkit. This product should offer substantial value for a relatively low price, acting as a "tripwire". The price point needs to be attractive enough for the customer to make their first actual purchase. The principle of consistency comes into play here. Once a customer has made a small purchase, they're more likely to make larger purchases in the future.
Core product (Purchase stage): This is your primary offering – it might be a full course or a long-term subscription. It should provide a comprehensive solution for your customer's educational needs. The social proof principle can be used here. Showcase positive testimonials or reviews from customers who have benefited from your core product.
High-value product (Retention stage): This could be an advanced course, personalized coaching sessions, or access to a premium community. The customer already trusts your brand at this point, and is willing to invest more for higher value. The principle of scarcity can work well here. Limited time offers, limited slots for personalized coaching, or early bird offers can create urgency, motivating customers to buy.
Upsells and cross-sells (Loyalty stage): Upsell customers to higher-priced products or services, or cross-sell related products or services. Behavioral principle: the foot in the door technique. Having accepted previous offers, customers are more likely to accept these upsell or cross-sell offers.

Remember, this is a simplified example and it's important to tailor this value ladder to your specific audience and your unique offerings.

Moreover, the key is to ensure that each step provides genuine value to your customers – this is crucial for building trust and ensuring customer satisfaction.

The Stages of the Value Ladder

The number of stages in a value ladder can vary depending on the business model, industry, and specific offerings. However, a common approach includes these five stages:

Lead Magnet: A free product or service that you offer to potential customers in exchange for their contact information, typically an email address.
Introductory Offer (Tripwire): A low-cost product that provides good value. This is designed to turn potential customers into actual customers, helping to establish a more committed relationship.
Core Offer: This is your primary product or service. It's what most people will think of when they consider what you sell.
Profit Maximiser: These are higher-value products or services that you offer to customers who have purchased your core offer. They are typically more expensive and provide an additional layer of value to what the core offer provides.
Return Path: This isn't a product or service per se, but rather mechanisms like email marketing, retargeting ads, or loyalty programs designed to bring customers who have exited your value ladder back into it.

How a Value Ladder Works

Value ladders capitalize on several behavioral psychology principles:

Trust Building: The value ladder helps to establish trust between the business and the customer. As customers purchase and use lower-cost products, they're able to evaluate the quality of the business's offerings without making a large financial commitment. If they find the products valuable, their trust in the business increases, making them more likely to purchase higher-cost products.

Perceived Value: Each step up the value ladder offers something of greater value to the customer. This can be perceived as getting a "better deal", making the customer more inclined to move up the ladder.

Commitment and Consistency: This principle from Robert Cialdini's influence research suggests that once a small commitment is made (like a low-cost purchase), people are more likely to continue making consistent decisions. So, once a customer makes a purchase (even a small one), they're more likely to continue their relationship with the business.

Reciprocity: This is another principle from Cialdini. Essentially, it suggests that when someone does something for us, we feel compelled to return the favor. When a business offers something of value at a low cost or for free, it may make customers feel obliged to reciprocate by making a purchase.

Loss Aversion: As customers move up the ladder, they invest more in the products or services. The more customers invest, the more they have to lose. This makes them more likely to continue purchasing to justify their initial investment and not feel like they've wasted money.

Cognitive Dissonance: People strive for consistency in their beliefs and actions. Once customers have made an initial purchase and justified it to themselves, they are likely to continue making similar decisions to avoid cognitive dissonance, i.e., the discomfort of holding conflicting thoughts or beliefs.

Why Your Startup Needs a Value Ladder

Creating a value ladder can be tremendously beneficial for a startup as it develops its offering. Here are some reasons why:

Customer Segmentation: Not every customer will want (or be able) to purchase your most expensive offerings right away. A value ladder allows you to create different products at different price points that cater to different segments of your market. This widens your potential customer base.

Revenue Maximization: By leading customers up your value ladder, you're effectively increasing the customer's lifetime value (LTV) to your business. They start with small purchases and gradually move up to higher value purchases, thereby maximizing your revenue per customer.

Customer Relationship Building: A value ladder fosters trust and builds a relationship between you and your customers. As customers gain value from your lower-priced offers, they're more likely to trust what you have to say and consider your higher-priced offers.

Risk Mitigation: Lower-cost items at the bottom of your value ladder can help to mitigate the perceived risk of purchasing from you, especially if you're a new startup without an established reputation.

Predictable Growth: A well-structured value ladder helps startups create a predictable growth and sales model. It becomes easier to plan marketing strategies and analyze the effectiveness of different stages of the ladder, giving a clear path to scale.

Understanding Customer Needs: The interactions and data obtained from customers as they climb the value ladder can give you crucial insights into their needs, preferences, and behaviors. This can inform your future product development and marketing strategies.

Viewing your startup’s offering through the lens of a a value ladder can help you develop a comprehensive business strategy. You’ll end up with stuff that meets customers’ needs and maximizes revenue.

Win Win.