More sales through the Value Ladder
Increase turnover without new customer acquisition
Increase revenue from every customer contact and thus achieve better results with less effort – the use of an effective value ladder makes it possible.
What is a Value Ladder?
Every company offers products, no matter in what form. It is one thing to offer only a certain single product at one price. A value ladder allows customers to see the entire product portfolio. This also allows each customer to decide directly for himself on which “level” in the product and service range he would like to enter, and also at what price.
By expanding its product portfolio, a company creates the basis for a ladder system for its own products, where each additional rung on the ladder stands for an even higher-quality product or an additional service that increases value from the customer’s point of view. This approach is known as the “value ladder”. It forms the sum of all items and services offered in the company in ascending order of price and value from the customer’s point of view.
With each additional rung on the ladder, the price increases and with it the value of the products offered. Behind this tactic is the realisation that for a customer in our target group, there is almost always a suitable option in our offers for the respective situation. We increase the likelihood of purchase through a variety of different offers with different prices and values. Even if it’s just the lowest step on the value ladder, which involves downloading a free report from our homepage – the customer has made an interaction and agreed to be contacted by us. This alone may be enough for the sales team to contact them in the future. The goal is to get an interaction from almost every lead – even if only in a small way for now. Especially in the digital world and combined with digital marketing, value ladders can be built and used effectively for businesses, which in turn can increase close rates.
Better likelihood of closing and more revenue per customer.
By not just offering a customer a single product that they may or may not like, with a value ladder we work with our entire product range on each offer. The likelihood that a customer will find something suitable from the entire portfolio of our goods and services, even at different price levels, is thus many times higher. An existing company with an already active customer base can often increase its sales figures by 50% to 200% with this alone – without changing anything about the actual products or the company.
While new customer acquisition is preached as the mantra par excellence in sales, effective use of a value ladder and professional selling is often the easiest way to generate additional sales – and thus more profit. All that is needed is to rearrange the existing products and align sales to this arrangement. No investments in research or development are necessary and no novelties have to be invented.
The main reason for this is a deeply psychologically anchored effect that we in sales can use to our advantage. We are all conditioned from childhood to follow a tier system and want to reach the top tiers. Starting at kindergarten age, up to the grading system in schools and universities, rank in the military, in company hierarchies, in politics, society, etc. We are all conditioned to follow a level system. In all these social constructs, we follow a similar grading system, from the lowest ranks to the highest.
But that’s not all, as customers can “advance” from one level to another, statistically they also stay loyal to our company longer and this increases the Customer Lifetime Value (CLV) per customer. This refers to the “value” of each customer over the entire time they are a customer with us. The longer we retain the customer and the more often they make a purchase from us, the higher their total CLV. This means we earn more profit per customer and have to acquire fewer new customers, which saves us costs and effort.
Making it easy to get started
The key to these value ladders is therefore to make it as easy as possible for the customer to enter the system. The first product on the lowest rung of the ladder and the first interaction with it must be as resistance-free as possible. From a psychological point of view, getting the customer to take the first step or action is the most significant and the most difficult. In the sales process, online and offline, this is our biggest domino. Once the customer has interacted with us, spoken to us once on the phone, corresponded by email or found out about our products, further communication thereafter becomes much easier from a sales perspective.
This first interaction on the value ladder can also be something non-monetary, such as subscribing to a newsletter or being willing to have a free consultation on a topic related to the product. Once a customer has taken the first step to connect with the company in some way, all subsequent steps will become easier for sales thereafter.
More importantly, from the first contact, the company will also have contact details such as phone number or email address for further exchange or sending additional offers relevant to the customer’s situation. (Read more: Data instead of cold calling – precision in sales thanks to technology) Sales can thus proactively contact the customer from the first step on the value ladder. Even a customer who is not ready to buy today may change his mind in a few weeks, months or even a year from now. Regular contact can ensure that the customer is always made aware of the company and its offers, and of the opportunities to improve their situation through our products.
Better onboarding for new customers
Arranging products according to this system makes it easier for the client to get on board with the final offer. Instead of immediately presenting the high-end software for 200,000 €, you can first pick up the customer at the first stage with a consulting day for 1,000 €, explaining the possibilities and advantages in more detail. Even before that, the customer might be interested in a white paper for companies in their specific situation or in a no-obligation get-to-know-you session via video chat. All these are possible entry points into our value ladder. Only then does the presentation of an initial version of the product follow, which is still available at a relatively low price. If the customer is enthusiastic about this version, the next better version with a moderate price but even better performance can be pointed out, and so on.
From the first interactions, our sales representative then works his way forward step by step. This happens again and again with regular intermediate feedback through the customer’s approval in the conversation. In this process, we thereby unconsciously build up an attitude of approval in our counterpart and anticipate a possible willingness to buy by consciously asking questions about the situation and background of the conversation. In this way, the customer is literally taken by the hand and guided through the sales process. Ideally, the value ladder adapts to the company’s customer journey and, together with the various customer touchpoints, creates a coherent overall picture. In this way, the company reacts to the customer’s willingness to buy, depending on the step on the value ladder, and also exploits this further for upselling, if possible, by always offering a higher-value product or an additional service for purchase.
In combination with digital systems from marketing that measure relevant data and evaluate it to improve the process, an optimisation of the previous, analogue sales process can take place. We can thus intervene precisely and make improvements at the points where we notice possible customer defections or where our sales process still appears to have weaknesses.
Using the Value Ladder in your own company
So why doesn’t everyone use a Value Ladder? Many entrepreneurs either do not understand the potential of a Value Ladder or are not creative enough to adapt it for their products and services. However, if you always work according to your industry standard, you will only get standard results in the long run. Extraordinary successes usually arise where someone dares to do something new and goes beyond existing boundaries. This can easily be done in any industry and for almost any product:
Possibility 1: Up-selling & cross-selling
Every potential customer who interacts with you, even if they only subscribe to your newsletter because you provide helpful content there, has already taken a big step from a psychological point of view. Even if no monetary exchange has taken place at this point. This gives us the opportunity to present the next stages of our Value Ladder. A large part of the gaming industry is now only based on games that are available for free, but in which you have to pay for virtual “extras” in order to progress faster and better. Similar examples are dentists who offer a free check, where statistically in 70% of cases further, necessary treatment is identified and agreed upon. This method can be implemented for almost all products and sectors, even in the area of industrial plants where, for example, maintenance contracts or additional consulting services can form the upper tiers to the product.
Option 2: Bundles & Packages
With this tactic we bundle our products and create added value by combining different offers. At the lowest rung, only the individual products are as they are. The more a customer moves down the ladder to e.g. “VIP Package” at the top, the more the different products are combined and bundled. This works best when a product has multiple add-ons that add value to the individual product. For example, on a cruise, you could book just the inside cabin. Or the inside cabin + flight. Or the inside cabin + flight + excursions on board. Or the outside cabin + flight + first off departure on shore leave + excursions. Or the outside suite + access to the VIP pool away from the crowd + Bon Voyage Party with the Captain + … etc.
Option 3: Exclusivity and scarcity.
The offerings at the top end of the litre can be scarcer and offer more extras than the standard products. For example, in the case of exclusive cars, there might be a “special edition” (usually from the in-house tuning forge such as Brabus, Alpina, etc.) that is limited to, say, 1,000 units. It could also be access to famous personalities, which promises more time and more personal interaction with each level. With each additional level, the (perceived) value from the customer’s point of view increases and so does the price.