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Why Value Ladder Concept is Extremely Important to Every Business

By Ravi Sahni|11th Apr 2020
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Give Away Something to Build Value and Watch Your Sales Grow as a New Start-Up

With new businesses and start-ups growing faster than dandelions during a late spring shower, increasing sales and securing customers may be difficult. One strategy that many successful companies use is to give away something that makes each potential customer’s life easier and helps them to make a good decision.


Would car dealers have sales if they didn’t give some mileage away during the test drives? Even retail stores give away some products when customers are allowed to try on clothing—from suits to shoes to perfume.


Why does this strategy work?


There are two types of people in the world: people who are short sighted and people who are long term oriented. Short-sighted people want to make a profit right away. On the other hand, people with long term vision and business acumen understand that to run circles around the competitors, you give away things—or time—for free in order to get people interested, and then monetize downstream. That’s where the value ladder comes in.


The value ladder is best explained through the following example:

Value-Ladder


A dentist loses money by providing free teeth cleaning. However, this gets them a long-term customer, and sometimes a lifetime customer because people don't shop around for dentists if they're happy, they stick with them!


A smart dentist understands that it's okay to lose money upfront. The money is made in the following visits when the patients start bringing their children or partner for a routine check-up. God forbid, if they had to get cosmetic or retainers, we all know how ridiculously expensive that could be.


The value ladder doesn’t exit just for dentists. If you’re innovative, you can create your way out of any box. Think about how you can build a value ladder in your business by giving away things which have a perceived high value. Be unique, be helpful, and you won’t have to beg for clients anymore once you understand this concept.


Trust is the most powerful currency in any business


The biggest hurdle between your start-up and the potential customers is trust. People don't know about the quality of your product or service; they don't know if you'll be able to deliver the promised service or product in a timely manner—heck, they don't even know if you're a genuine or fly-by-night business. That's why initially giving away something valuable is an important strategy.


This kind of practice is quite common in the online world. For example, SaaS companies offer anywhere from 14- to 30-day free trials. Netflix and Amazon Prime both offer a 30-day free trial.

Amazon Kindle offers a free sample of every book so that readers can assess a book and decide whether it is interesting enough to buy.

To encourage people to try out Adwords, Google offers up to a $150 coupon to new users.


As the marketing legend, Claude Hopkins in his book “Scientific Advertising” said, "I always emphasize that my proposals were always altruistic. I was always offering service. Anyone could try what I offered without risk."


When these multibillion-dollar companies are willing to give away something valuable to get people to interact with their services, why do you think that, without offering any monetary or non- monetary value upfront, you stand a chance of winning against your competitor who does?


However, the great news is that most businesses don't do this. Look around your industry, and see if you can find anyone who is giving value upfront to the customers. The chances are slim.


Personal anecdote


Five years ago, when my girlfriend created her first website Get School Supplies; she knew very little about SEO and got almost zero traffic in the first few months. Then she decided to create a long list of schools and organizations who were offering free school supplies in the town at that time and shared that article to Facebook groups related to mothers, parenting, education, and local towns.


As you can probably guess, she started getting thousands of visitors per day for the next two months during the back-to-school season.

The take-home message is to find something valuable which your competitors are not talking about; offer it your customers; be patient, and soon you’ll realize that you’ve hit the jackpot.

India’s most prolific entrepreneurship conference TechSparks is back! With it comes an opportunity for early-stage startups to scale and succeed. Apply for Tech30 and get a chance to get funding of up to Rs 50 lakh and pitch to top investors live online.

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