Nothing has the potential to grow your business and generate more profit than a properly constructed value ladder.
But before we get into the details, let’s start by talking about the main metric that I believe every business needs to focus on: Customer Lifetime Value, or CLTV for short.
Maximizing Your CLTV With a Value Ladder
Put simply, CLTV is the amount of revenue you expect to generate from a customer while they are using your product or service.
When you think about a typical software business, for example, if someone pays you $100 a month and they stay for 12 months, then their CLTV is $1,200 — $100 a month over 12 months.
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If you’re in e-commerce, it’s the average number of purchases that someone makes while they’re a customer, multiplied by the average order value.
In short, CLTV is basically what a customer pays you while they are using your product or service over their lifetime.
What you want to focus on is maximising your Customer Lifetime Value, because the more you make from a customer during their lifetime, the more you can spend on customer acquisition — which is how much you spend to get a new customer.
The more you can spend on acquiring a new customer, the more marketing channels you can use to get them, which is how you beat your competition.
The best way to maximise your CLTV is to implement a value ladder into your business. A value letter basically means that you have different products and or services at different price points.
Why implement a value ladder? Well, it’s really hard to grow any business with just one product or service. Sure it can be done, but it’s a challenge.
Think about the companies you buy from – Apple, Google, Microsoft, etc. They ALL have multiple products or services which you can purchase.
A value ladder is really just a method of mapping out your product or service offerings visually in ascending order of value and price, like this:
Let me tell you a bit about the value ladder that we have at Insane Growth.
At the lower end of our value ladder, we have online courses. They are priced anywhere between $500 and $2,000.
These courses are pre-recorded and uploaded into our member’s area. You watch the course in your own time, complete the worksheets, etc.
The next step up in our value ladder is in-person workshops. These are small group workshops with anywhere between 8 and 20 people with a typical price point of around $3,000 and run for 2 or 3 days.
We run the workshops in our Sydney or Los Angeles boardrooms.
Beyond that we have Peak, our mastermind group which costs $24,000 per year. The mastermind includes four in-person workshops per year, bi-weekly group coaching calls and access to our entire vault of online courses.
Finally, we have one-on-one coaching with me personally, which starts at $50,000 per year and is for founders doing 7 figures who want to get to 8 figures quickly.
So we have four different offerings that make up the Insane Growth value ladder. And we cover all different price points. From $500 all the way up to $50,000+ per year.
Now here’s the thing – if we just had online courses it would’ve been very hard to build Insane Growth into a multi seven-figure business.
It might’ve been impossible, because our customer acquisition cost couldn’t be more than $500, otherwise we wouldn’t be able to cover our operating expenses and make a profit.
Competing with other businesses on Facebook and Instagram ads to get people into our funnel, onto our email list and to become paying clients would be really hard if we could only spend a few hundred dollars to acquire a customer.
Luckily, we can spend thousands of dollars to acquire just one customer and still make a substantial profit. That’s only possible because of our value ladder.
When I started Insane Growth back in 2015, our average Customer Lifetime Value was $243. Today it’s $3,826 — that’s a 15 X increase in 4 years.
The only way we were able to do that was by sitting down a few years ago and mapping out our value ladder.
We started with a few simple questions:
“How do we get someone in at a low price and really deliver huge amounts of value? Then when they come back to us wanting more, how do we ascend them up our value letter so we can generate more revenue and offer them even more value?”
The great thing about creating your own value ladder? You don’t necessarily have to launch new products or services from scratch.
There’s different ways you can package up a lot of what you might already have in your business, but deliver it in different ways where your audience would find a higher perceived value in the way that’s delivered.
That’s essentially what we did with our value ladder.
When I started Insane Growth, I had my methods and strategies that I’d used to build my own successful businesses for well over 10 years.
I knew some people liked taking online courses because of their flexibility. So I decided to package my different business growth methodologies and strategies into various online courses using video.
But I also knew that some people didn’t want to sit at their computer and watch videos about how to grow their businesses. They wanted to see me in person, so we could interact, so they could ask questions, etc.
That’s when we started to run multi-day workshops.
People loved the workshops, but at the end they always asked “Mitch, how do I get more from you? How do we keep this momentum going?”.
From there, I decided to launch Peak, the Insane Growth mastermind. And that’s been a huge success.
But even still, people in the mastermind kept saying “I love Peak, but how can I work with you one-on-one to help grow my business?”, which of course led to one-on-one coaching.
So that’s how our value ladder evolved and developed over time. It took more than 18 months to implement, but how else can you get a 15x increase in Customer Lifetime Value?
The return on your time invested to build a value ladder is enormous.
The best way to start planning your value ladder is to ask one question:
“What other problems do our customers have that we can help them solve?”
As a general rule of thumb, you want to help them solve bigger and more complex problems as they ascend up your value ladder, because that’s how you’ll generate more revenue and increase your CLTV.
The best way to answer this question is to get on the phone with your top 20 or 30 customers and simply ask them. You’ll be surprised at how open and honest they’ll be, especially if they love your existing products or services.
They will give you all of the answers you need to map out your value ladder. You’ll see gaps in your current offerings, you’ll see opportunities to launch new products or services and you’ll get ideas to repurpose or reposition those you already have.
In a perfect world, you want to structure your value ladder in a way that ascends as many people as possible from your lowest price offering to your highest priced offering.
- 100% of customers buy your $500 offer
- 25% of customers buy your $2,000 offer
- 5% of customers buy your $10,000 offer
- 1% of customers buy your $50,000 offer
Each part of your value ladder requires its own sales and marketing, too.
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For example, when people buy your $500 offer, then should then be put into a marketing campaign that drives them to purchase your $2,000 offer. We use email marketing and retargeting via Facebook Ads to do this automatically.
When they buy your $2,000 offer, you move them into another email marketing and retargeting campaign, etc, until they’ve ascended all the way up your value ladder.
The great thing about a value ladder is regardless of the price point someone enters at, you can upsell OR downsell them.
For example, if someone buys your $10,000 offer but says no to your $50,000 offer, that’s fine. You can start downselling them to your $2,000 offer.
Remember – The ultimate outcome from a value ladder is to maximize your Customer Lifetime Value, so whether you do that by moving them up or down your value ladder doesn’t really matter.
Once your value ladder is up and running and you’ve backed it up with effective (and ideally automated) marketing campaigns, you’re then in the envious position of deciding what to do with your increased profits.
If you’re focused on growing your business and gaining market share, you can invest those profits to start scaling existing marketing channels and also testing new channels.
For example, if you only run Google Adwords, you might allocate 25% of your increased profits to start testing Facebook and Instagram Ads.
Always remember the famous quote from Amazon founder Jeff Bezos:
“Your margin is my opportunity.”
Jeff more than anyone understands the long game. He knows Amazon’s CLTV down to the dollar, so he can outspend Walmart, Target, etc on customer acquisition.
When you get your business to that point, it’s almost impossible to lose, because the more you can spend to acquire a new customer, the more customers you get. But most importantly, the fewer customers your competitors get.