Understanding The Value Ladder & How It Impacts Your Profits!

This is a critical concept to understand if you are wanting to attract new customers (or retain existing clients). One of the quickest ways of achieving this is by offering something special, for a local service business, such as say a beauty salon, a gym, a hairdresser etc, it may be by offering a CRAZY discount. But the key is to ensure that you make money in the process, not lose it, as many businesses have gone out of business by making a great offer that has brought people through the door but sent them broke in the meantime.
The value ladder, here it is:

So we have price along one axis and value along the other. As the price goes up the value goes up and typically it’s the higher value items where you can make most of your money – but they do usually require more of your time or resources.

So as an example, for say a beauty salon:
The lowest value item of service may say an eyebrow wax, then going up the ladder may be a leg wax, then a facial or a massage, then perhaps some services packaged together – so you may have a range of services from say $20 to several hundred dollars.

The problem that many businesses get into is that they don’t realise where they are making their money and as such when they need more business, they discount their higher priced services rather than the lower priced ones.

Have a think now about your products and services and where each one fits within your value ladder?
If you are doing any discounting, then the purpose of that discounting should be just to get people in the door. Once you have a captive audience and they are able to experience you, your staff and the service you offer, then they should be keen for other (higher priced services) at their normal prices, as people are very happy to pay the “normal” price once they are convinced that they are receiving great value and this will often be the case once they have experienced your service. As such, in the case of the beauty salon, an ideal service to discount (or even give away) is an eyebrow wax. Once your new clients are there, they will then be great candidates for all of your other services.But it was only once you got them in, with your special offer, that they got to experience you and your service. Without that special offer, many wouldn’t be there, but now that they are they become candidates for all your services.

In our experience, if you put an offer on say the “eyebrow wax” many even when booking this service will add to the service “whilst I’m there I may as well get a …. especially since I’m saving money on the eyebrow wax”. And many others, once they come in for the eyebrow wax will then realise a) what other services you have to offer and b) how good you are and will then make a subsequent booking. Many wills of course also purchase some products while they are there. And it’s exactly the same for the hairdresser with a blow-wave – chances are very good that on the day once you have a new client in they will want to add a trim or treatment to that, but either way if they like what they see the first time they will have a good reason to come back!

We ran a campaign for a client that kicked off with a “free eyebrow wax” and finished up with well over 60 new customers in under two weeks and the campaign more than covered its costs before any return visits!
Remember, if you are discounting, discount services on the lower rungs of your ladder, with the view that ideally, clients will purchase services on the higher rungs, at full price. Never discount the major services – as that’s where you make your money!

What if you are a business that only has higher priced services or a single product. Well, in that case, the CRAZY discount offer is probably not the best option. But you can still use the same concept. You need to think about something that you can offer a prospect to “get them in” it may be some information that will be of value to people who are looking for your service, maybe produce a “how to guide” or a “7 traps that people often fall into when purchasing a —“. Or maybe it’s a free or heavily discounted initial consultation (if this is something that you usually charge for). If you can give your prospect something of value that gives them the opportunity to see that you know what you are about and that you offer a good service, then they are more likely to take the next step with you. Once they see you as the professional, then price becomes less of an issue and as such, they are generally happy to pay “normal” prices, so even though you have given something away upfront, this will enable you to not have to compete as much on price with your competitors (within reason).

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