How a product ladder makes it easier for customers to buy – and keeps them coming back for more.
Kaizen is a Japanese word for continuous improvement. It is the philosophy of continuously examining what we do and making improvements where possible. Kaizen first became famous in the west when Toyota’s manufacturing processes seemed to be able to produce more and more vehicles while maintaining levels of quality that far surpassed their competition. Today, kaizen is accepted and practiced by top-performing organizations all over the world.
As humans, we’re not that fond of change. Change involves the unknown, and the unknown is uncomfortable – even dangerous. So we’re naturally wary of change. For change to be effective, we need to assimilate and get used to the new way of doing things before it becomes “normal” and we’re willing to look at more change.
Attracting a customer to purchase a first product or service from you involves change – and risk – for your potential customer. The smaller you can make that risk the easier it will be for your customer to make that leap of faith.
What is a product (or service) ladder?
At it’s most basic, a product (or service) ladder is simply a range of products or services rising in price. A higher price gets you more features and benefits.
Product and service ladders are all around us. Apple’s range of iPhones is a great example – you can start off with the (relatively) cheap and cheery iPhone SE and progress all the way up to the iPhone 7 with its high-performance cameras.
Internet services are another good example of product ladders. The more you’re willing to pay, the faster your Internet connection and the more data you can stream.
Why do you need a product ladder?
Attracting customers is a process of building trust. When a potential customer first makes contact with you they’re wary – they don’t know you and they dont know if your products or services will live up to your promises.
Usually we try to alleviate their fears through case studies or testimonials. But taking that first step – giving you money in exchange for your product or service – is still risky. So you need to do more to make that first purchase easy.
One way to do that is to make your entry-level products or services relatively cheap – even free. If your customer is happy they will most likely come back for more. And customers that come back for more are way more profitable than attracting new customers.
And that’s why you need a product ladder – make it easy to start small and build trust so that it’s easy to come back for more.
(Of course, there are other things you need to do to minimize risk for your potential customers – that’s a story for another day.)
How do you create a product ladder?
In principle a product ladder is simple: a range of products that rise in price, value and features. Depending on where you are in your business growth at least one of the following techniques will help you create your product ladder:
Unbundle existing products or services
If you’re already in business with one or two products or services you can break them up into smaller products or services, or offer “starter” versions (this is way easier with services, of course).
For example, if you offer web site development services your flagship offering may be a full business analysis with web site design, copy writing, search engine optimization (SEO) and social media marketing. But not everyone is ready to jump in to this big offering.
Instead, break up the whole process into steps. Your first step could be to create a road map for your client – how their web site and marketing could evolve over time. (Another entry-level offering could be a free review of their current web site.) A second step could be a basic web site so that you can showcase your technical and design skills. A third step could then be ongoing SEO and social media marketing.
If you’re selling physical products they could range in features, or you could offer your products in a range of packaging, for example singles, packs of 3 or smaller to larger selections of edible items.
If you’re just starting out you can start with an entry-level product. Rather than build all your products at the same time (spending a lot of time and effort), you build a small, relatively cheap product that is easy for customers to buy.
Then, as you get feedback from customers on what’s valuable to them, you start adding higher-value products.
This approach is easier and less risky for you and gets you to market a lot faster. And the biggest benefit – you get feedback on what your customers really want.
Your product ladder must provide value – even (especially) in free offerings
A lot of companies offer free five-day email courses or 10-step check lists as an initial offering – the so-called lead magnet. Mostly, these are useless. They dont teach a skill, the information is shallow and they dont help you solve a problem.
And this does more harm to your business than not having the offering in the first place. When I download a free product that does not provide value I am going to make a judgment on whether it’s worth coming back for more – and if there’s no value I won’t come back.
When do you need to create a product ladder?
If you don’t have a product ladder, you need to build one now.
Trying to build a business based on one product only gives your customers only one choice – they can only say yes or no. But a range of products will allow them to select the one that most suits their needs, risk tolerance and budget.
A product ladder is a great way to start a new business. You don’t need to build the mother of all products or services to start; instead you can start with the smallest one, learn from it and build out from there.
What if my business is not suitable for product ladders?
There are very few businesses that can not create a product ladder. (Actually I have not yet come across one – if you think you’re one of those I would love to hear from you.)
Let’s say that you’re a small engineering company. Engineering services are very process-driven. We’re even tempted to think that you have to go through the whole process to deliver a product or solution to your client.
But how about you offer the customer a choice (a product ladder):
Start off with concept design. Do it in such a way that your client understands they can take the concept design anywhere for further development.
Then progress to prototype development or pilot installation.
And finally there’s the full production version.
I am not an engineer so I may be completely off the mark. But I have worked with engineers for long enough to know that the above progression is at least feasible.
Again – if you feel that your business does not lend itself to creating a product ladder, I would like to hear from you.
Here are some examples of great product ladders
Apple’s iPhones and iPads are a great example of product ladders. If you’re not convinced that a tablet is for you, you can start with the low-end iPad mini. When you’re ready to upgrade you will most likely look at a higher-end version.
Worst of All Design is a badass branding company based in New York. Their product ladder consists of:
A 1.5 to 2-hour Brandshrink interview followed up by 2 to 3-page brief. Current cost: $1,450.
A 1-day Brandup. Cost: last time I looked, $10,000. Cost as of today: $14,950.
A 2-day Brandup Plus. $19,950.
A 3-day Celebrity Brandup. $29,950.
And they’re booked out months in advance.
Every business needs a product ladder.
A product ladder is a range of products varying in price and features.
Product ladders make it easier for potential customers to buy into your product line.
Create a product ladder by breaking services into chunks or offerings products in different sizes or feature sets.
Every product or service in your ladder must provide value – especially the free ones.
A product ladder is a great way to start a new business.
One step at a time
Getting customers to come back for more requires that you build trust and prove your value.
Just like Kaizen practice takes improvement one step at a time, your product ladder must give your customers the opportunity to take one step at a time.
Each step builds trust. And when you trust that someone is going to provide you with value you are likely to come back for more.
What to do next
Our next product is in the works – and it is a detailed guide on how to create product and service ladders and roadmaps. If you would like to get advance notice of when the product is available, sign up for our newsletter now.
Check out Worst of All Design’s web site – they are a great example of a product ladder.
And if you’re serious about creating a product ladder (and even changing your business model), check out Pia Silva’s book Badass Your Brand. She’s one of the two people behind Worst of All Design.
Have a great weekend!