As you build passive income streams for your business, one of the most important concepts to understand is the idea of a “value ladder.”
This is a powerful concept because the key to really growing the passive income side of your business is to offer different products at different levels that appeal to different customers.
The value ladder is an idea that was popularized in Russell Brunson’s book Dotcom Secrets. You can get a free copy of the book by clicking here.
(Note that the link above is an affiliate link — we earn a small commission if you use this link to get your free copy of the book. Thanks for your support!)
What is a Passive Income Value Ladder?
There are two simple ideas behind the concept of the value ladder:
- As your customers get to know you, they start to trust you more and more.
- Some of your customers will have the money and the desire to buy more expensive, more detailed products from you, others won’t need (or be able to afford) those more expensive products.
A value ladder is a simple representation of all of the products you offer to your client universe, showing the progression that you hope to lead them on, from lower-priced products to higher-priced products.
Here’s an Example of a Value Ladder in Action…
For example, let’s say you’re a political campaign consultant, and you want to launch passive income products on your site. Your value ladder might look like this:
Here's how this value ladder works, rung by rung:
- First, you offer a free downloadable guide called 10 Ways to Use Yard Signs to Win Your Next Campaign. You offer this guide to get people to give you their e-mail address and sign up for your e-mail newsletter.
- The next product you offer is an e-book called How to Build a Grassroots Team to Help You Get Elected. The book costs $9.
- After that, you offer a webinar called How to Raise the Money You Need to Win Your Election. This one-hour webinar costs $47.
- Slightly more expensive than your webinar is an online class you offer called How to Run a Successful Campaign: The Complete Guide. This 8-part class costs $199.
- The final level of your value ladder is a one-on-one coaching program you offer. This isn’t really passive income, but it can be very lucrative.
With respect to rung #5, let’s say you run a coaching program where you speak with clients one-on-one for an hour every week to help them win their elections. Plus, you are available to them for e-mail questions at any time. You charge $2,500 per month for this coaching program.
(And remember, you can still sell your normal consulting packages or work on consulting projects, alongside the passive income portion of your business.)
The Ultimate Goal of Your Passive Income Value Ladder
The goal for your passive income value ladder is to move as many people as possible up each step of the ladder.
For example you may find that for every 100 people who sign up for your e-mail newsletter list, 25 eventually buy your e-book, 10 buy your webinar, 3 buy your class, and 1 signs up for your coaching program. The process isn’t necessarily linear — meaning someone doesn’t need to buy your e-book in order to buy your webinar. But your customers often will start with buying smaller products before moving up to larger ones.
The objective of your marketing is to get as many people to ascend up the ladder as possible, while realizing that not everyone will have the desire or capacity to move up to the highest rungs of your ladder.
How to Build a Value Ladder for Your Business
As you build out the passive income side of your business, you’ll want to think through the various things that you know that other people are willing to pay to learn. You’ll also want to think through the natural progression of your customer’s needs.
Another Example of a Value Ladder
If your free give away item (that you use to get people to join your e-mail list) is a special report on using yard signs to win a political campaign, what else do people need in order to succeed?
Well, if they are going to use lots of yard signs, they will probably need a grassroots team to help them go out and meet voters and put up the yard signs. Thus, the next step in the ladder is a paid e-book that teaches them how to put together a grassroots team.
If they’re putting together a grassroots team and building out a campaign, they’re going to need to raise money to fund their efforts. Thus, the next step on the ladder above is a webinar, that’s more expensive than the book, that teaches them how to raise the money to fund their campaign. And so on and so on…
Climbing the Ladder Takes Time
Note that these items don’t need to be sold all at once. Sure, you could have a marketing funnel that gives away the guide, and then if someone signs up for the free guide, they get a sales pitch for the paid e-book, and if they buy the paid e-book, they get an upsell pitch for the webinar, etc.
But you could also just make sure that once someone downloads your free guide, they start getting e-mails automatically sent to them selling the paid e-book, along with all the other great content that you send out in your email newsletter.
Speaking of great content provided in an email newsletter, subscribe to our newsletter for some excellent weekly tips on generating passive income. And just like in the example I shared above, you'll also get our free guide. 😉