For example, say a dentist was to advertise a "free teeth cleaning" on Facebook as their front-end special offer in their ad. They would get a ton of people coming in to claim this offer!
Say during 1 month of running this offer, 30 people actually show up to get the free teeth cleaning. Now on the surface, it looks like the dentist just lost a bunch of money... (For the time and materials needed to do these 30 free teeth cleanings)
However, while cleaning a few of the patients' teeth, the dentist found several cavities, and because of the massive value she already provided for free, she is able to offer these services to her patients right on the spot (upsell).
Next, the dentist will notice that some of her patients have yellow teeth and may legitimately need teeth whitening. This is further up the value ladder (step 2). Because of the massive value she just provided with the free teeth cleaning and affordable fillings, most people will naturally want to get even more value.
So say 30 people come for the free teeth cleaning, 10 get upsold to teeth whitening (several hundred dollars each). Next, maybe 3 or 4 of these patients will need braces or a retainer (several thousand dollars each).
Further, possibly 1 or 2 patients will need serious cosmetic dental surgery ($10,000+ each). Cosmetic is the highest point on the dentist’s value ladder, called the "back end" product, where the business provides the most value and gets the most money.
And this is how a perfectly executed value ladder works! Now, of course not everyone is going to move on to step (2). Some people will take the free teeth cleaning and never come back, but the people who ascend to the higher steps more than cover the cost of doing free teeth cleanings for 30 people. Does that make sense? Are you having an epiphany!?
In DotCom Secrets, a brilliant marketing book by Russell Brunson, Russell talks about how he helped save his friend's sinking chiropractic business by helping him define his Value Ladder.
They offered a free 30-minute massage on the "front end," $50 back adjustments as the "middle-tier" product, and a $5,000 per month (per client) wellness continuity program, where the chiropractor spent several hours per week with each client, helping treat diseases like carpal tunnel, sciatica, scoliosis, etc.
In a short amount of time the chiropractor was able to hire 2 full-time massage therapists to do all the free massages, while he focused on adjustments and the wellness program. The massage therapists were trained to spot any problems with spinal alignment and guided patients higher up the value ladder.
As I mentioned earlier, the "front end" is what gets the people in the door and the "middle-tier" and "back-end" products are what brings in the real revenue. That's why it's okay if you break even or lose money on the "front-end."
Remember, "amateurs focus on making money on the front end", while the pros understand the concept of the Value Ladder and the LTV (Long-Term Value) of a customer, and provide massive value up front for free, while smoothly guiding their happy clients up their Value Ladder.