What is ladding? Pros and cons

Laddering translates as "creating stairs." It is used in two contexts: investment and marketing.

In Iinvesting laddering can be used in different ways:

1. Laddering as a method of investing when an investor prefers to buy several assets of the same type with different maturities. For example, it can be certificates of deposit or bonds. The purpose of such an investment is risk diversification and planning. The formation of such a ladder is perfect for forming the right approach in financial planning. For example, when you  buy various bonds with different maturities, you can plan to release funds when it is convenient for the investor: after a year, the child needs to pay off the contract for training, after 5 years a major purchase is planned, etc. up to retirement age. The investor can decide for himself how to form the ladder, from short-term assets to long-term (with favorable economic indicators that contribute to generating income) - this is an advantage. One potential disadvantage of this type of investment is that you need a lot of capital to provide significant income, because the yield on the output is low.
2. Laddering as a way of manipulating prices at the initial public offering (IPO). Such manipulation is not considered as legal, because at first the client is offered to buy assets at an artificially low price during the IPO, in exchange for what they buy at a higher price more securities than planned when the promotional period is over. Thus, certain class of customers is immediately distinguished.

In marketing, laddering in marketing is a special marketing research method that can help you understand why people buy and use these products and services.

The goals of laddering in marketing: to determine the relationship between the quality of a product or brand, properties, benefits from use and the emotional component of consumers. Thus, the main emotions that affect the client’s decision to purchase a particular product are revealed. It is believed that a person buys a product according to their preferences and emotions at the same time, and often purchases are compared with the rationality and functionality of the planned acquisition. At the same time, emotions are powerful motivators that stimulate desires or needs.

For example, a person who is passionate about sports will buy sneakers from a well-known brand. We can find out why he is buying these sneakers:

Question: "Why are you buying these sneakers?" - Answer: "They are very convenient." (Property)

Question: "Why is convenience important to you?" - Answer: “I often run long distances” (Functional Benefit)

Question: "How do you understand what is convenient for you?" - Answer: "I can run longer without injuries and feel less tired (Rationality and quality)

Question: "What does running without pain and fatigue mean to you?" - Answer: “I can run longer, faster, with better time of speed running” (Emotional gain).

Pros: laddering can be used as a technique for obtaining high-quality information. It is necessary to improve product offerings, advertising and the general business strategy of a company / brand.

Cons: a large number of questions may not seem interesting to the respondent, some questions can be difficult to answer. It leads to imposition, which can lead to a distortion of understanding.

Kuantyay Sabaaymi

Kuantyay Sabaaymi was born in Phuket, Thailand. Graduated International Business the executives at the University of the Thai Chamber of Commerce. Over the past three years he served as a Financial Analyst, where he was answerable for study, ordering and research of monetary data and accounting reports. The other job was to make, keep up and give and monetary detailing and examination.

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