3 Levels Of Customers

There are three levels of customers: Level 1, Level 2, and Level 3.

Level 1 Customers

Level 1 Customers form the largest group. They have lower income and spending power. They often buy once and have high refund rates, needing a lot of effort to turn into higher-level customers.

These customers tend to blame others for their lack of success, making them challenging to work with. They are more demanding, spend $50-$100 on average, take less action, and complain more than other levels. They require a lot of customer service and hand-holding, with refund rates between 10-40%.

Level 2 Customers

Level 2 Customers earn more than Level 1 and have a higher chance of buying again. While they might not spend as much as Level 3 customers at first, they are important for business growth and can move to Level 3 with the right support.

These customers are often hobbyists, spending $100-$1,000 on average. They show some responsibility issues but have limited repeat purchases. Their refund rates range from 3-15%.

Level 3 Customers

Level 3 Customers are fewer in number but have significant financial potential. They have high disposable incomes, are repeat buyers, and invest in premium products and services.

These customers are fully committed, with refund rates of 1-3%. They spend $1,000-$100,000 and need very little customer service. They have unlimited buying power for their goals and are eager to improve at all levels.

Focusing only on Level 3 customers might seem tempting, but ignoring Levels 1 and 2 can harm your business. These lower-level customers play key roles in:

1. Funding advertising: Revenue from lower-priced products helps fund marketing to attract Level 3 customers.

2. Optimizing ad campaigns: Facebook and Google use algorithms that consider user engagement and spending habits. Selling to Level 1 and 2 customers, even at lower price points, can improve the performance of your ad campaigns by optimizing your target audience. Facebook categorizes users based on their engagement and spending patterns. High-value users who frequently engage with ads and make purchases are shown ads at a higher cost to advertisers. Conversely, users who primarily browse without purchasing are considered lower-value and are shown ads at a lower cost. Therefore, targeting both high and low-value users can help balance advertising costs and optimize your ad campaign's effectiveness.

3. Building a community: Levels 1 and 2 can become loyal fans and create a thriving online community, attracting Level 3 customers.

3 Levels Of Customers Examples

1. Apple

Apple started with premium products for Level 2 and 3 customers but introduced affordable options like the iPhone SE to reach Level 1 customers:

1. iPhone SE: $429

2. iPhone 17: $799

3. iPhone 17 Pro: $1099

2. Tesla

Tesla offers cars at different price points for various customer levels but even Tesla started with premium car that funded the production of the Model 3 and Model S later on:

1. Model 3: $40,380

2. Model S: $76,630

3. Model X Plaid: $113,000

This principle is covered in the book "Automatic Clients" and it is a game-changer for consulting or agency business.

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