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Customers are...

 

DisciplinesMarketing > Understanding Customers > Customers are...

Description | Example | Discussion | See also

 

Description

All businesses have customers, but what exactly are they? Here is a simple definition:

Customers are people or organizations with whom you exchange value.

Often, customers are people who buy your products and services in a simple transaction. Usually this involves the exchange of money for goods and services. When organizations buy, it is often more complex with multiple approvals and so on.

Benefit is the positive value that customers get. As well as benefits there are disbenefits, which are things that take away value, and non-benefits, which neither add nor remove value.

Selling and interaction are transactions that benefit both sides (in other words, the seller needs to get value too).

Example

A retailer has customers who come into the shop to buy goods.

A social services organization helps people in distress. They view them as 'customers'.

In business-to-business (B2B) sales, the notional customer is the buyer, but real customers include a range of people who may not be met by salespeople but who will actually use or benefit from the products.

Discussion

A transaction (or value exchange) can be at a single point in time. It may also be asymmetrical and spread across time, for example where a service is paid for monthly then delivered as needed, or where a product is bought up-front then value gained each time it is used.

There can also be value in intangible aspects, such as trust and loyalty. A good relationship can get better service for the customer and more sales for the supplier.

While the term 'customer' is often used in the retail transaction situation, the principle of service is often applied to any context where a person acts in some way. The question 'who is your customer' can be very powerful. This includes individual people in organizations, whose 'internal customers' may include their manager and other individuals. In some ways, your customers' customers are also your customers, in particular if you do not sell to end-customers (typically retail purchasers).

Michael Porter described Five Forces, one of which is 'customer power'. Customers always have the power to withdraw their patronage, and the more they spend with you, the more power they have. You can ask of any customer 'What power do they have over me?'

Businesses have often focused first on profit and consequently treated customers as a source of revenue. When customers are intelligent and have choice, they dislike this treatment and will be inclined to go elsewhere. Businesses that more customer-centric start with a focus on satisfying customers and, paradoxically, are often more profitable.

See also

Porter's Five Forces, Relationships, Trust

 

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