Definition of a customer
A customer is an individual or business that purchases another company's goods or services. Most public-facing businesses compete with other companies to attract customers, either by aggressively advertising their products or by lowering prices, in an effort to expand their customer bases.
A customer is not necessarily someone who is currently purchasing from the marketer. In fact, customers may fall into one of three customer groups:
- Existing Customers: Consists of customers who have purchased or otherwise used an organization’s goods or services, typically within a designated period of time. For some organizations the time frame may be short, for instance, a coffee shop may only consider someone to be an Existing Customer if they have purchased within the last three months. Other organizations may view someone as an Existing Customer even though they have not purchased in the last few years (e.g., automobile manufacturer). Existing Customers are by far the most important of the three customer groups since they have a current relationship with an organization and, consequently, they give an organization a reason to remain in contact with them. Additionally, Existing Customers also represent the best market for future sales, especially if they are satisfied with the relationship they presently have with the marketer. Getting these Existing Customers to purchase more is significantly less expensive and time consuming than finding new customers mainly because they know and hopefully trust the marketer and, if managed correctly, are easy to reach with promotional appeals (i.e., emailing a special discount for new product).
- Former Customers: This group consists of those who have formerly had relations with the marketing organization typically through a previous purchase. However, the marketer no longer feels the customer is an Existing Customer either because they have not purchased from the marketer within a certain time frame or through other indications (e.g., a Former Customer just purchased a similar product from the marketer’s competitor). The value of this group to a marketer will depend on whether the customer’s previous relationship was considered satisfactory to the customer or the marketer. For instance, a Former Customer who felt they were not treated well by the marketer will be more difficult to persuade to buy again compared to a Former Customer who liked the marketer but decided to buy from someone else who had a similar product that was priced lower.
- Potential Customers: The third category of customers includes those who have yet to purchase but possess what the marketer believes are the requirements to eventually become Existing Customers. As we will see in the Targeting Markets Tutorial, the requirements to become a customer include such issues as having a need for a product, possessing the financial means to buy, and having the authority to make a buying decision. Locating Potential Customers is an ongoing process for two reasons. First, Existing Customers may become Former Customers (e.g., decide to buy from a competitor) and, thus, must be replaced by new customers. Second, while we noted above that Existing Customers are the best source for future sales, it is new customers that are needed in order for a business to significantly expand. For example, a company that sells only in its own country may see less room for sales growth if a high percentage of people in the country are already Existing Customers. In order to realize stronger growth the company may seek to sell their products in other countries where Potential Customers may be quite high.
The Customer Concept
The Customer concept is a 4 stage model which shows how the organization can achieve growth by capturing and retaining its customers. The customer concept model can be used to determine where the organization stands in terms of serving its customers. This model can be used in product market as well as the service market. Here are the four stages of the customer concept
1) Starting point Over here the customer is just an individual who falls in a Target group. Thus the first thing which the organization needs is to know the Segmentation, Targeting and positioning. Once the customer has been defined its time to move to the next phase.
2) Focus In this stage, the organization needs to focus on the customers needs and wants as well as the value it provides for the customer. What is it that the customer exactly wants? . It is very important that the organization stays in sync with the continuous changes in the business world. Thus it needs time to time gap analysis as well as market surveys and research to focus on customers needs and wants.
3) Means What are the means available for the organization to deliver value to the customer? In this stage, it is very important for the organization to connect each and every function of the organization so as to form a Value Chain. The services should be connected to sales which in turn should be in sync with the manufacturing so on and so forth. You can refer the value chain to understand how customer value can be created in an organization. Along with this, integration of multiple sales channels is also important.
4) Ends Customer share, customer loyalty and customer lifetime value are three concepts which can define the customer equity of the organization. Thus this is the last stage of the customer concept wherein the organization has to ensure that it has kept its customers satisfied, that the organizations customers have become “repeat customers” and finally that they remain a customer for a lifetime.
Types of Customers
In the retail industry, customers can be segmented into five main types:
- Loyal customers: Customers that make up a minority of the customer base but generates a large portion of sales.
- Impulse customers: Customers that do not have a specific product in mind and purchases goods when it seems good at the time.
- Discount customers: Customers that shops frequently but bases buying decision primarily on markdowns.
- Need-based customers: Customers with the intention of buying a specific product.
- Wandering customers: Customers that are not sure of what they want to buy.
The Importance of Customer
One of the primary goals of any marketing strategy should be to identify and meet the needs of the consumer. Considering customer importance at all stages of the marketing process helps your company to ensure greater customer satisfaction and increase its long-term goal of repeat business.
- Psychological Considerations: The psychological makeup of consumers plays a crucial role in developing a product and a marketing campaign that identifies and addresses consumer needs. According to Lars Perner, assistant professor of clinical marketing at the University of Southern California, some of these considerations include how consumers "think, feel, reason and select between different alternatives." These considerations can be influenced by environment, such as culture, family and media. The purpose of marketing research is to identify these variables and to incorporate them into the campaign.
- Marketing Considerations: Some of the considerations to take into account when marketing to your customers are honesty, integrity and clarity. Keeping consumer needs in mind is also an integral part of effective marketing. Sneaky advertising campaigns can generate quick sales, but those sales will falter as consumers realize they've been duped. Selling a good product marketed with integrity brings back customers. To do this, a company needs to build customer confidence in its product over time. Customer confidence is what brings consumers back to your product and ensures long-term success.
- Word of Mouth: Underestimating the power of customer word of mouth is detrimental to your success. Consumers like to talk, whether they are talking about a product they enjoyed or a product that left them wanting. Word of mouth has a snowball effect, particularly in an age when fast worldwide communication is common. Your company can't afford not to consider how quickly its product and reputation can be badmouthed or blacklisted. This is why marketing a product honestly and with integrity is important.
- Customer Service: Considering customer needs during the development and promotion of a product is not the only way to emphasize customer needs. Customer considerations after the product has been marketed are important as well. Customer service and interaction with the consumer after the product has been sold not only build strong relationships with the consumer but offer companies valuable information that will help to design more effective marketing efforts in the future.
Customer Acquisition Cost (CAC)
Customer Data Integration (CDI)
Customer Data Management (CDM)
Customer Due Diligence (CDD)
Customer Effort Score (CES)
Customer Engagement Hub (CEH)
Customer Experience Management (CEM)
Customer Lifetime Value
Customer Service Management
Customer Relationship Management (CRM)