Customer Definition - Investopedia

A customer is an individual or business that purchases another company's goods or services. Customers are important because they drive revenues; ... Business BusinessEssentials BusinessEssentials GuidetoMergersandAcquisitions WhatIsaCustomer? Acustomerisanindividualorbusinessthatpurchasesanothercompany'sgoodsorservices.Customersareimportantbecausetheydriverevenues;withoutthem,businessescannotcontinuetoexist.Allbusinessescompetewithothercompaniestoattractcustomers,eitherbyaggressivelyadvertisingtheirproducts,byloweringpricestoexpandtheir customerbases,orbydevelopinguniqueproductsandexperiencesthatcustomerslove.ThinkApple,Tesla,Google,orTikTok. KeyTakeaways Customersaretheindividualsandbusinessesthatpurchasegoodsandservicesfromanotherbusiness.Tounderstandhowtobettermeettheneedsofitscustomers,somebusinessescloselymonitortheircustomerrelationshipstoidentifywaystoimproveserviceandproducts.Thewaybusinessestreattheircustomerscangivethemacompetitiveedge.Althoughconsumerscanbecustomers,consumersaredefinedasthosewhoconsumeorusemarketgoodsandservices. UnderstandingCustomers Businessesoftenhonortheadage"thecustomerisalwaysright"becausehappycustomersaremorelikelytoawardrepeatbusinesstocompanieswhomeetorexceedtheirneeds.Asaresult,manycompaniescloselymonitortheircustomerrelationshipstosolicitfeedbackonmethodstoimproveproductlines.Customersarecategorizedinmanyways.Mostcommonly,customersareclassifiedasexternalorinternal. Externalcustomersaredissociatedfrombusinessoperationsandareoftenthepartiesinterestedinpurchasingthefinalgoodsandservicesproducedbyacompany.Internalcustomersareindividualsorbusinessesintegratedintobusinessoperations,oftenexistingasemployeesorotherfunctionalgroupswithinthecompany. StudyingCustomers Businessesfrequentlystudytheircustomers'profilestofine-tunetheirmarketingapproachesandtailortheirinventorytoattractthemostcustomers.Customersareoftengroupedaccordingtotheirdemographics,suchasage,race,gender,ethnicity,incomelevel,andgeographiclocation,whichallmayhelpbusinessescultivateasnapshotofthe"idealcustomer"or"customerpersona."Thisinformationhelpscompaniesdeepenexistingcustomerrelationshipsandreachuntappedconsumerpopulationstoincreasetraffic. Customersaresoimportantthatcollegesanduniversitiesofferconsumerbehaviorcoursesdedicatedtostudyingtheirbehavioralpatterns,choices,andidiosyncrasies.Theyfocusonwhypeoplebuyandusegoodsandservicesandhowitimpactscompaniesandeconomies.Understandingcustomersenablesbusinessestocreateeffectivemarketingandadvertisingcampaigns,deliverproductsandservicesthataddressneedsandwants,andretaincustomersforrepeatbusiness. CustomerService Customerservice,whichstrivestoensurepositiveexperiences,iskeytoasuccessfulseller/customerdynamic.Loyaltyintheformoffavorableonlinereviews,referrals,and futurebusinesscan belostorwonbasedonagoodorbadcustomer serviceexperience.Inrecentyears,customerservicehasevolvedtoincludereal-timeinteractionsviainstantmessagechats,texting,andothermeansofcommunication.Themarketissaturatedwithbusinessesofferingthesameorsimilarproductsandservices.Whatdistinguishesonefromanotheriscustomerservice,whichhasbecomethebasisofcompetitionformostbusinesses.ThisisakeyelementofSigmaSix. Customersvs.Consumers Thetermscustomerandconsumerarenearlysynonymousandareoftenusedinterchangeably.However,thereexistsaslightdifference.Consumersaredefinedasindividualsorbusinessesthatconsumeorusegoodsandservices.Customersarethepurchaserswithintheeconomythatbuygoodsandservices,andtheycanexistasconsumersoraloneascustomers. Customersdifferfrompurchasingagents,whousecorporatecapitaltobuygoodsatwholesaleforcommercialorindustrialuse. CompareAccounts AdvertiserDisclosure × TheoffersthatappearinthistablearefrompartnershipsfromwhichInvestopediareceivescompensation.Thiscompensationmayimpacthowandwherelistingsappear.Investopediadoesnotincludealloffersavailableinthemarketplace. Provider Name Description RelatedTerms WhatYouShouldKnowAboutEntrepreneurs Entrepreneursandentrepreneurshiphavekeyeffectsontheeconomy.Learnhowtobecomeoneandthequestionsyoushouldaskbeforestartingyourentrepreneurialjourney. more RetailBanking Retailbankingconsistsofbasicfinancialservices,suchascheckingandsavingsaccounts,soldtothegeneralpublicvialocalbranches. more GoodCustomerServiceMatters Customerserviceisthedirectone-on-oneinteractionbetweenaconsumermakingapurchaseandarepresentativeofthecompanythatissellingit. more BrandLoyalty:WhatYouNeedtoKnow Brandloyaltyisthepositiveassociationconsumersattachtoaparticularproduct,demonstratedbytheirrepeatpurchasesofit. more WhatIsaBrand? Abrandisanidentifyingsymbol,mark,logo,name,word,orsentencecompaniesusetodistinguishtheirproductfromothers.Learnwhybrandsareimportant. more WhatAreEconomiesofScale? 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