What is a Customer?

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Definition:

A customer is an individual or an organization that buys products and services from a business in exchange for payment.

🤔 Understanding customers

Businesses generally make their money by offering either a good or service. To continue to operate and make a profit, businesses need people to buy their offerings — The people who buy from them are customers. Companies can drastically increase their profits by learning who their customers are so they can speak to them directly through their marketing efforts. Businesses can also obtain repeat customers and good word-of-mouth marketing through exceptional customer service. A customer is not the same as a consumer, which is the end-user of a product. Both individuals and businesses can be customers and consumers.

Example

Every business has customers — Those are the individuals or companies that purchase the goods and services that a business has to offer. Suppose that a local butcher is selling cuts of meat. Individuals come in to purchase meat to cook their meals at home, but several local restaurants also buy meat for their businesses. Both the individuals and the restaurants that buy the meat are customers. However, they aren’t both consumers — Only the customers buying the product to consume it themselves are consumers.

Takeaway

Customers are like the crew of a ship…

Some ship captains might choose to treat their crew better or worse than others. But at the end of the day, the captain relies on the crew to keep the ship afloat, and so he needs them on his side. Similarly, companies rely on their customers to keep the business afloat. After all, you can’t keep your doors open if no one is buying the goods and services you have to offer.

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Tell me more…

What is a customer?

A customer is anyone who buys a product or service. A customer could be an individual purchasing a product to use at home. Businesses can also be customers, whether they buy a product to use in their business or to resell to consumers.

Customers play a critical role in any business. After all, a business can only stay afloat as long as it has customers providing revenue. Companies can acquire and maintain customers by getting to know their customers and providing excellent customer service.

What is the importance of customers?

Customers are critical to the success of any business. If there’s no one buying your products and services, you aren’t going to stay in business for long. The more customers a company has and the happier they are, the more money a company has the potential to make.

Companies can become more successful by adopting a customer-centric business model, which means that the customer is the central focus. One example of a company with a customer-centric model is Amazon.

Amazon’s founder, Jeff Bezos, famously claimed that the company is customer-obsessed rather than competitor-obsessed. They pursue this goal through services such as their free two-day shipping, free and simple returns, and well-trained call center staff. Amazon also markets to each customer uniquely, so anyone visiting the site sees items that are specifically curated for them — This improves the customer experience.

Recognizing the importance of customers has led Amazon to become one of the highest revenue-earning companies in the world.

How do you find out who your customers are?

If you’re running a business, you must figure out who your customers are. The more you understand your target market, the better you can support them and provide the goods and services they want.

To identify your target market, think about what type of person would buy your product. To do this, consider what type of person needs the benefits that your product offers.

Additionally, identify the demographics of the people who buy from you already. They might be primarily either male or female, old or young, single or married. You can also identify demographic factors such as education level, income, and geographic location.

One of the best ways to figure out what your customers buy and why they buy it is simply by talking to them. This may help you to figure out what is important to your customers. You can also use online surveys or keyword research to figure out what your customers are thinking about and seeking to buy.

What are customers’ needs?

To best service your customers, you need to know what they need from you. The more effectively you meet their needs, the more likely they are to choose your business over competitors.

One way to figure out what your customers need is to ask them. You can create customer focus groups, or send surveys to current and former customers. Another way to figure out what your customer needs is to listen to what they’re saying online. What are customers saying in their reviews? What are they posting about your products on social media?

Unfortunately, your customers might not always be able to identify what they need. They can’t quite put their finger on it, but they know it when they see it. One way to address this issue is to look at what your competition is doing differently than you. You might be able to pick out a unique selling point that’s pulling the customers away from you and to your competitor.

What is the difference between customers and consumers?

A customer is a person or business that buys a product or service from a company. A buyer might be both a customer and a consumer, though that’s not always the case. Someone can be a customer of a business regardless of whether they are the end-user of that business’s product. A consumer, on the other hand, is someone who buys a product or service to use it.

For example, suppose you’re buying a mixer from your local department store. You plan to take the mixer home to bake for your family. In this case, you’re both a customer and a consumer of the department store.

But suppose you’re a small business that buys mixers to sell in your shop. You buy a bunch of mixers from your local wholesaler to sell at your store. You’re a customer of the wholesaler, but you aren’t a consumer. Instead, the consumers are the people who buy the mixers from your store to use themselves.

It’s not just individuals who are consumers — Businesses can be consumers as well. But they’re only consumers in cases where they purchase an item or service to consume or use themselves rather than to sell to a different end-user.

What are the types of customers?

There are five primary types of customers with which most businesses deal. First, a loyal customer is one who repeatedly frequents the same business. Throughout their relationship with a business, loyal customers result in many more sales than other customers. You can probably think of an example of a company to which you are a loyal customer. It might be your favorite retailer where you buy all of your clothes or a restaurant that is always your go-to for date night.

The next type of customer is a discount customer. These customers frequent the same establishments, but they only buy discount products. It might be that these customers only buy the store-brand products, or perhaps they only shop when there’s a coupon or sale available.

Next, impulsive customers are those who tend to buy without a lot of thought. They aren’t walking into the store with a list — Instead, they spend money when they see something they like.

Another type of customer is a need-based customer. These individuals visit a particular business when they have a specific item they need. They’re often frequent customers, but only for very particular needs. For example, suppose that your local deli makes really good macaroni salad. They usually only make the macaroni salad every few weeks, and you always buy it when it’s available. However, it’s the only thing on the menu that you buy, so you don’t go unless they have the salad.

Finally, wandering customers are those who aren’t loyal to a particular store and aren’t looking for a specific product. Have you ever been walking downtown and noticed a small boutique you’ve never visited? You don’t know what the store sells, and you don’t need anything, but you decide to stop in and walk around. In this situation, you’re a wandering customer.

Knowing the different types of customers is important for any business. With this understanding, a business will be able to prioritize serving its loyal customers while finding ways to entice the impulsive and wandering customers to come back again.

What is customer service?

Customer service refers to everything that companies do to help individuals and businesses that purchase their goods and services. Customer service encompasses just about every interaction that a company’s employees have with customers. But it also refers more specifically to departments that exist to assist customers with any issues they have with the product. Customer service can take the following forms:

  • In-person customer service: This form of customer service is most common when you’re making a purchase or returning an item in a local business
  • Phone customer service: Both brick-and-mortar and online businesses provide customer service over the phone. Many customers prefer to speak to a representative over the phone. In fact, the inability to speak to someone over the phone is the top customer service complaint.
  • Online customer service: As more of our lives move online, so too do more companies’ customer service processes. Businesses offer customer service via email, social media, text messaging, and online chat support.

Customer service is critical to running a successful business. First of all, effective customer service has a direct impact on your profit margins. Maintaining existing customers is a lot cheaper than acquiring new ones, so good customer service can save you a lot of money per customer.

Customer service today is about a lot more than just speaking with a customer when they have a problem. With the increase in the number of online and subscription-based products and services, customer service is now a part of the product. And customers are willing to pay more for that product when they feel they’re getting good service.

Ultimately, customer service is one of the primary factors in determining how successful your company is in both the short term and the long term. It’s one of the most critical pieces of the profit puzzle.

Ready to start investing?
Sign up for Robinhood and get your first stock on us.Certain limitations apply

The free stock offer is available to new users only, subject to the terms and conditions at rbnhd.co/freestock. Free stock chosen randomly from the program’s inventory. Securities trading is offered through Robinhood Financial LLC.

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