3.2 Who is the customer?
Customers are people who buy our products and services, and may or may not use them. The key to defining these people as ‘customers’ is that each engages in an exchange relationship that adds value to the organisation providing the product or service. Consumers do not give any value to organisations – there is no exchange relationship. They use products and services, but do not buy them.
Activity 2 (revision)
Think about how these definitions apply to both internal and external business relationships.
If you could complete this activity, well done. You have met these concepts before and probably deal with customers in your day-to-day work, but could you identify your consumers?
If you had difficulty don't worry, in my experience it's sometimes quite difficult to answer such a fundamental question. Keep reading, as there is an opportunity to do this activity again later.
For the most part, the commercial sector uses the terms customer and consumer interchangeably. This is because members of this sector have to satisfy the needs of both groups with their products and services. However the non-profit sector makes a clear distinction between the two groups. In the non-profit sector the resource provider is seen as the customer and the resource user as the consumer.
Outside the commercial sector, customers and consumers are often treated as two distinct markets. While market-led philosophies transfer well from customer to customer, many non-profit organisations believe that their consumers are different. This is because it is the resource provider's job to specify what product or service the consumers need and how they can obtain it.
One of my marketing students, commenting on their first assignment, wrote to me recently:
I was so relieved when I saw that I could apply the marketing concepts internally – we don't really have any customers in our hospital – we tend to classify people by their illness.
The publicly-funded health sector is a good example of the resource provider / user split. The government is the customer and provides the financial resources to medical practitioners and hospitals. These financial resources are used to provide goods and services to patients, i.e. the consumers. However, with closer investigation, we could say that patients should also be regarded as customers because without patients the hospital would close. The patients have an exchange relationship with the institution. When a patient chooses which hospital to go to he or she exchanges their patronage for the services the hospital provides.
Think of the police – do they have customers or consumers?
List four customers for the police service.
Make another list of four consumers for the police service.
Can you identify the differences in the relationships that customers and consumers have with the police?
I asked my local policeman if he could answer this activity. He said: ‘I don't have any customers – they're either guilty or innocent.’
A common misconception in public services is that, because there's no price charged for the service provided, managers think that they don't have any customers. I hope you now agree with me in thinking that they have both customers and users (i.e. consumers).
The government is the customer for the police service – it provides the financial resources to enable the police to run their service, in exchange for law and order in society. You could say that victims are their customers too – victims are looking for retribution and they pay taxes to the government to make sure they get it. You could even say that the general public are its customers – it is our tax money the government uses to fund the police. We want to be able to feel safe in our homes and have the police deal with the people who break the law.
But what about criminals – do they participate in an exchange relationship? They do not intentionally give their patronage to the criminal justice system. They don't add value to that system. This is an example of a resource provider/user split. The criminal is the consumer and the general public – via the government to whom it pays taxes, part of which are passed on to the police service – are the customers.
Activity 4 (Activity 2 revisited)
Make a list of your customers and consumers. I hope that what you have just read will help you answer this question more fully now.