Definition Of A Customer

In business, commerce, marketing and economics, a consumer is the first recipient of an idea, product, service or a gift - received from a provider, supplier, or the seller through a commercial transaction or exchange for cash or any other relevant value. More specifically, a consumer is anyone who buys or receives something of value and no one else. However, there are two distinctions that should be made when using the term consumer. The first is between people shopping for themselves and others and the second is between people receiving things as gifts and people getting things for themselves. The second distinction can be used to determine the value of a consumer.

 

To simplify this explanation, we will use the word value to refer to the perceived value that one would place on a gift. So, for example, if I was shopping for myself, I would value the object in question based upon its physical condition, its usefulness, and my observations of the people who may not receive it. The same would be true for someone shopping at a store. I would assess the store's product or service based on my observations, feelings, needs and preferences.

 

In business, however, we rarely make such assessments. Rather, in business, we make our assessment of value from the performance of our organizational processes, the quality and quantity of our output, and our relationship to and exposure to customers, suppliers, and competitors. From these factors, we come to determine how to best serve our customers, the extent to which we can satisfy their needs, and how to maximize our potential as employers and owners of businesses. This evaluation of process, output, and environment can be a very difficult and laborious process.

 

Unfortunately, there are many definitions of a customer that confuse the meaning of the word with the meaning of the word profit. The definition most commonly associated with the word customer is 'a person who buys a product or service from a business". While this definition describes the buying of a product or service from an entity, it is actually a definition of a group of people. The problem is that using this broad definition of customer leads to confusion about whether it really makes any difference if a business produces or receives any revenue at all.

 

To understand the issue of profit and loss, we need to look at how we define market share. Market share refers to the percentage of sales that a firm has of the total market share that firms in a particular industry have. That is, in a market where X percent of all firms produce and sell, Y percent of sales goes to the firm that produces the highest percentage of market share. If we take the word profit with it, then we must interpret it as the excess of market share that is produced by firms Y and X, over what they collectively produce. So, instead of being a measure of profits, profit becomes a measure of market share, which can be thought of as a measure of the value of a firm relative to other firms.

 

The key thing to note about this definition is that market share can be misleading. If a firm produces a high percentage of market share but gets a very low margin (the difference between the price and the cost), this can mean that a large portion of the value of the firm comes from the buyers of its products or services, and not necessarily the firm's customers. On the other hand, if a firm's customers offer very low margins, then a large portion of the value of the firm comes from the firm's customers, and not necessarily its producers. This definition of profit might make more sense when used in conjunction with another definition of customer base. In other words, the definition of customer base is important because the definition of profit does not always take into account the size of a firm's customer base.

 

Another key factor that must be considered when defining profit is the extent to which sales are impaired due to market conditions. Sales are always impaired in bad markets, though there are some exceptions. A firm may be very profitable in good markets and still lose all of its customers to competitors, even if those competitors have access to more resources than the firm. Also, it should be noted that this definition of profits should not include sales of a firm's products and services to customers that the firm does not sell directly to. This exclusion can be a very important factor in analyzing overall profitability.

 

Finally, the definition of profits should also include the value of a firm's relationships with customers. Most sales transactions are ultimately governed by the relationship that a firm has established with a customer. If a firm does not maintain an effective relationship with a customer, it will likely suffer from diminished sales. Firm sales are also affected by the distribution of profits between partners. A partner that receives a portion of the profits will be less likely to pass these losses onto their partners, which means that profits will generally be in place for the partners to split. This distribution of profits is referred to as the dividend.