Customers vs. Consumers

It is not uncommon for the entrepreneur to have trouble figuring out which side their bread is buttered on and who is doing the buttering. I often hear about start-up companies that are “doing really well” even though they haven’t made a dime. Heck, I’ve had companies like this myself. In these days of free online services it’s easy to get carried away with the fact that your web site is getting a lot of users even though they aren’t spending any money.

Keeping your eye on the money-ball is important. I like to think of my business in terms of customers vs. consumers. These two words are often interchanged, but using them improperly can cloud good communication about the actual success of your company (or lack thereof). Simply put, a customer is someone who pays for your product and a consumer is someone who uses it. A customer can also be a consumer, but a consumer may not be a customer.

I, for instance, am a diaper customer. I am not a diaper consumer (yet). My daughter, however, is a diaper consumer, but not a diaper customer.

Good marketing should help your company find and keep customers. In these cases the target audience is always someone who pays. In the diaper scenario I, or my wife, is the target customer. Merrily, my daughter, is the target consumer. If she is happy and dry my wife and I will continue to be diaper customers. The diaper company targets my daughter by imprinting pictures of Elmo on the diaper. I could care less, but this image is of great importance to my daughter who is an important influencer in the process.

This all seems straight forward- right? What about Google? Who is the customer there? I use Google all the time but I’m not a customer. I am a consumer. As a consumer, I am essentially Google’s product. That is, without me and the millions of other Google consumers Google would have a hard time selling advertising to paying customers. It’s easy to see how the logic can get cloudy.

Take another example. What about a fire department? You will often hear a fire chief talk about victims as the customer. This is not so. Victims are merely consumers of fire extinguishing services. So who is the customer? To figure this out you need to figure out who pays. In the case of the fire department the customer is generally a private donor or a municipality. Non-profits are often confused about who their customer is. I prefer to use the term beneficiary when dealing with a non-profit as there are no real customers.

Generating interest from consumers is often key to the heart of the customer. Telling the difference isn’t always apparent, but it is an essential part of moving the start-up from a great company that everyone loves to a great company that makes lots of money.