What kind of people become customers?
Let's first give a definition of the customer and the product. If we continue to use the metaphor of the company as a cow: customers are people that are after a company's dung and in the pursuit of which get their grass cut. Of course this is not very flattering. Here is a more neutral version.
The customer: a person that purchases a product.
The product: a service or object produced by a company intended for sale.
These are very clean definitions. However they just focus on the physical action. Let's take a closer look at what a customer actually is.
Every employee generates manpower. Or better said: working hours. The effect of these working hours is a product. In exchange for the effort, money is given to the worker. A resource that can be exchanged for any other kind of resource. When buying a product, the customer exchanges his or her working hours for those of someone else, swapping the products he produces for products of his choice, essentially having produced these himself. In effect the customer is the agent who decides on what manpower is spent. A company just stores products temporarily while handing out money to employees. It again receives money when a customer buys the product. It also provides the working space.
The net result of all this would be zero. In reality, there is the market place. I will make no attempt to explain its complexities in this text. For this text it was enough to make the point of what a customer really is, and what essentially happens in a purchase.
Different types
Now we know what a customer is, we can look at the different types of customer. When hungry, we buy bread. When we got the money, we buy a fancy car. There are two types of customer:
The willing customer: a person motivated by want.
The unwilling customer: a person motivated by need.
Note, need always supersedes want. For example, let me provide you with either drugs or bread. Which gets bought? Want is a subjective term. I might judge you to want drugs and need bread. You might need the drugs and opt to forgo the bread.
Of course you might think of many more types of customer. Happy, sad, enthusiastic, disinterested, loyal, disloyal, incidental, habitual, etc. In this text making the essential difference is enough. When we buy a product the chief actor is need or want. Other characteristics such as behavioral, psychological or socio-economic characteristics merely impact on need and want. All customers and companies can be classified by just these two (a company might produce bread, or fancy cars).
Getting the customer
So how do we get the customer to become our customer? And once they bought our product, how do we keep them loyal?
Advertising
Well we first have to communicate existence of our product. We can do this in two ways:
Honestly: it exists. You can buy it. It does this and that.
Dishonestly: let us lure you in. Our world is wonderful. We give amazing purchase value. We will tell you with a smile that it does this, that and more... so much better than anything out there. But really it doesn't.
Advertising has the greatest effect on the first purchase. Once a customer knows the product, the effects diminish. Of course if the customer is happy with the product, advertizing for a new product can have great effect.
Depending on customer psychology, market and product, advertizers choose a mix of both reality and fantasy based elements.
Treatment
Secondly, we treat the customer a certain way. There are two extremes for this continuum. They are the same for what we do and how the customer perceives it.
Good treatment: the customer experiences treatment matching or exceeding his standards.
Bad treatment: the customer experiences treatment below his standards.
Treament of course has impact on each individual purchase. However the effect is most felt in the area of customer loyalty. Very bad treatment might scare customers away from even the initial purchase. However if your company treats people allright, but the competition treats them great, you will still loose business. Treatment is also influenced by the type of customer. Whether a person needs or wants something, makes a great difference.
Product
Then there is the product. In recent times it has seemed that the actual product matters less than the customers perception of the product and the company. Take Apple versus the rest. Samsung, LG, Sony, they all wish their customers could have the same experience with their products as Apple customers. It has been argued.. that the products are virtually indentical in their capabilities and production costs. Perhaps Apple customers just prefer the beautiful and seductive fantasy created by the Apple company above the more mundane experience provided by it's competition. However, it still matters if your product works as advertised, or not. If Apple were to produce a defective ipod, their customer base would shrink.
There are two basic types of product:
The single purchase
The service
These are the extreme ends of a continuum. Bread for instance is per unit a single purchase but a service when customers go back to the same bakery each time.
There are two classifications for any product:
A product based on need
A product based on want
There is one intrinsic characteristic of any product: the continuum called quality. The product works as needed or it doesn't, or somewhere in between.
Based on the kind of product we sell and customer we want to sell it too, we can make a choice for the quality we offer.
Means versus waste product
Do note that in this text we state that products can be seen as the waste products of an organism like a cow. You could instead state that products are the means by which companies collect money. Like the mouth of a cow. Products enable the company to graze money.. Perhaps there is merit to both metaphors. However, if you look at what happens to money in a company and why people buy products the original metaphor of this text holds up.
Money is processed into usable materials for the company in the same way an organism processes food. It becomes infrastructure, real estate, salaries, bloodvessels and cells. And after all usable materials are collected from the food, the unwanted materials are pushed out, which are helpfull to generating more grass, but can not sustain it since more is taken than delivered. Grass grows because of sunshine and materials in the earth. Eventually grass exhausts the land it resides on. Usually rivers etc. prevent this by carrying sediment down hill. The same goes for the customer, it's not sustained by the product, the product only helps it a bit. Most of it's materials are delivered by other means (income stream).
Products tempt the customer to give money to the company. It's the temptation (advertising -which includes the product being on the shelve-, treatment, etc.) that is the mechanism by which it is collected. This is the mouth. Only after collection and processing a product is delivered. The company's adaptation to its environment includes the mouth, the way it sells (collects grass).
Now you can say: Well hey, for most companies, you receive the product immediately after buying. But this is just a temporal paradox. It's a little like the company already produced dung from the money it has yet to receive. More exactly, it's the dung from the previous money of the previous customer. For some companies like a custom furniture company, the metaphor of the cow holds up even in the temporal sense.
Competition
There is one more factor that decides whether people become our customer. The available choice. Our own decisions on advertising, treatment and quality are directly impacted by the competition, or lack there of. Location is a good example. If people have to travel too far too reach your business, they will opt for the competition. This referred to as a local monopoly.
Company policy
When we leave out morals and law, the choice businesses make for how they advertise, make products and treat customers depends on the type of product, the type of customer and the position in the market. Let's look at a few examples.
For simplicity, we disregard other factors in each example.
Two types of customer: need versus want. Grocery story versus jewelery story. A jewelry store has to tempt the customer to buy, a grocery store only has to be there. People will buy food no matter what. There is no need to lie about the product. There is no need for quality and good treatment either.
Two types of product: single purchase versus service. Car company versus telecom company. The financial risk of lying is higher for the telecom company than for the car company. The latter only has to convince the customer once. The same goes for quality. As long as the customer believes he is making a good purchase, it doesn't matter if the fuel economy is actually lousy. As for treatment, the car company only has to treat the customer well once. After that, calls can be ignored.
Two possible market positions: monopoly versus competition. General Electric versus Apple. The need for effective advertising is high if people have plenty of choice. The same goes for quality and treatment. Apple has plenty of competitors to worry about. It needs to excell in all areas. If you are the only one who can make certain types of industrial generators, you can afford to make different choices.
So when do people become customers?
People become customers out of want or need. They become our customers depending on our choices for advertising, treatment and product quality. A great influence on our choices is the available competition.
So what makes a good business? Let's explore this subject in our last text.
Next chapter: Succes or failure
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