Table of Contents

Customer: Definition and How to Study Their Behavior for Marketing

By

Will Kenton

Updated June 14, 2023

Reviewed by

Khadija Khartit

Fact checked by

Katharine Beer

What Is a Customer?

A customer is an individual or business that purchases another company's goods or services. Customers are important because they drive revenues. Without them, businesses can neither survive nor thrive.

All businesses compete with other companies to attract customers, either by aggressively advertising their products, by lowering prices to expand their customer bases, or by developing unique products and experiences that customers love. Think Apple, Tesla, Google, or TikTok.

Key Takeaways

Customers are the individuals and businesses that purchase goods and services from another business.
To understand how to better meet the needs of its customers, some businesses closely monitor their customer relationships to identify ways to improve service and products.
The way businesses treat their customers can give them a competitive edge.
Although consumers can be customers, consumers are defined as those who consume or use market goods and services.

Understanding Customers

Businesses often honor the adage "the customer is always right" because happy customers are more likely to award repeat business to companies who meet or exceed their needs.

As a result, many companies closely monitor their customer relationships to garner information about customer behavior and to solicit feedback from customers on ways to improve product lines.

Customers are categorized in many ways. Most commonly, customers are classified as external or internal.

External customers are dissociated from business operations and are often the parties interested in purchasing the final goods and services produced by a company.

Internal customers are individuals or businesses integrated into business operations, often existing as employees or other functional groups within the company.

Studying Customers

Businesses frequently study their customers' profiles and behaviors to fine-tune their marketing approaches and tailor their inventory to attract more customers.

Customers are often grouped according to demographics such as age, race, gender, ethnicity, income level, and geographic location, all of which may help businesses cultivate a snapshot of the "ideal customer" or "customer persona."

This information helps companies deepen existing customer relationships and reach untapped consumer populations to increase traffic.

Customers are so important that colleges and universities offer consumer behavior courses dedicated to the study of customer behavioral patterns, choices, and idiosyncrasies. These courses focus on why people buy and use goods and services and how those decisions impact companies and economies.

Understanding customers enables businesses to create effective marketing and advertising campaigns, deliver products and services that address needs and wants, and retain customers for long-term repeat business.

Customer Service

Customer service, which strives to ensure positive experiences, is key to a successful seller/customer dynamic. Loyalty in the form of favorable online reviews, referrals, and future business can be won or lost based on a good or bad customer service experience.

In recent years, customer service has evolved to include real-time interactions via instant message chats, texting, and other means of communication.

The market is saturated with businesses offering the same or similar products and services. What truly distinguishes one from another is customer service, which has become the basis of competition for many businesses. Customer service is a key element of the quality improvement methodology, Six Sigma.

Customers differ from purchasing agents, who use corporate capital to buy goods at wholesale for commercial or industrial use.

Customers vs. Consumers

The terms "customer" and "consumer" are nearly synonymous and are often used interchangeably. However, there exists a slight difference. Consumers are defined as individuals or businesses that consume or use goods and services. Customers are the economy's purchasers who buy goods and services. They can exist as consumers or simply as customers.

What Are the 5 Basic Types of Customers?

The five basic customers are new customers, impulse customers, angry customers, insistent customers, and loyal customers.

What Is the Best Type of Customer?

Loyal customers are the best because they make repeat purchases over the long-term (sometimes decades) and they are likely to recommend you to friends, social media connections, or business associates.

What Do Customers Value Most?

Customers probably most appreciate high quality products or services, low prices, good service, and the opportunity to give a company feedback that the company acknowledges.

The Bottom Line

A company's most valuable asset is its customers for without them, they're out of business. The best companies go to great lengths to study and understand customer behaviors and desires so that they can address issues that displease buyers and promote products and services that they like and want more of.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

Zendesk. "5 types of customers and what they need."

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