Why customers are important

An organization adopts the marketing concept when it takes steps to know as much about the consumer as possible, coupled with a decision to base marketing, product, and even strategy decisions on this information. They operate on the assumption that success depends on doing better than competitors at understanding, creating, delivering, and communicating value to their target customers.

Both historically and currently, many businesses do not follow the marketing concept. For many years, companies such as Texas Instruments and Otis Elevator have followed a product orientation , in which the primary organizational focus is technology and innovation.

All parts of these organizations invest heavily in building and showcasing impressive features and product advances, which are the areas in which these companies prefer to compete.

This approach is also known as the product concept. Rather than focusing on a deep understanding of customer needs, these companies assume that a technically superior or less expensive product will sell itself. While this approach can be very profitable, there is a high risk of losing touch with what customers actually want. This leaves product-oriented companies vulnerable to more customer-oriented competitors.

Other companies follow a sales orientation. These businesses emphasize the sales process and try to make it as effective as possible. While companies in any industry may adopt the sales concept, multilevel-marketing companies such as Herbalife and Amway generally fall into this category. Many business-to-business companies with dedicated sales teams also fit this profile.

These organizations assume that a good salesperson with the right tools and incentives is capable of selling almost anything. Sales and marketing techniques include aggressive sales methods, promotions, and other activities that support the sale. Often, this focus on the selling process may ignore the customer or view the customer as someone to be manipulated. The production concept is followed by organizations that are striving for low-production costs, highly efficient processes, and mass distribution which enables them to deliver low-cost goods at the best price.

This approach came into popularity during the Industrial Revolution of the late s, when businesses were beginning to exploit opportunities associated with automation and mass production.

Production-oriented companies assume that customers care most about low-cost products being readily available and less about specific product features.

Today this approach is still widely successful in developing countries seeking economic gains in the manufacturing sector.

Marketing exists to help organizations understand, reach, and deliver value to their customers. In the process of the marketing exchange, value must be created. There is no value in the exchange. Now, imagine that you are passing by a machine that dispenses bus tickets. How does that make sense in the v alue equation? From his perspective, the ability to use the bus ticket dispenser in that moment adds value in the transaction. Value is not simply a question of the financial costs and financial benefits.

It includes perceptions of benefit that are different for every person. The marketer has to understand what is of greatest value to the target customer, and then use that information to develop a total offering that creates value. The inconvenience of filling in many forms, or concerns about providing personal information, can add cost which will subtract from the value the customer perceives. For this person, the benefit of attending and participating is lower because of costs related to personal connection and convenience.

As you saw in these examples, the process of determining the value of an offering and then aligning it with the wants and needs of a target customer is challenging. As you continue through this section, think about what you value and how that impacts the buying decisions you make every day.

Customers instinctively make choices between competitive offerings based on perceived value. Imagine that you are traveling to Seattle, Washington, with a group of six friends for a school event. However, one of your friends finds an AirBnB listing for an entire apartment that sleeps six people. Regardless of which option you would really choose, consider the differences in the value of each and how the presence of both options generates unavoidable comparisons: the introduction of the AirBnb alternative has the effect of highlighting new shortcomings and benefits of the Marriott Courtyard hotel room.

Alternatives generally fall into two categories: competitors and substitutes. A competitor is providing the same offering but is accentuating different features and benefits.

If, say, you are evaluating a Marriott Courtyard hotel room vs. Both offerings are hotel rooms provided by different companies. The service includes different features, and the price and location vary, the sum of which creates different perceptions of value for customers.

AirBnb is a service that allows individuals to rent out their homes, apartments, or a single room. AirBnb does not offer hotel rooms; it offers an alternative to, or substitute for, a hotel room. Substitute offerings are viewed by the user as alternatives. The substitution is not a perfect replication of the offering, which means that it will provide different value to customers.

We refer to this as differentiation. Differentiation is simply the process of identifying and optimizing the elements of an offering that provide unique value to customers.

Sometimes organizations refer to this process as competitive differentiation, since it is very focused on optimizing value in the context of the competitive landscape. This is a competitive advantage. It exists when the competencies of a firm permit the firm to outperform its competitors. We have discussed the complexity of understanding customer perceptions of value. As the company seeks to understand and optimize the value of its offering, it also must communicate the core elements of value to potential customers.

Marketers do this through a value proposition , defined as follows:. A business or marketing statement that summarizes why a consumer should buy a product or use a service. This statement should convince a potential consumer that one particular product or service will add more value or better solve a problem than other similar offerings. It is difficult to create an effective value proposition because it requires the marketer to distill many different elements of value and differentiation into one simple statement that can be easily read and understood.

Despite the challenge, it is very important to create an effective value proposition. The value proposition focuses marketing efforts on the unique benefit to customers. This helps focus the offering on the customer and, more specifically, on the unique value to the customer.

Also, the value proposition is a message, and the audience is the target customer. You want your value proposition to communicate, very succinctly, the promise of unique value in your offering. A value proposition needs to very simply answer the question: Why should someone buy what you are offering? If you look closely at this question it contains three components:. When creating or evaluating a value proposition, it is helpful to step away from the long lists of features and benefits and deep competitive analysis.

Give your team a chance to be a part of something larger than themselves. Let them know how much each customer depends on their work. The intangible feeling of having a purpose motivates people far longer than free food ever could.

When you create a culture of serving people, your employees follow suit. Engineers help the sales team. Product listens to customer support reps. Teammates work together with kindness, compassion, and, above all, respect. Some companies write it on the office walls or make their employees memorize it. Company culture exists whether or not you define it.

By valuing customers, and tirelessly working to serve them, you simultaneously create a company culture of helpfulness. Work gets done faster, productivity goes up , and both employee and customer sentiment thrive in a more collaborative environment. The coolest brands on the blocks — meaning, those with the most and best brand awareness — get all the fame and fortune.

Positive customer experiences play a huge role in brand awareness, as they often lead to word of mouth advertising. Provide a positive experience for existing customers and watch them rave about your brand. Analytics help you track awareness by measuring everything from online reviews to social media sentiment to recommendation potential.

Customer marketing involves turning existing customers into advocates. Save money and time with every loyal customer. Not only do they purchase more, but they also bring in new business. When everyone at a company has the same end-goal, the entire workflow becomes streamlined. Place the ultimate emphasis on your customer, then move through each department to align them behind customer service. For instance, when everyone is on the same page, the flow for bug reports should look something like this:.

To make sure this collaboration spans the long-term, set a larger goal to improve a customer experience-based metric , like NPS. Then, put the responsibility on every department to move the needle.

Business owners take a huge risk when founding a company. For scaling start-ups, providing an excellent customer service experience is the surest way to keep up momentum and minimize loses. Reasons for failure range from lack of funds, to misunderstanding of market value, to inability to sustainably scale. Customer service is one of the most under-valued assets in business. Measure ad performance.

Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Personal Finance.

Your Practice. Popular Courses. Business Business Essentials. Business Essentials Guide to Mergers and Acquisitions. What Is a Customer? 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. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Terms Brand Loyalty: What You Need to Know Brand loyalty is the positive association consumers attach to a particular product, demonstrated by their repeat purchases of it.