Definition of Customer

 

 

Unit 1: Definition of Customer

 

In sales, business, and economics, a customer is someone who buys something from a seller, vendor, or supplier in exchange for money or something else of value. This person is also called a client, buyer, or purchaser.

Customer is an individual, group of individuals or an organization who receive or may receive goods, services, products or ideas from another individual or a company in return of value which can be money or anything of equivalent value. Customer forms the backbone of business. Usually more is the number of customers, more is the business thriving and vice versa. Business needs customers to buy their products or services. A customer may not be buying your product right away but may buy it in future but still remains part of your target customer group.

1.1 Types of Customers:

1. Potential Customer

Kind of person who is very likely to buy the product or service offered by the business. e.g.

a customer looking for an apartment in a particular area becomes a potential customer for the local realtors who would have a flat which will suit the requirements of the customer. The customer might end up buying the apartment. Potential customers can present an opportunity for the business to sellers and after qualification can convert into a quote stage and eventually result in an order or a sale.

2. Loyal Customers

Those who are loyal to one business and repeat the purchases irrespective of minor changes in parameters like price, quantity etc.

e.g. a customer who buys the same airline's ticket irrespective of price.

 

3. New Customer

The customers who have used the product or service for the first time from a particular organization. Such customers can be switching from a competitor brand or may be new entrant into the market.

 

e.g. a person buying car for the first time after a salary raise. From the perspective of the organization, a new organization would acquire new customers from the market either by launching a new product category altogether or launching a competitive product offering in the market.

 

4. Discount Customer

Those who only buy or use the offering because it was on discount or offered a cashback. These people are more likely to switch brands easily if prices reduce unlike loyal customers. e.g. A customer who takes a different flight based in the discounts offered though the preferred airline brand was different based on past travels.

 

5. Former Customers

Those who were once buyer of one business and became buyers of a new business because of some reason. These people would still be potential customers as they have already tried the product or service once.

e.g. A person who used to buy a specific beverage switched to a more healthier option offered by a competitor.

 

6. Internal Customer

One who is connected to your organization and is internal to your organization. These for example are your shareholders, employees & other stakeholders.

OR

These are individuals or departments within an organization that rely on the services or products of other departments within the same organization. Ensuring internal customer satisfaction is crucial for a well-functioning company.

 

7. External Customer

An external buyer is a buyer of your services and products but external to your organization. An example of your external consumer could be people buying your products in the marketplace.

OR

These are customers outside the organization who purchase products or services. They are the primary focus of CRM efforts.

 

8. Intermediate Customer

Those who purchases the goods for re-sale e.g. retailers. The customers are part of a longer supply or value chain.

9. Individual Customers

These are individual consumers who purchase products or services for personal use. They can be categorized further based on demographics, psychographics, and behaviour.

 

10. Business Customers

These are organizations or companies that buy products or services to support their operations. They can be further divided into B2B (business-to-business) and B2C (business-to-consumer) customers.

 

1.2 TYPES OF CUSTOMERS IN TEMRS OF HOSPITALITY AND HOTEL

1. Families

Families are one of the classics in the hotel sector and this type of customer has essentially had the same priorities for years. The family decision-maker, i.e. the person making the booking, knows that leisure and catering services are essential. For this reason, during the research process, they will only consider establishments that can adapt to suit their family.

 

On the one hand, this decision-maker will have an absolute necessity to keep the youngest and/or teenagers entertained, so will look for an adapted hotel with appropriate facilities. They will also make sure that there is a catering service which offers meals suitable for the little ones.

 

On the other hand, the objective of the decision-maker will be to take a break from their daily routine and they will look for activities which will allow them to relax, accompanied by their partner, or perhaps keep them active in a distinguishing environment, accompanied by the youngest members of the family.

 

2. Tourists

Tourists are a type of customer for whom the hotel is an experience in itself. A tourist looks for the comforts offered by the establishment, so all additional services play a fundamental role in the enjoyment of their stay. However, the guest also wants to discover the essence of the destination in a way that is simple, so visits (often guided) will be key.

 

This is the type of customer whose opinion has also been fundamental to those establishments which are centred on “beach tourism”; however, there are a wide variety of different profiles within this category, according to location and trends.

 

3. Travellers.

Leisure, tours and the most active experiences are fundamental for self-proclaimed travellers (non-tourists), a type of customer for which the establishment is solely an addition, as they are interested in the destination and the experiences they have there.

 

This type of customer is an avid consumer of information regarding local culture, someone who is interested in discovering the lesser-known and most unique locations, how to get around independently, in addition to the types of events that may coincide with their stay.

 

Within this typology, it is worth highlighting the growing influence of Generation Z in tourism: a profile with great technological knowledge, and makes trips that prioritize experience over price, despite the fact that this is a decisive factor when booking. Focusing efforts on this next generation of travelers can ensure a competitive advantage.

 

4. Special

Whether they are elderly customers or have a disability, special guests have very specific needs and are looking for a more specialised or adapted type of hotel. In these cases, although the final customer may be of one type or another, this may not coincide with the decision maker, i.e. the person researching and making the booking. These special customers choose destinations and activities that suit their abilities and, in many cases, group experiences are valued.

 

5. Business

20% of global travellers do so for work and consequently, these business travellers could become the most important market for many inner-city hotels, a market which, occasionally, is not solely work-based, as we will see.

 

This is a type of executive customer that has very specific needs in terms of commodities which enable them to continue with their routine, in addition to having access to all the technology required in order to work. They may also require rooms enabled for the planning of specific events. In fact, MICE tourism is a great source of income for large cities.

 

6. Luxury

Although in the other groups we can identify disparate purchasing powers, the type of customer that demands luxury is clear that the cost of its demands and preferences can be high. This customer looks for exclusive, unique experiences, an excellent, limited service, with privileges that are not offered to the general public.

 

7. Eco-friendly

The main goal for eco-friendly travellers is to enjoy the environment in its purest, most natural state. This growing type of traveller goes in search of sustainable experiences and takes into consideration the impact of their actions and the services they acquire, in order to reduce the consumption of natural resources. This type of customer demands specific information and consciously aims to contribute to the local economy.

2. Ownership & Value:

 

- Ownership: In CRM, ownership refers to the idea that customers "own" their experiences with a company. This perspective emphasizes that customers have the power to choose where they spend their money and expect a certain level of service in return.

 

- Value: Customers seek value in their interactions with a company. Value can be defined as the benefits customers receive relative to the costs they incur. CRM strategies aim to enhance this value proposition.

 

3. Characteristics:

 

A. Customer Value:

 

- Customer Lifetime Value (CLV): This metric estimates the total revenue a company can expect from a customer throughout their entire relationship. It considers not just the immediate transactions but also the potential for repeat business.

 

- Customer Segmentation: Customers are not uniform; they have varying needs and preferences. Segmenting customers based on demographics, behaviors, or preferences allows companies to tailor their CRM efforts for different groups.

 

- Customer Loyalty: Loyal customers are those who consistently choose a particular brand or company over others. They often spend more and advocate for the brand. Building and maintaining customer loyalty is a central goal of CRM.

 

B. Total Cost of Ownership (TCO):

 

 

Total Cost of Ownership (TCO) is a financial estimate that calculates the complete cost associated with acquiring, operating, maintaining, and eventually disposing of a product or asset over its entire life cycle. TCO is a comprehensive approach to evaluating the true cost of owning and using an item, beyond just its initial purchase price. It's a valuable tool for businesses and individuals when making purchasing decisions, especially for durable goods, equipment, or long-term investments.

TCO Analysis: This involves calculating all the costs associated with owning and using a product or service over its entire life cycle. Understanding TCO helps companies make informed decisions about pricing and customer support.

TCO typically includes several components:

 

1. Initial Purchase Price: This is the upfront cost of acquiring the product or asset. It's the most obvious cost but represents just a fraction of the overall TCO.

 

2. Operating Costs: These include expenses related to using the product or asset over time. This can encompass costs such as energy consumption, maintenance, repairs, consumables (like fuel or printer ink), and any other ongoing operational expenses.

 

3. Maintenance and Repairs: These costs include routine maintenance to keep the product in good working condition, as well as any unexpected repairs or replacements that may arise during the product's life cycle.

 

4. Upgrades and Enhancements: If the product requires updates or improvements to remain efficient and effective, those costs are factored into TCO. This can involve software updates, hardware upgrades, or other enhancements.

 

5. Training and Support: Expenses related to training users or personnel to operate and maintain the product, as well as the cost of customer support or technical assistance, are considered in TCO.

 

6. Downtime Costs: If the product experiences downtime, it can result in lost productivity and revenue. Downtime costs account for the financial impact of such interruptions.

 

7. Resale or Disposal Costs: At the end of the product's life cycle, there may be costs associated with disposing of it properly or selling it as a used asset.

 

8. Potential Cost Savings: In some cases, TCO analysis may also factor in potential cost savings, such as improved efficiency, reduced energy consumption, or lower maintenance requirements compared to alternative products.

 

The goal of TCO analysis is to provide a comprehensive view of the financial implications of owning and using a product or asset. By considering all relevant costs over time, TCO helps individuals and businesses make informed decisions about whether a particular investment is economically viable and which option offers the best value for money.

 

TCO analysis is commonly used in various contexts, including IT equipment purchases, fleet management, industrial machinery, and even consumer goods like cars and household appliances. It allows stakeholders to make more informed choices and select products that align with their long-term financial goals and operational needs.

 

C. Philosophy of Guest in the Hotel Industry:

 

- Guest-Centric Approach: In the hotel industry, guests are treated as more than just customers; they are treated as guests. This approach emphasizes personalized service, anticipating guest needs, and creating memorable experiences.

 

- Customer Feedback: Feedback from guests is highly valuable. Hotels use guest feedback to continuously improve their services and facilities, addressing any issues promptly.

 

- Hospitality CRM: Hotels often use CRM systems to manage guest information, preferences, and history. This allows for a more personalized and efficient guest experience.

 

In summary, Customer Relations Management (CRM) is about understanding the various types of customers, recognizing their ownership and value, and focusing on characteristics such as customer value, total cost of ownership, and adopting a guest-centric philosophy, especially in the hotel industry. These concepts serve as a foundation for effective customer relationship management strategies.