Distinguishing between Customer & Consumer is foundational to Innovation

Male Model ShoppingIf you are a practitioner or a serious student of Innovation especially in these modern times, the important distinction you have to make is between Customer and Consumer. They may or may not be the same entity in all cases and even if they are the same, there is a need for understanding them distinctly and differently.

The traditional economic definition of a customer is “one who pays in exchange for an offering that your business has to make”. In a simple world without the complexities of globalization and intense competition and the added twists of multiple medium, channel, and devices / methods of distribution and reach, that definition takes a beating. Everyone in that Value Chain who has contributed to a Product, Process and / or Service Revenue (Business offering) is therefore a Customer. This includes the Employee, Client, Business Partner, Vendor, Stakeholder, Shareholder and Society in which the business operates.

A Customer’s interaction starts with his / her need and ends with the expectations being fulfilled when they buy the product.  If any of the dimensions that govern the transaction of business change, it is likely that the Customer will find alternatives. But this is where the Consumer steps in. The Consumer is perhaps not the direct Customer but is the key influencer to the verdict on the business offering and its sustained support by the Customer. While the transaction business processes must focus to meet the Customer Expectations and fulfill them to the absolute satisfaction, the Innovation Process must focus on fulfilling the Aspirations of the Consumer; who has a more telling impact on experiencing the Product / Process and / or Service offered by a business enterprise. And who also consequently influences the Customer.

CUSTOMERCONSUMER MAPPING

Please observe the above Illustration. If you were to plot a graph to find Strategic Value represented on the Y-Axis against Time on the X-Axis, it will not take an Einstien to discover the following:

  • When Aspirations are covered, the automatically address the Expectations, Needs and Wants.
  • Unfulfilled Needs become more urgent over a period of Time and represent themselves as Wants.
  • A series of fulfilled Needs results in fulfilling of Expectations.
  • However, if you equate an enterprise growth to the Strategic Value it creates in the marketplace, you will recognize that the only way an enterprise can experience exponential growth is to respond to aspirations.

To further validate this point, the attributes for understanding a data driven approach to the Customer and Consumer may be the same but the dimensions are different as represented in the following two tables.

CONSUMER FOCUSED MODELING

Geography Market Segment Customer Customer Maturity
VERSION
RELEASE
Functionality
Features
Rate of Use
Ease of Use
Points of Use

CUSTOMER FOCUSED MODELING

Geography Market Segment Customer Customer Maturity
Quality
Cost
Delivery
Service
Flexibility (Ease of Interaction)

No further evidence is required to understand that Consumer Focused Modeling is different from Customer Focused Modeling. While the former can lead to Industry Leadership, the latter at best can lead to Competitive Advantage. And we all know from experience that Competitive Advantage cannot last forever and its practice has a very debilitating and demoralizing effect on an enterprise; especially in a weak economic environment.

Incidentally, leadership and enterprise management and the plethora of business gurus, consultants and business authors, know everything that is mentioned here. The question then is, why do enterprises not follow the path that is more risk assured? Well, that is where the discipline of processes comes in. Instead of building processes that connect and collaborate across the value chain, enterprises are spending money on populating date and making everything more complex than viewing the business in as simple a form as the above two tables. It would be extremely effective if enterprises established a way of intersecting their Product Life Cycle with their Consumer Life Cycle and then established their Distribution & Reach that enables Customers to Transact & Interact with the enterprise seamlessly assuring both Loyalty and Satisfaction equating to Customer Life Cycle Management.

Post Script:

Retailers across North America are trying to increase the Black Friday sales volume by opening sales outlets and malls on the evening of Thanksgiving. Is it a wise choice and which big data provides clues to this answer? We will probably find out once the sales figures are announced at the end of the quarter. However, one this is certain – that it has managed to disrupt those who serve and those who will be served from a holiday that was supposed to be spent in cherishing family values with loved ones; one day in a year.

Happy Thanksgiving. There is more to life than just buying and selling. Female Model

About Subbu Iyer

Subbu Iyer is an Innovation & Transformation Leader as with 28 years of serving customers globally. He is currently the Chief Designer & Transformer at Energizing Innovation, an enterprise that is being founded to facilitate continuous growth in enterprises and as a consequence create societal wealth. The Radical Shift that this enterprise intends to employ is focusing on the Potential rather than the Performance of a business. He has been a serial entrepreneur and an intrapreneur in his past life, having founded Nihilent Technologies and Nandaki Systems besides being associated in senior leadership roles with firms such as Coopers & Lybrand, Cambridge Technology Partners, Tata Consultancy Services, Wipro Technologies and Steria.
This entry was posted in Business Process Management, Business Strategy, Business Strategy & Innovation, Change Management, Customer Management, Innovation, Management, Society, Transformation and tagged , , , , , , , , , , . Bookmark the permalink.

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