Customer is called King since his/her purchase brings cheers to the organisation and its manpower. No customer means No organisation. Organisation is created to sell to customers and earn profits from such sale. Let’s understand about this customer.
Customer is the person who purchases the goods or services provided by the organisation for a price. Therefore, goods and money are pre-requisites for customer. The transaction would become complimentary / gift / charity / donation without consideration.
Customer is an important part of extended team of the organisation. Some of the organisations are built to service their customers only. These organisations work on supplying raw material to their customers.
Organisation’s activities need to be alignment with customers’ requirements for remaining successful.
Characteristics of a Customer and sale transaction
- Customer is a person (i.e. customer could be an individual, corporate, firm or anybody);
- The underlying transaction is for purchase of goods or services in which organisation deals / trades / manufactures, etc. and customer got interested in purchasing the same;
- The customer may need the goods or services for self consumption OR trading OR using as raw material OR exporting to other countries;
- The customer passes on the consideration to the organisation. The consideration could be in the form of money equivalents (barter transactions) OR exchange of goods e.g. gold getting exchanged in the form of jewellery from jewellers;
- The customer got interested in goods or services based upon advertisement through print or visual media OR referral by other satisfied users OR presentation given by marketing team, etc.;
- The purchase can be seen as transfer of promised value by the organisation OR perceived value by the customer;
- The price could be settled in cash down payment OR payments in instalments over a period;
- There would be exchange of documents before transfer of ownership, risks and rewards to the customer like purchase order, contract, sales invoice, delivery challans, packing list, transporter’s invoices, etc.
- The customer may be offered post-sale warranties OR guarantees for free replacement of goods / parts OR free services, etc.;
- The customer may be entitled / offered to receive free / concessional add-on products / services alongwith purchase of goods.
Why customer purchases?
- Purchase is the result of underlying need of the customer;
- Needs may be apparent or hidden in the mind ignited by advertisement OR by marketing team OR referrals OR family members, etc.;
- e.g. the person may have wish to travel abroad and the same getting postponing for a long period BUT advertisement of payment in easy instalments OR visit by friends alongwith pressure from family members, may cause journey immediately;
- The customer always looks for promised / perceived value which is getting transferred from organisation alongwith goods / services to satisfy the needs.
Consequences of Customer not receiving promised value
- Lost trust
- Organisation loses the present and future sale to that customer;
- One bad customer spoils thousand good customers’ trust by sharing bad experiences.
- Litigation / disputes
- Bad sale transactions result into disputes, claims from customers and unless settled, result in litigations involving huge cost.
- Loss of operations
- If losses are significant → customer may demand huge damages / compensations resulting in operations getting affected OR even results in closure of the organisation.
- Penal actions from Government
- Govt. may step into to initiate penal actions against the organisation where public interests are involved OR there is a loss of human life due to organisation’s fault in delivering the promised goods.
- Troubled cashflow
- Customer may
- Deduct amount from outstanding amount;
- Delay the payments to the organisation;
- Not paying outstanding amount in whole.
- The above results in
- Funds shortage for organisation and vendors since organisation may choose in delaying payments to vendors and cycle of delayed payment keeps widening affecting large number of organisations;
- Default / delays in payment of
- Statutory dues resulting in interest and penalties;
- Employees’ remuneration affecting employees’ morale, etc.
- If vendors are not co-operating in accepting delayed payment → organisation may have to resort to borrowings → the bigger the need of organisation to borrow; the higher the lending rates.
- Customer may
Importance of Quality vis-à-vis Customer
- Organisation grows when new customers come and old customers stay;
- Regular cash inflow from customers is very important to meet costs of raw material and operational costs;
- Quality has a major role in building the organisation;
- Unless organisation committed to deliver quality products / services → troubled cashflow as discussed in last paragraph;
- Quality improves cashflow since organisation can dictate terms of receiving the consideration in advance or reducing the credit period;
- We have discussed more about “quality as a value” and importance of “quality control department” in separate articles.
Defining moments for customers
- ‘Defining moments’ for a customer are happy OR wow moments where the customer feels ecstatic / overjoyed / overwhelmed with organisation’s products OR quality of services OR organisation’s gesture;
- Defining moments result in repeat orders and referrals from a happy and satisfied customer;
- Organisations go extra mile to create defining moments since they know its benefits;
- We have discussed more about the practices adopted to create such moments in ‘Packaging’