Small business strategy question: How do you define a customer?

In a previous blog post I listed 100 small business strategy questions that entrepreneurs need to ask and answer to grow their businesses. Then I’ve been occasionally examining each question and providing tips and advice on how to answer that question and then apply the answer to your business.

The small business strategy question I’m looking at today is: How do you define a customer?

The first part of the answer to this question has to do with the synonym you use in place of the word “customer”. I use the word “customer” to refer to anyone who buys when you’re selling but not every business uses the word “customer”. They might use words like “client”, “buyer”, “subscriber”, “patient”, “member”… or something even more specific (like “seller” for real estate clients who sell their homes or “insured” for someone who has purchased insurance). But for my purposes in this blog post, I’m going to use the word “customer” to refer to the group of people you sell to, regardless of what you call them in your day-to-day business.

That’s not the only way we define a customer. We also define a customer based on what commitments they make. Someone who subscribes to our free newsletter might not be a customer. But they are a subscriber. To some businesses, a subscriber is a customer; to other businesses, a subscriber is not a customer.

And, we define a customer based on when they become customers in your sales funnel will help you define your customer. For example, they might be a prospect until they commit to buying from you, even if they don’t pay until after they’ve received service. But that’s not the case for every business. Some businesses don’t have customers until that customer hands over cash.

It’s kind of a fuzzy line: When someone goes to McDonald’s, are they a customer when they drive into the parking lot or when they walk in the door or when they stand in line or when they order or when they pay their money or when they get their food?


You might be wondering why it matters how you define a customer, and why you should go through all this trouble for something that is apparently a very fuzzy definition.

There are a few reasons why it matters: Knowing who your customers are (and when they become customers)…

  • … helps you to market more effectively by shaping your marketing and sales efforts toward the value that the paying customer will receive (as opposed to some general value that people can get for free from you). This protects you from doing all that work to drive people to your blog or email newsletter only to have them think that you have given away everything of value and there is nothing worth paying for.
  • … helps you to work toward one specific goal in your sales funnel. (And, if you have other people on your team, you can align that goal so you’re all working together toward the same thing).
  • … helps you to measure your marketing and sales success so you can test the effectiveness of your marketing and sales efforts and improve for greater profitability.
  • … helps you provide better customer service by helping people who are actually customers (versus those who might be committed to your business but not a paying customer.
  • … helps you to innovate with simple things in your sales funnel like adjusting your paygate or delivery times

All businesses have customers but businesses define those customers differently. How do you define yours?

Published by Aaron Hoos

Aaron Hoos is a writer, strategist, and investor who builds and optimizes profitable sales funnels. He is the author of The Sales Funnel Bible and other books.

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