Critical Definitions in Marketing Cost Price Consumer Customer

Critical Definitions in Marketing:  Cost and Price

Consumer and Business Customer

Many of us use the words “cost” and “price” interchangeably.  But we cannot do that when we are in business, because each has a specific meaning.  Let’s review what each is and why the definitions matter.

We can actually clear this up really quickly with a quote from a microeconomics text:  “From the firm’s perspective, cost is what they pay for the inputs necessary to produce the product. Price is what the firm receives for selling the product. Thus, cost is a negative and price is positive; they are not the same thing” (Microeconomics, n.d., italics added).

Since we were able to clear that one up so quickly, let’s move on to two other bugaboos.  That is the difference between a consumer and a business customer.  You know that consumer behavior and business buying behavior tend to be different.  But did you know that a business customer cannot be called a consumer?  You’ll say, of course, that a business customer consumes.  And of course, he or she does.  However, in business, a consumer is always an individual that purchases a product or service for individual use.  Thus, only those who are purchasing for themselves or their families can be called a consumer.  We generally call businesses “customers” or “clients.”

Here is some interesting information from Boundless.com.  It shows why we may get confused by the root of the word by highlighting the word consume and consumer in italics.

• Consumer goods marketers sell to individuals who consume the finished product. 
• Business-to-business marketers sell to other businesses or institutions that consume the product in turn as part of operating the business, or use the product in the assembly of the final product they sell to consumers.
• In addition, consumer goods marketers might employ emotional appeals and are faced with the constant battle of getting their product into retail outlets.  Emotional appeals typically do not work with businesses. 

That also means that buying behaviors are different between the two, and so are the segmentation methods.  You can read more about those in traditional texts and additional readings generally available.  

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Why It Matters: Production. Authored by: Steven Greenlaw and Lumen Learning. License: CC BY: Attribution

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