One of the first subjects I cover with nonprofit leaders when we are talking about business models, strategy, fundraising, or a myriad of other topics, is the difference between customers and consumers. I can’t understate how crucial understanding this difference is to nonprofit leaders. I am not one who touts the "supremacy" of the for-profit world over the nonprofit one, but I do see ways that one sector can contribute to another and this is one where nonprofit executive directors and CEOs can benefit. Having clarity on the difference between customers and consumers will enable you to understand the motivations and needs of some of your most important partners, thereby allowing you to more effectively serve them.
Here's the simplest definition - your customer is the person who purchases your goods and services. The consumer is the one who uses them. Many times in the economy, a customer and consumer are the same or very closely connected.
Let me give you a simple example. I like pizza. Let’s say I go into a pizza shop and buy three slices—one for me and one for each of my sons. When I buy the slices, I am the customer—I hand over the money and receive my lunch in return. However, when we eat them, all three of us are consumers (even though I was the only customer). In this case, the customer (me) is also a consumer. Additionally, I am with the other two consumers (my sons), thereby giving me a lot of first hand data on how the consumers enjoyed (or didn't enjoy) the customer's purchase.
The proximity of customer and consumer in the for-profit world has led to the two words often being used interchangeably. This extends to the nonprofits where you often hear executive directors and CEOs say "everyone is my customer". But in reality, that isn't correct, in fact, the difference is even bigger and more relevant for nonprofits.
BUT IN THE NONPROFIT WORLD...
In the nonprofit world, your customers are rarely consumers and vice versa. That is, the people who fund your work (customers) are typically not the ones using the services (your consumers). Further, your customer is probably not well-connected to your consumer (and, of course, the opposite is true as well) so the two have little information about the needs and motivations of the other.
Let me give you some examples of customers and consumers in the nonprofit world to bring home the concept:
- The School District Director of Professional Development (the customer) engages you to implement your capacity building model with principals and teacher (the consumers).
- A Foundation Program Officer (the customer) awards you a grant to provide services to homeless youth (the consumers).
- A private donor (the customer) invests in a scholarship that you will provide to a youth in poverty (the consumer).
In each of these examples, you have two different types of people to serve.
First and foremost, you have to persuade the customer to give you the resources (not only money, but this could be access, facilities, or anything else of value). Further, you need to keep them abreast of implementation or at least of how their investment had impact in order to show that your organization had value for them and pave the way for future funding.
But while you are making the customer happy you can't ignore the consumer. They are crucial to your success. If they don’t use your service or product you won’t be able to generate the change you want to affect in the world thereby letting your customer down and also not fulfilling your mission. For example, if you can’t get families in need of financial counseling in the door to participate in your program, you fail your funder and your mission. So knowing the consumer and the customer is about understanding two different roles - neither is more important than the other but instead they are typically two different parties with different needs and motivations, both of whom you need to serve effectively.
If customers and consumers were as monolithic as they were in the examples above your job would be a lot easier, but sadly it is more complex.
Let's take customers first. As you can see in the examples, the customer isn't always in the top position in the organizational structure (e.g., the school-district director of professional development rather than the superintendent). In other cases, you may need to "sell" to more than one customer. For example, in order to work with Nonprofit A, you may need to not only convince Nonprofit A’s Executive Director on using your program but then also meet with the donor who is providing Nonprofit A with the funding and convince her as well.
As for your consumers, you need to remember they are rarely all the same - they can have different needs and motivations. For example, you have a program with the objective of serving 100 families in poverty. But the needs of those families will be very different. For example, a family without any extended relatives will have different needs than one with a large extended family that has the resources and time to help them. Another example is a family in a rural environment will typically need different services than one in an urban geography. In all these cases the family is in poverty, but what they need as consumers can differ greatly.
The most important thing to remember is that your mission can only be fulfilled by doing something valuable for both your consumers and customers. The ability to serve both groups is your business model and at the heart of your path to sustainability.