Business Glossary

What is a Consumer?

This article is for informational purposes only and does not constitute legal, employment, tax or professional advice. For specific advice applicable to your business, please contact a professional.

What is a consumer?

A consumer is a person who spends money to consume a product or service. The word consumer is often used interchangeably with the word customer. This usage is not entirely accurate. A customer is a person or organisation that purchases goods or services. However, they may or may not consume them.

Examples of a consumer

In Australia, consumers are people acting outside their usual course of business. This means that whether or not a buyer is considered a consumer often depends significantly on context.

For example, if a chef buys equipment for their business kitchen, they would be considered a customer but not a consumer. This is because purchasing kitchen equipment is part of a chef’s job.

If the chef bought their own kitchen equipment, they would be considered a consumer. They are acting outside of their normal course of business. Although they are more knowledgeable than the average consumer, they are acting privately in purchasing their own equipment.

In some cases, whether or not a person is considered a consumer can be a matter of opinion. For example, if a freelance chef signed up for a cooking course, they may or may not be considered a consumer. So, on the one hand, the cooking course is related to their trade skills, but conversely, their regular business does not directly include training, so they might be considered a consumer.

The importance of defining consumers

For the most part, it doesn’t matter if companies mix up the definition of consumer and customer. There are, however, a couple of instances where it is important to use the proper definition. Here are some examples where defining consumers and customers accurately is important.

The issue of consumer protection

If a purchaser is defined as a consumer rather than a customer, they may be entitled to extra legal protection, often known as consumer rights. For example, Australia has the Consumer rights and guarantees.

The logic behind this is that businesses are expected to have a higher level of knowledge and experience than regular consumers. Therefore, the onus is on the business to ensure the consumer has all the information they need to make an informed decision.

It’s worth noting that these extra protections generally only apply in transactions between individuals and businesses. They do not usually apply in transactions between companies or even transactions between large businesses and small businesses.

Similarly, they do not usually apply in transactions between private individuals.

Where consumers and customers are different

The word consumer is often used interchangeably with a customer because consumers are often the same as customers, and vice versa.

In some cases, they are different. One clear example is gift-giving. Another is parents buying goods and services for their children to use.
This raises the question of whether businesses should market their products to the customers, consumers or both. If the businesses decide to do both, they need to determine which type of buyer should be prioritised: the customer, the consumer or split it equally.

A lot of the time, it makes sense to market to the customer rather than the consumer. Ultimately, the customer is the one with the buying power. Usually, the customer will only buy something if they believe that the intended consumer either needs it or wants it.

This means that businesses need to ensure that customers are clear on the benefit to the end consumer. They could include that message as they market to customers. Alternatively, they could reach out to the consumers by creating relevant digital content. Often the best approach is a mixture of both.

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