What is a consumer? Definition and meaning

A consumer is an individual or organization that purchases or hires a product or uses a service. It is a human or other economic entity that uses a good or service – and does not sell it on. This person or entity is the end user – not necessarily the purchaser – in the distribution chain of goods and services.

In biology, consumers are organisms that get all their energy by consuming other types of organisms or organic matter. In the animal kingdom, for example, consumers prey on other organisms because they are unable to produce their own energy or obtain energy from inorganic sources. In that sense, human beings are consumers – in order to obtain energy, we eat other organisms.

According to Dictionary.com, a consumer is:

“1. A person or thing that consumes. 2. (Economics) a person or organization that uses a commodity or service. 3. (Ecology) an organism, usually an animal, that feeds on plants or other animals.”

This article focuses on the economic definition of the word ‘consumer’.

What is a consumerConsumers are the end users of a product or service. In this image, the customer is the adult, he paid for the product (doll), but his daughter is the consumer.

The consumer in the marketplace

In the world of business, i.e. the marketplace, the consumer is a person or economic entity that purchases or hires a product or service for personal use. He, she or it does not buy or hire it for manufacture or resale.

When the non-business or non-financial media talk about consumers, they are usually referring to people engaged in evaluating, acquiring and using products and services to satisfy their needs and wants.

A consumer is a major figure – some would say the key figure – in the marketplace, around whom all activities are focused.

Adam SmithAdam Smith (1723-1790), a Scottish pioneer of political economy, known as the ‘father of modern economics’, once said: “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.” (Image: Wikipedia)

Consumer vs. Customer

We often use the terms ‘consumers’ and ‘customers’ interchangeably, but they do not always have the same meaning – a customer is not always the consumer.

Customers purchase a product or service, but it is the consumers who use it.

For example, the customers of a company that sells small children’s toys are mostly adults, while its consumers are those adults’ children, nieces, nephews, grandchildren, friends’ children, and children’s friends.

The difference between consumers and customers impacts how businesses market their products. Customers will only buy their toys, for example, if consumers demand them. Therefore, marketing efforts should be targeted at the children, so that they ask adults to buy them.

Of course, in many cases consumers and customers are the same people. A ladies’ clothing store will sell mainly to the end users.

What is consumer law?

Consumer law involves all the laws, regulations and statutes that aim to create a more equitable balance for purchasers in the marketplace, and prevent vendors from using dishonest tactics.

In the United States, both state and federal laws play a role in regulating consumer law, which range from forbidding false advertising and imposing product safety measures to laying down regulations regarding debt collection practices and protecting consumers’ identifying data.

Martin FriedmanMilton Friedman (1912-2006), an American economist who received the 1976 Nobel Prize for Economics, once said regarding consumers and the government: “Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.” (Image: thefamouspeople.com)

Consumers commonly find themselves requiring legal assistance after falling victim to online scams, buying a product without being told of hidden defects, or losing their savings in financial schemes, such as identify theft or illegal and/or unauthorized credit card charges.

Regarding consumers understanding their rights, the British Government wrote:

“Consumers who understand their rights can play a strong part in driving growth because they force businesses to innovate and pursue efficiency.”

“For this they need both competitive markets and a strong but simple framework of consumer law that can be effectively enforced. Poorly understood law leads to economically unproductive disputes between businesses and consumers and tends to favor those less scrupulous firms which exploit uncertainty.”

What is a consumer society?

A consumer society is one in which people frequently buy new products, especially goods that are not required for survival. Most societies in North America, Europe, Japan, South Korea and Australasia are today consumer societies, where a high value is placed on owning many things.

If we go back just a few centuries, virtually nobody in any country spent a significant amount of time or resources shopping around for goods produced far away from home.

Before the Industrial Revolution, the vast majority of people in Western Europe and North America lived in rural areas and worked in farms. Their clothing and household possessions were very limited by today’s standards and were typically made by a household member or by somebody in the same village.

The vast majority of people were not driven by fashions, technological change or social pressure to make new purchases. In fact, most goods were used for decades, and repaired if needed. A major item, such as a winter coat, was expected to last for the rest of your life, and was then passed on to your children after you died.

Today, we do not even bother darning out socks – as soon as we see a hole they are thrown away and replaced by buying a new pair.

Our economies have become completely dependent on consumer spending for GDP (gross domestic product) growth. In today’s advanced economies, sixty percent of GDP growth is driven by consumer demand.

Video – Global Sustainability in a Consumer Society

In this talk given at a TEDx event, the speaker wonders what would happen if we put all the creativity that currently goes into consuming things, into involving people in society as citizens.