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What Is The Difference Between Internal & External Customers?

external customer

External customers exist outside of your business. They can either be individuals, or they can be entire organisations, that purchase goods or services from your organisation. Many businesses are set up with mainly the external customer experience in mind, which is fair enough. But when the question of internal and external customers comes up, there’s usually confusion around the concept of an internal customer.

The difference between external and internal customers is important, as both camps have different customer needs. So that you can build a positive work environment that treats customers both externally and internally, we’ve put together this article to go over their differences and needs.

What is an external customer?

An external customer is the end user, attempting to gain goods and services from your organisation.

If this isn’t enough of a dividing line between the internal and external customer, think of it like this: the external customers are your main source of revenue. They are who, all in all, your internal customers are attempting to do effective business with. Keeping external customers happy, holding on to them and pulling in more just like them is the way you build your business.

Between the internal and external customer, the external comes first. But without ensuring your internal customers have access to the resources they need, then you’re essentially hampering your own business’ productivity.

External customers can be the following:

Customer TypeCharacteristicsExamples
B2C (Business to Consumer)Purchases are for personal useIndividuals buying groceries, clothing, electronics, entertainment services
B2B (Business to Business)Purchases are for business operationsCompanies buying software, raw materials, office supplies, marketing services, logistics providers
Resellers/DistributorsPurchases are for resaleWholesalers buying in bulk from manufacturers, retailers purchasing products for their stores
Government AgenciesPurchases adhere to specific regulationsNational or local governments buying equipment, vehicles, construction services, consulting
Non-profit OrganisationsMay prioritise social impact alongside costCharities, educational institutions, foundations, NGOs purchasing goods or services related to their mission

 

What is an internal customer?

Internal customers are individuals, or departments, within an organisation that rely on the company’s products or services themselves, but not in the same way external customers do. Internal customers are using these goods/services to enhance their services – for the business. The main point of this is to cut the costs of using other organisations’ goods/services by doing it themselves, with cooperation from other departments.

Someone who works in marketing, for example, may need the support of a designer to achieve their ends. This marketing person would, then, be an internal customer. Understanding this and establishing effective communication across your organisation will speed up productivity and increase quality.

Whilst employees are your main internal customers, there are other examples:

Internal Customer TypeRolesTypical Needs
EmployeesSales reps, developers, customer service agents, HR staff, managersReliable technology, clear policies and expectations, training, access to information, timely support from other departments, recognition of their value
DepartmentsMarketing, IT, Product Development, Finance, OperationsClear goals and budgets, adequate resources (staffing, tools), collaboration across teams, communication, respect, and processes to support efficient work
Suppliers (within the organisation)Procurement teams, facilities, cleaning team, vendors providing internal servicesTimely payment, clear ordering procedures, defined processes, communication, fair treatment as a valued partner
Shareholders/StakeholdersOwners, board members, investorsTransparency about performance and strategy, financial accountability, return on investment, communication of major decisions, alignment with their goals

 

All of the above rely on your organisation’s services and goods to achieve ends.

Why are they called internal customers?

Simple – linguistics.

A customer is typically described as someone who requires your company’s products or services. However, as business management became more nuanced, there was a shift in the idea of what a customer is. The rise of the “total quality management” philosophy in the 1980s saw a productive shift in how a business owner should see those working in, or close to, their company. When it was learned that excellent customer service resulted in increased profits, businesses began to take this concept inward. Now, all people who work within or close to the company will receive similar services. When an internal customers’ needs and goals are met easily, the end product is enhanced.

Think of it like this:

Raw materials are processed into a finished product and are then sold to customers. In this chain, there is a lot of internal customers at play. A salesman or admin in the IT department is not going to know how to gather the resources and manufacture the end product, but if every person in the team acts like a well-oiled machine, then through their shared better understanding and individual specialisation, the end product will be of higher quality.

Instead of calling them workers or affiliates, the term “customer” shifts the perspective. It changes their perspective on the people they work with, knowing they rely on them for a service just like their clients.

Benefits of customer profiling

How to Balance Internal and External Customers

Both types of customers have demands. The external customer is king. Regardless, your internal customers require care too.

Let’s consider it this way – your sales team is closing in on a major deal. But in order to do this deal, your internal customers in the product development team need to get on it as soon as possible. But what if they’re already backlogged? This is called a bottleneck. The best way to remedy a bottleneck is to ensure it doesn’t happen, but when it does, only great internal customer service can help.

The best way to remedy this isn’t to leave them to their devices, but to incorporate their troubles into the overall business. For example, perhaps approach your internal customers’ through systems, such as flagging, and hold a business meeting at higher levels to work through the issue and put in plans to block it from happening again.

The key here is open communication lines that will allow greater coordination in times of trouble. This is just one example of many, and we will later go in-depth on the best practices. But by allowing greater communication within the company, you allow yourself to tackle issues head-on.

Identifying Internal and External Customers’ needs

If we embody the service-oriented mindset of modern business, then the following should be an easy way of identifying internal customers’ issues, and the external customer experience.

Internal Customers

Here are some of the ways that you can pinpoint internal customers’ needs.

  • Work Flows – All organisations have a workflow. By understanding where and to whom this work goes, you have the opportunity to ensure communication and cooperation methods are in place for your internal customers. You also have the ability to establish a failsafe.
  • Direct Relationship – By allocating effective managers who can understand their subordinates’ requirements, you can gain a greater understanding of your internal customers and eliminate their points of concern. This is especially important in a business that evolves.
  • Observation – Shadow your internal customers. Understand first-hand what it is they are expected to do and how much difficulty they have achieving their ends.

External Customers

Your external customer will always be your most important, and here’s how you capitalise:

  • Market Research – Finding what your customer wants will help you achieve your customer needs. What problem are they trying to solve and how can you provide a better service than competitors?
  • Feedback – Surveys, customer reviews – all of these go a long way in finding out why your customers make the decisions they do.
  • Sales Team Insights – This goes back to internal customers, but the people who engage with your customers the most will have possibly the best understanding of what does and doesn’t work.

Doing all of this will allow you to build a customer profile that you can adhere to.

Six Strategies for Improving External and Internal Customers’ Experience

With the merger of internal and external customers in mind, we’ve put together six strategies to help bring both together and achieve greater results overall.

1. Understand your Customers’ Needs

The first step is internal. Understand what your internal customers require.

Map out your workflows and ensure you know who is where, with what capabilities, and what oversight. Ensure all action is taken with as little micromanagement as possible. You need to activate their individual skills whilst also mandating communication.

Be proactive in conducting surveys and feedback to ensure all parties know where they stand, what they must do, and what they need to achieve their ends, and create a positive work environment they want to thrive in. Personal interest comes into heavy play here.

For external customers, a lot of these steps are less involved but are on the same wavelength. For new customers, go and look for the best solutions to their problems, and study your existing customers so that you can see what works for them.

Ensure you are engaging with both.

2. Be Responsive

Set clear SLAs for your internal customers to reference and adhere to, and set up flags/alerts to ensure that no cracks can be left to slip through. By tracking and responding to your internal workplace, you can streamline and make the entire business much more cohesive.

When it comes to external customers, there’s nothing more important than ensuring that they have a way to contact you. Nowadays, with the internet, it’s much easier. Live chats are a rapidly growing way to get in contact with your customers. A riskier, but a lot more in-demand and quick way to reach out to your existing customers is through social media.

A great business trick is to ensure that you set an average response time and strive to beat it. This demonstrates professionalism, and that you take your external customer needs seriously. It also allows you to quickly adapt to changes in the business.

3. Listen to Customer Feedback

Opening up lines of communication between different departments and workers are key to ensuring your business is productive. When you get feedback from these sources, make it clear what you intend to do. Actioning feedback, regardless of whether it’s a positive or negative response, is key, as it establishes that you’re willing to come to the table. It’s also a good idea to ensure there are channels where feedback can be given anonymously, as some issues are hard for employees to broach.

For external customers, one of the best tools is a post-purchase review. This can be hard to get without incentive, so it’s best to couple it with a reminder of the things they’re entitled to after the fact – such as warranty or support.

Furthermore, it’s important to keep an ear to the feedback given on other channels, such as social media. By having your finger on the pulse of your customers like this, you’re able to make changes in the future to accommodate concerns.

4. Provide Quality Products and Services

To supply quality is to garner a reputation and further business. Invest in your internal departments, ensuring that new technologies and tools that can provide further productivity is in place. Quality standards should be laid out plainly, with safeguards within areas of concern being put in place to protect your weak points. This is a winning business strategy, as it’s best to start high and perfect the process.

The quality control should extend both to the purchase and after-purchase by your external customers. From the start to the end, your service should be as good as it can be.

5. Create Engagement

If an employee does well, recognise this, especially in the realm of cooperation. Whilst an individual doing well in their individual role is fantastic, failure to provide that same quality when dealing with internal customers brings the business down. Open up opportunities for skill development, as this will create loyalty and improve the prospects of both you and your business.

For your customers, put in place loyalty programmes and establish an avenue of communication. Not only can this be perfect for garnering loyal customers, but it can also open opportunities to gain further insight and feedback.

6. Personalise Everything

Understand the areas in which each department within your organisation runs. By identifying strong points and weak points, you can find methods to enhance and diminish both respectively. Instruct managers to gather this data themselves and work with them to personalise the work of your internal customers.

For customers, CRM systems go above and beyond to gather data you can use. With an effective CRM, you can go into every interaction knowing the purchase history, complaints, concerns and past conversations with your clients. This takes a lot of burden off of them and makes communication easy. This simple method results in a great customer experience.

What does Six Sigma say about internal and external customers?

Six Sigma revolves around the “voice of the customer” and is a series of methodologies business owners can use to improve their business processes. In this context, the customer is referring to both the internal and external customer.

  1. Customer Focus – Six Sigma denotes that making your customer needs synonymous with business success is the way a modern business should be run. The internal and external customer must both achieve satisfaction through your leadership and service.
  2. Data-Driven – Gather data effectively, understand it, and use it to mould your business. Both your internal customer and external customer will provide you with all you need.
  3. Cut Waste – All unnecessary actions that do not benefit the customer should be cut. For the internal customer, all the time spent doing things that can be automated should be. Streamline your processes. For the external customer, eliminate all friction in using and purchasing your goods/services, eliminate all defects or unnecessary elements, and provide exactly what they need to achieve customer satisfaction.
  4. Continuous Improvement – Make it part of your business strategy to enhance the capabilities of all your departments and services. Continue to adjust according to customer needs.
  5. Process Focus – Six Sigma analyses end-to-end processes, seeking to optimise the entire delivery chain. The interconnectedness of your business results in vital growth.
  6. Employee Involvement – Your employees must be just as involved in the business as you are. With support, and a push in the right direction, you can overhaul your entire workplace into a near autonomous machine.

By following the Six Sigma approach, organisations and businesses alike improve their customer service strategies which will result in happier customers both internally and externally.

Final thoughts

The interactions between the internal and external customer is there, though removed by passing products and services down the work chain. Happy internal customers result in happy external customers. It starts with the business itself.

The effort to understand customer needs and wants is a tough one, but businesses that perfect it see greater success than most. This is why this approach has been so successful.

Pay attention and accommodate – this is how you deal with the internal and the external, and achieve great results with the services provided.

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