The Internal and External Customer – What’s the difference?

The terms “internal and external customer” were popularised throughout the 1980s through the Total Quality Management (TQM) philosophy, created by Joseph M.Juran and W. Edwards Deming. The philosophy aims to embed a framework for continuous improvement throughout the organisation by focusing on customer satisfaction, employee involvement and systematic problem solving. A key part of this is dividing external and internal customers and following the steps needed to ensure both are satisfied.

But what are these customers, and what are their key differences? In this Article, RealBusiness will outline these queries and break down how to approach both under TQM for maximum results.

What is an external customer?

An external customer is the end user attempting to gain goods and services from your organisation. Between internal and external customers, this is more or less the default idea that springs to mind. You, yourself, are likely an external customer to many businesses daily, from groceries to subscription models.

To better outline the meaning of this term:

Business success revolves around satisfied external customers, both through the goods or services that attract them and the good customer service of the company. But you’re only able to achieve these two goals if the company itself runs well, and that revolves around internal customers.

What is an internal customer?

Internal customers are people in a business or company that rely on assistance, skillsets or input from another individual or department to complete their work. This can be anything from a simple employee in another department to a third-party supplier. They don’t directly increase revenue, but they are essential to ensuring smooth operations and therefore should be treated as customers, hence the term “internal customer”.

Whilst other employees are the main examples of internal customers, there are other examples:

All of the above rely on your organisation’s services and goods to achieve their ends, and ensuring that they are taken care improves operational efficiency.

Why are they called internal customers?

The main reason is so that you associate them with the expectation of customer service, as satisfied internal customers allow for smooth operations.

This brings us back to the “total quality management” philosophy, which outlines that management should view every process as part of a chain of services. By ensuring quality at every stage, every internal handoff will have the same quality as what external customers would expect, thereby increasing the final output’s higher quality.

Put simply, internal customer relationships result in excellent customer service, which results in increased profits.

Internal vs external customers – who is more important?

The short answer is the external customer, but it’s insufficient. The truth is, there is no room for an “internal vs external customer” mindset. The external customer may bring in revenue, but expanding your market share and keeping your existing customers rely heavily on how well your internal customers operate. This is because internal customers are responsible for refining and perfecting processes, as per TQM.

For an example of this theory being levied in the internal vs external customers pipeline, think of how raw materials are processed into a final product and then sold to customers. In this chain, there are a lot of internal customers at play:

1. Procurement teams begin the chain and act as an internal customer to the production team. Whereas their main duty is procuring and handing off goods to the production team, there may be other issues that arise, like a sudden need for a certain resource that isn’t aligned with procurement’s day-to-day. Failure for the procurement team to get this would lead to poorer operational efficiency and a lack of internal customer satisfaction.
2. The production team converts these raw materials into a final product. They have to meet quality, volume and deadline requirements, then pass them on to quality control.
3. Quality control ensures the finished products are to the standard set out by the company, but perhaps they run into issues with using vital software. This would result in them approaching the IT department for help. A failure on their part could mean delays or an inferior product being shipped, so the IT department should feel obligated and happy to help.

So, how do we apply this framework in business? Many would say to leave employees to their own devices. The truth is, this is the wrong answer. Order in a business is what leads to operational efficiency. Instead of taking order out of the equation, incorporate all potential troubles felt by internal customers into the pre-existing business structure.

Two ways to make this happen:

• Coach – Coach your organisation on the meaning of internal customers and their duties.
• Communication – Allowing open communication channels that hold no possibility for backlash is key to this. Having a fear-free workplace not only makes employees feel valued, but it also allows them to take initiative.

A company’s products and services becoming refined enough to attract and retain a base of external customers is all well and good, but the issue that stands in the way of many businesses’ success is their lack of ability to improve. The set procedure becomes all there is, and the lack of progression in company structure and offerings results in the loss of external customers.

Identifying internal and external customers’ needs

In detailing internal and external customers, we’ve mostly focused on the former, but that’s only because it’s the less well-known of the two terms. That being said, making external customers happy is always the priority. Without identifying their needs, you can’t solve their problems with your goods and services.

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, as well as what departments may be needed in cases of an emergency (tech support), you can catalogue existing touch points, create new ones, and work on refining them.
• 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.
• 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 customers’ 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 possibly have 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

Start with the external customers. What problems are you solving with their products or services? Build your business to first capitalise on this:

• Example – A good real example of this is the Nintendo Wii. Many thought gaming was too complicated, having no entry point and alienating non-gamers, not to mention a lack of focus on games for an entire family. So, they made a console with simplified controls that would appeal to both avid and non-gamers alike. The result was over a million units in sales.

Once you have consistent revenue, then you move on to improve inter department communication. There are several things you can do:

• Internal survey – Use anonymous forms to gather honest feedback on employees’ current pain points, expectations and service quality. Best practice is not to ask for positive reviews; focus on the negative.
• Meetings – Either one-to-ones or team meetings. Allow for free, open feedback with the intention of making changes to uncover real-time needs.
• Review workflow – Employee satisfaction and efficiency are proven to rise when they spend most of their time pursuing their core competencies.
• Monitor service desk or tickets – Round up the most common support needs and prioritise fixing them.
• Set service level agreements (SLAs) – A service level agreement is a standard of what departments expect from one another.
• Identify bottlenecks – Identify areas that suffer from too little productivity as a result of either too much demand or inability to service, and fix them by either hiring more, offsetting tasks effectively, or outsourcing.

Creating a positive work environment, constantly improving inter-department communication and refining touch points are key to keeping things efficient and high quality.

2. Be Responsive

Utilising software is the best way to be responsive to both internal and external customers.

• Internal customers – Software such as Jira Sevice Management allows organisations to create internal service desks that have custom workflows, request types and SLAs. For example, each department will get its own portal to raise requests, such as a marketer submitting a ticket to IT for software access. Reporting features make it fantastic for receiving internal customer feedback.
• External customers – Customer relationship management (CRM) software gives your external customers a profile where you can track purchase history, complaints etc. This allows you to make them feel heard, as everyone who interacts with the external customer via live chats, phone calls, etc. will know their long-standing issues, giving your company a platform to make things right before you lose them. CRMs are widely lauded for being instrumental in making and keeping external customers happy.

A great business trick is to ensure that you set an average response time and strive to beat it by constantly developing your efficiency. By challenging yourself like this, you will find that internal customers will have their needs met for smooth operations, and external customers will feel like their issues are prioritised.

3. Prioritise customer feedback

Internal vs external customer feedback differ. External customers give feedback, usually, through complaints, and being able to deal with those complaints quickly and effectively is key to keeping them. Internal customers are typically much more unbiased and practical. Of the two, the external customers must take priority.

• External customers – The best way to get customer feedback is to ask for it after you’ve solved a problem. For example, live chat for Amazon is where a lot of returns, refunds or product support takes place, and afterwards, there’s a feedback request that many tend to fill in. This is taking advantage of the relief that comes with a problem being solved and the anger that comes from the opposite. The latter is likely on their way out, which you may not be able to do anything about, but you can use the complaint to better refine your service.
• Internal customers – When you begin opening up lines of communication is when you’ll get the most internal customer complaints. This is not a bad sign but a good one. As we said before, internal customer complaints are typically unbiased and practical, meaning solving them improves practicality.

4. Provide Quality Products and Services

All businesses have a baseline product and service, and improving the quality of these products involves different actions for both internal and external customers.

• Internal customers – Improving internal customer satisfaction improves the end product through better quality, faster delivery and fewer errors. You will feel the effects of this through your products and services that are filling a need in the market already. When you don’t think you can improve your product any more than you already are, perfect your internal customer relations.
• External customers – Using feedback and market research in this endeavour means to identify other gaps in the market, or changing your product to take advantage of opportunities or counter your competition.

5. Create Engagement

Creating engagement differs for internal vs external customers. External customers are a lot harder to engage with, as outside of using your products and services, they usually don’t want to be bothered. Internal customers, however, want to be engaged. Engaged employees are busy and happy, employees.

• Internal customers – Having your finger on the pulse of improving the internal state of your business means keeping track of goals, changes, etc. This puts you in a good position not only to witness positive changes but also to provide positive reinforcement for good behaviour.
• External customers – Far harder. To engage with existing customers, think about using email campaigns using modern techniques. This means being able to tailor your content to suit their specific customer type, such as high spenders, new customers, etc. Furthermore, consider hiring a social media manager who knows how to engage seamlessly (see Wendy’s revolutionary social media persona).

6. Personalise Everything

Personalisation makes people feel heard and is equally effective for both internal and external customers. For internal customers, roadblocks to enjoying their work are removed, and external customers feel less exploited.

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 external 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 customers 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.

Conclusion

The interactions between the internal and external customers are 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.