Internal vs. External Customers: What's the Difference?

Updated January 5, 2023

Effective customer service is vital to client relations, product consumption and overall company success. In order to create the best customer experience possible, it's helpful to understand the difference between internal customers at a company and external customers who interact with that company. This allows for businesses to more properly value and accommodate each type of customer, improving customer service overall. In this article, we define internal customers and external customers, discuss the differences between them and review frequently asked questions.

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What are internal customers?

Internal customers are company employees who consume goods or services that another employee provides. This often involves relying on someone else within the company for help. For example, if an employee needs assistance with a computer issue and reaches out to the IT department for help, that employee becomes an internal customer of the IT department. Employees, owners and other types of representatives, like shareholders, may all be internal customers.

Some common types of internal customer relationships include:

Employees within a team

If one employee needs help and reaches out to another employee on their team, they become an internal customer to the other. This is a very common type of interaction and occurs almost every day for most teams. Some roles rely on other individuals continuously in order to complete their own work. For example, a social media manager might rely on a graphic designer on their team to complete a graphic for a social media post.

Employee to IT department

Anytime an employee has an issue with technology, they may request assistance from the IT department. As most companies rely on computers and other technology to operate smoothly, this is a very important internal customer relationship. Sometimes, an employee can only move forward with their work for the day after an IT team member has helped them. This means that swift and effective customer service by the IT department is essential to making sure that employees can reach their full potential for the workday.

Employee to HR department

Human resources departments provide training and benefits, so every employee is an internal customer to their company's HR department. HR may also assist with internal relational conflict and mediation. When hiring new employees, the HR department and particular branches or managers may be internal customers to each other, as they assist each other with the hiring process.

Internal employee to product

An internal employee may also consume the product that the company sells. In this situation, the employee consumes the product as an internal customer. They may choose to follow the same channels as external customers when making this purchase, or they may rely on internal knowledge to find special deals or routes to service. For example, an employee of a hotel chain could get a discount if they stay at another hotel in the same chain.

Read more: What Is an Internal Customer? (With Examples and Tips)

What are external customers?

External customers, also known as the clients or clientele, are the people who pay for the goods and services that a company provides. They generally have no other connection to the company beyond their purchases. Identifying, engaging and maintaining relationships with external customers is an important aspect of business because it's where companies generate much of their revenue. For this reason, the satisfaction of external customers is the central focus for most product, marketing and user experience (UX) teams.

Some specific types of external customers include:

  • Individuals

  • Businesses

  • Government organizations

  • Volunteer organizations

Related: Customer Relations: Definition, Benefits and Tips

Internal vs. external customers

The major difference between internal and external customers is that internal customers operate from within the company structure, while external customers are not part of the company. This major difference is the basis for several other distinctions between the two types of customers. Here are some of those differences:

Connection to the company

The connection of a customer to the company is one major difference between internal and external customers. The company does not pay external customers, and these customers have no responsibility beyond each transaction. While some may become regular clients and even develop a relationship with the company, many only interact with the company a few times.

Internal customers have multifaceted connections with the companies for which they work. The company pays an internal customer to complete their work and may also provide job benefits. This means that internal customers often rely on the company for their personal and financial well-being. Likewise, the company relies on its employees to function well after investing the resources to hire and train them. One result of this connection is that internal customers are often more loyal to the company, while external customers may be more likely to purchase products from whatever company suits their interests.

Knowledge regarding the company and product

Internal customers are usually intimately familiar with the form and function of the organization for which they work. This may make it easier for them to navigate the correct channels for their needs. External customers may require extra customer service channels to connect them with the proper department to assist them with their needs.

Internal customers may also be aware of inside information about products or deals that they can use to their advantage. For example, an internal customer may know exactly how much money was used to make a product and could use that information to bargain with the company to secure a more reasonable price for themselves. External customers are more likely to take product prices at face value, as they rely on the information advertised by the company.

Customer service goals

External customers bring in revenue for a company, so customer service is likely to focus on helping them complete purchases. Another goal may be to facilitate a smooth purchasing process for external customers to encourage them to leave positive reviews. Internal customer service goals may focus on creating ideal work conditions or processes to promote job satisfaction and productivity.

Related: A Look into Customer Needs and How To Identify Them

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Frequently asked questions about internal vs. external customers

Here are some common questions to help you further understand internal versus external customers:

Why is it important to care about internal versus external customers?

A common business saying is, "Customers come first," so seeing internal personnel as a different type of customer can improve the respect that large organizations have for the needs of their employees. Departments may also be more likely to assist each other in a timely manner if companies encourage them to see other employees in the same way that they see customers.

It's also important to note that internal customers are likely to function better in their roles within the company if their own needs are being satisfied. Understanding and accommodating for needs, like better communication channels or product support, may help an internal customer proceed with their work in the most efficient manner possible. Accommodating more general needs and wants can result in a better work environment, which may lead to better employee morale, improved productivity and a more successful company in the long term.

What can you do to help accommodate internal customer needs?

To develop a positive internal customer experience (CX) program, it's useful to begin by collecting feedback from current employees about their needs. Companies that show a continued appreciation for feedback may be most successful in opening clear lines of communication. Once you have a better understanding of needs, you can implement changes, like new channels of communication, service standards for internal assistance and celebrations of employee success. Empathetic management, fair pay, a good work-life balance, comfortable working conditions and functional technology are all areas that may offer improvement opportunities for internal customer experience.

Read more: 13 Needs of Employees and How To Meet Them

What can you do to help accommodate external customer needs?

External customers are a central driving force behind profits, so it's in a company's best interest to accommodate their needs to the best of their ability. Kind and helpful customer service representatives, consistent communication and patience with any product-related or technical challenges are all useful ways to accommodate external customer needs. These customers can also leave reviews, which may provide useful insight into potential improvements. If an issue arises for an external customer, some businesses implement a reward package to offset any frustrations they may have encountered.

Related: What Is Customer Satisfaction and Why Is It Important?

How are internal and external customers connected?

Some internal roles are "client-facing," which means that they interact directly with external customers. In these situations, the needs of an internal customer are likely to have a direct impact on the needs of an external customer. In some cases, they may even share the same need. For example, imagine a vet clinic has a broken phone system. This would be an issue for internal customers, like receptionists, and external customers who want to call and schedule an appointment.

There is also a connection between external customers and internal customers, even if there is no direct interaction between them. Satisfied internal customers may help contribute to quicker and more thorough project and product outcomes, which can result in more satisfied external customers. Often, by addressing the needs of one type of customer, the company can also help to ensure that they meet the needs of the other.

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