When talking about customers from an organizational point of view we often talk about so-called external customers who bring in the revenue.
However, an organization also consists of so-called internal customers who are crucial for a business to succeed. Both, internal and external customers share similarities and differences between each other.
An internal customer is an employee, a manager or any other internal stakeholder working inside an organization and is serving an external customer, who buys a product or service once or repeatedly, submits complaints, and provides feedback about the buying experience of an organization.
The relationship between an external and an internal customer must consider several factors, understanding the differences, similarities and how to even go about internal customers or external customer metrics are essential in building a successful business.
Differences Between Internal and External Customers
There are a few differences and similarities between an external customer and an internal customer. Let’s start by looking at an external customer since we can relate to this type of customer easily.
Understanding external customers
An external customer is a person who comes to an organization to purchase a service or a physical product. He or she exchanges money which goes into the ledgers of the organization and in return receives something (e.g., a product) of value.
This “normal” customer, is the type which you reach through your marketing channels. Most of the business strategies and campaigns are targeted towards the external customers.
This customer will usually be analysed from a customer journeys point of view, such as how did he or she notice the brand, how did this external customer understand the value proposition of a specific product or service sold by the organization, how is the customer service, and lastly does the customer have a generally enjoyable experience while interacting with the company.
The goal for most companies is to have a lot of these external customer since they are driving the revenue of an organization and are therefore responsible for paying the salary of the employees of an organization.
A simple example of an external customer is yourself when you need a new pair of shoes. You can either go and shop online or you go to a mall close by. While browsing the options you see different shoe brands such as Adidas and you might think that this is a famous brand so let’s have a closer look at the options.
Since it is Adidas, and you’ve heard of the brand, you have a certain set of expectation when interacting with the brand, in this case you expect sports like, hip and of course the signature Adidas stripes somewhere on their shoes.
After browsing a bit, you found a nice pair of shoes which fits you well, so you decide to purchase and exchange your money for a product. This was an example all of us are familiar with and one in which you act as an external customer.
Understanding internal customers
Now on the other side we have the so-called internal customers. Those are people who are working for an organization or do have an interest in the organization’s overall performance.
For example, an employee can be considered an internal customer of an organization but also a manager, the board of directors or the shareholders should be considered internal customers.
Every person who is working with, or for the organization, and is trying to “keep the lights on” can be considered as an internal customer. The reason for this is because all these people are responsible to ensure, in one way or another that the external customers are continuing with their purchases of the service or product.
For example, you’re an employee responsible for selling shoes at a Adidas store. You interact and serve external customers in finding a nice pair of shoes and you try to sell them on other products.
Since you love working for Adidas and wear the brand in your free time you can have an authentic discussion with the external customer about the shoes – which the external customers in many cases value more than the typical sales pitch without any enthusiasm.
That means that your behavior, while serving the external customer, your mood, your overall happiness in working for the organization can have a direct impact on driving sales and revenue to the organization.
A manager on the other hand, who is ensuring that his employees at the shop floor have the training and the tools they need to sell the organizations products to external customers is indirectly responsible for driving sales and revenue.
Internal and external customer example in every organization
One last example which can be found in every organization, is the interaction between employees and the IT department. Think of it, every employee relies on your internal IT help desk department which ensures that the company equipment (e.g., a computer or a phone) is set up properly and works smoothly.
Without the IT department who ensures that the equipment is running properly, the employees could not do their jobs. That means the external customers are not receiving the best possible service, resulting in a reduction of the organizations performance.
Think of an Adidas store in which the cashier systems suddenly stopped working. You can’t really sell anything then, and the external customers are going to be disappointed. The salesperson in that store then becomes the internal customer of the IT department and hopes that they can help fix the issue.
Internal and external customers require different metrics for success
Another difference lays in the metric of how satisfaction, happiness and engagement or broader, how success is measured for either internal customers or external customers.
Looking at the external customer first, organizations are typically trying to provide a unique customer experience and ensure that the customer is satisfied with the purchase.
Which means an organization would look at the overall experience of a customer from first understanding that he or she has a problem, until learning about the product from the organization, over to purchasing the product, until lastly verifying that the external customer is satisfied with the purchased product.
The organization is looking therefore at the customer experience with various datapoints and the final customer satisfaction after the purchase.
Whereas the metric of success of how internal customers are measured relies on the level of engagement or in simpler terms, how connected an employee feels towards an organization. The next paragraphs will go look deeper into this topic because this really deserves to be discussed in a lot more depth.
Now after understanding the difference, you might wonder about the benefit of considering your employees as customers. I mean isn’t it enough that they get paid to do their job?
Well, what if you would ask the same questions as you would when it comes to the experience of external customers with your organization.
For example, how do your employees or your board of directors feel while interacting with the organization, how is their perception of the organization, do your employees like to work there, and how well are they equipped to do their job for example.
Let’s find out.
Internal Customers are Directly Impacting Business Performance
Considering your employees or every stakeholder who is working for and with your organization as an internal customer, to a similar degree and care as you would your external customers, can have a significant impact on the performance of a business.
To be more concrete the idea of considering your employees as customers, in a similar way as you would with external customers is to ensure that they have a satisfying experience, are proud to work for the company and are not slowed down by internal processes for example.
However, the goal of considering your employees as internal customers is to ensure that your internal stakeholders are engaged with your organization.
Studies have shown that organizations with highly engaged employees have 17% higher productivity and 21% higher profitability, meaning they are willing to work harder and stay longer.
State of the American Workplace
Whereas engagement from an employee’s point of view in an organizational context means how strongly the employee feels towards their workplace from a mental and emotional point of view.
The stronger the mental and emotional connection, or for example the level of proudness an employee feels while working with/for an organization, the higher is his or her level of engagement and ultimately their productivity.
How can you achieve this and how does considering your employees as internal customers help organizations?
As soon as organizations understand that employees are people who have specific needs as well, which should be taken into account when deciding on company culture, organizational strategy, internal processes and more.
When organizations consider internal customers in a similar level of care and intensity as they would when looking at how they could improve the interactions with a paying external customer.
Then the organization is on the right track to create an environment, where employees can and will perform more than is required of them. They will even go the extra mile, simply because they feel engaged and valued by the organization.
Another perspective to remember is, that employees also represent the business to an external customer. Which means that if your employees are engaged and satisfied, they are able to project integrity and enthusiasm towards external customers.
And once an external customer sees friendly and engaged staff, then it is more likely that an external customer decided to go with your service or your brand instead of choosing another.
Now you might be wondering how you should approach this when it comes to internal customers. Luckily, we can learn a lot by looking at proven methods and pointers when interacting with our external customers.
Learning from External Customer Satisfaction and Experience
I have mentioned in the beginning that there are differences as to how success can be measured for either external or internal customers. I thought it mandatory to expand on this with a little more depth.
Especially when considering or building a strategy to focus on internal customers, the learnings and the metrics we can see how organizations interact with external customers can provide some valuable pointers for our internal customers.
Organizations already invest heavily in making the customer experience, meaning the entire sales or purchase process, as easy, eventful, and memorable as possible.
An external customer usually bases their experience and their interaction with your brand on factors such as your employees friendliness, the simplicity of purchasing from you, and the feeling of being valued meaning that the organization is somehow recognizing that the external customer has purchased from them.
The external customer experience begins when I for example first visit your website or enter a physical location and continues all the way through the sales process, as well as the actual interaction when using the product, how the customer service experience is for me as a customer and more.
The customer experience only ends if and when I have finally decided to not use your service anymore. Meaning when you’ve lost me as your customer.
On the other hand, customer satisfaction is a metric which applies to customers who have already purchased and used your product or service. Understanding how well you delivered on the customers’ expectations towards a product or service and whether you met their expectations is crucial for successful businesses.
Without this step an organization wouldn’t know if the products or services are being developed into the right direction.
Both metrics are immensely valuable when understanding how external customers feel towards an organization and their respective products or services.
Having the metrics of external customers in mind, in particular their overall experience and their satisfaction level we ‘re able to refactor some of the concepts towards internal customers.
Measuring Internal Customer Engagement Is Crucial
I’ve mentioned before that internal customers, or employees who are engaged can achieve 17% higher productivity and 21% higher profitability. Which is great but does not really help if we don’t understand what is and what isn’t engaging your internal customers.
I have previously authored an article about the most crucial factors to retain your employees besides offering bigger paychecks. This becomes especially crucial when dealing with the millennial and the upcoming gen z generation who value completely different things then the boomer generation.
You can find the article here: Retaining Your Employees.
So, the first step in making your internal customers become more engaged with your organization is to gain insights as to what your internal customers think of your organization. How well it does overall and if there are certain areas which could be improved.
Measuring your internal customers engagement level can benefit you in identifying strengths of your organization as wells as problem areas or even hidden truths.
In addition, asking for feedback as an organization can build trust and gives your employees the feeling that their opinion matters.
The most common way to get feedback is by creating surveys which are sent out to your internal customers.
Of course you could also do other types of feedback capturing methods such as focus groups or individual interviews – but if you want to capture everyone’s perspective in a structure way then a survey is the best option.
As a side note: Keep the number of surveys you sent out as small as possible since employees might get overwhelmed with dozens of surveys and simply won’t answer any of them then.
An idea is to provide some form of incentive to everyone who has taken the time to participate in the survey. Either everyone individual or you could do a lottery with everyone who’s participated in the survey.
When creating engagement surveys, organizations commonly try to gather the internal customers opinions about topics such:
- How well teams’ function/operate
- Trust towards the leadership but also towards coworkers
- Personal Development and career development opportunities (crucial for millennials and the upcoming gen z generation)
- Benefits and pay
- How well the brand is perceived
- Individual recognition
- Confidence for the future
Next to these factors, one of the most crucial point is that organizations need to move towards a culture in which active listening about employees’ concerns, wishes or feelings is a continuous effort.
And in which the continuous support from an organization to overcome concerns or negative feelings becomes an ongoing process.
The mindset shift of considering your employees as your internal customers is certainly a beneficial step towards better internal engagement, and in the long-term higher productivity and higher profitability.
