The term ‘customer’, refers to a party that receives a product or service. As a small business, you’ll likely come into contact with both internal and external customers. Since the two categories require different approaches, it’s important to know how each one operates and what they respond to.  

This article will explain the difference between internal and external customers, allowing you to acknowledge the role both may play in your venture. We’ll answer the following questions:

  • What is an internal customer?
  • What is an external customer?
  • How do I keep internal customers happy?
  • How to attract and keep external customers?

What is an internal customer?

Internal customers are people who have a direct relationship with a business. In other words, an internal customer is anyone who works within the company or stakeholders that interact with people inside the business as part of their job or responsibility. Examples may include business owners, employees, subcontractors, and in some cases, suppliers. 

What is an external customer?

To be regarded as an external customer, people must pay for the product or service your business provides. As a small business, external customers are likely the ones you’ll deal with most often.

In contrast to internal customers, external customers don’t provide a service back to the business in exchange for your solution. These customers make straightforward transactions. Due to this, businesses rely on appealing to these customers for making sales. 

For example, someone who walks into your store and purchases an item would be considered an external customer. They are making a business transaction, receiving something in exchange for payment. 

How do I keep internal customers happy?

In order to keep your internal customers happy there are a few things that you could do.


When it comes to internal customers, a lot of the time they will want to be able to communicate their opinions. To keep them happy, it is essential to keep an open channel so they can raise any concerns they have immediately. Transparency is also crucial when communicating with internal customers. It’s important to always share important information to maintain trust.

Learn more about how to improve communication with customers in business.

Expectation management

When dealing with internal customers, it is also crucial to manage expectations. Avoid overpromising and have a plan in mind for the worst-case scenario in every situation. By offering realistic goals and sticking to them, you will gain the confidence of your internal customers. This is crucial for you to maintain a healthy business.

How do I attract external customers?

There are a few ways to attract external customers. The simplest way to explain is using the four P’s:

  • Price — you must give your product or service a price in which your audience is going to deem fair. You can use different pricing strategies depending on the market you are selling to. For example, a new product could use penetration pricing (lower than competitors) to attract external customers.
  • Product — you must produce a product or service which the audience is going to deem of value. The level of quality that you provide must be reflective of the cost that you have chosen and it must fulfil a need that the external customers have. See more on product development.
  • Place — you must sell your product or service somewhere which is accessible to your external audience to attract them. They need to be able to purchase what you are providing easily, in order for them to decide to do so.
  • Promotion — you must communicate to your external customers in a relevant way. They have to understand what you are selling and why they need it. This is a very crucial part of attracting new external customers.

How to keep external customers happy

Your customer service plays a key role in retaining the customers you have attracted. Similar to the internal customers, external customers need to feel as though their thoughts matter to you. Listen to the external customers and keep them involved throughout your business practice. This will ensure that you always adapt what you offer to keep them interested.

An excellent way to think about your customer service interactions is if your brand is a person. So plan and organise your external customer communication as if you were responding to a friend. Make sure you adopt a friendly and personal tone of voice and use it  to maintain contact with the customers. Use your social media channels to spark conversations. You can also use email newsletters to update your external customers on what you are doing routinely. 

By ensuring that your external customers form a lasting relationship with your brand, you can benefit from their business for longer. Of course, it does take some effort to maintain this communication, but it is easier to encourage existing customers to return than bring in new ones. In addition, they are already familiar with the business and the offering, so just providing them with engaging interactions should keep them.

For more ways to treat customers, here is a guide that lists nine ways to surprise and delight customers.

Free up time to focus on your customers by using Countingup

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