What is Customer Departmentalization? Definition, and Pros/Cons

What is Departmentalization By Customer?

When the departments are created on the basis of the customer’s nature and customer’s groups that departmentalization method is known as departmentalization by customer or customer compartmentalization.

The customer groups may be on the basis of wholesale buyers, retail buyers, industrial buyers, etc. The main objective of customer departmentalization is to better serve the particular customer group and get maximum profit through high customer satisfaction.

Departmentalization by customer method is applied by those organizations which deal differently with different customers. For these organizations, customers are the key basis for departmentalization.

For example, banking organizations create departments on the basis of customer service like deposits, cash withdrawals, letters of credit, loans, etc. Similarly, a business organization may be divided into customer services like industrial product buyers and consumer product buyers. Again, the customer product buyers may be classified into wholesaler buyers, retailers, and final customers.

Like functional and product departmentalization it is also one of the types of departmentalization. Here, a separate department is created on the basis of customers group, and all organizational functions are brought under the respective department.

A typical example of customer departmentation in a business organization,

In the above picture, consumer product buyers are the focused department, and on the basis of them, the functional departments are created like production, finance, marketing, and personnel.

Advantages of Customer Departmentalization

• Departmentalization by customer method is suitable for those organizations dealing with different customers.
• Customers’ needs and wants can be easily recognized as they are treated separately.
• Good cooperation between customers and organizations can be maintained.
• Management can concentrate on clearly identified and potential customers thus their level of satisfaction will be very high.
• Customers help with the promotion of the products and services because of the high level of satisfaction.
• Special attention can be given to the taste and preferences of customers.
• It is adaptable to environmental change.
• It provides the benefits of specialization.

Disadvantages of Customer Departmentation

• In customer departmentalization, customers’ expectations can be increased because of a close relationship. This creates challenges to satisfy their new needs and expectations.
• If the needs of customers belong to two or more departments at a time, it becomes difficult to serve them.
• There may be difficulty in maintaining coordination.
• There may be an underutilization of facilities, especially during a period of low demand.
• There is a chance of duplication of activities.
• Possibility of conflict between departments due to overemphasis on own department by departmental managers.
• Overemphasis on customers may lead to a waste of time and resources.