Probably not customers in the usual sense. This difference may help explain why TQM and other business methodologies have never caught on in academia, but it does not excuse us from a responsibility to develop a corresponding set of methodologies for universities. According to this model, research is not a primary mission of a university. Neither is teaching. Both are done because they help educate the students.
Universities can differentiate themselves in several ways.
Some may choose to specialize in, say, technology, or business, or the performing arts. Some may emphasize undergraduate education, or doctoral education, or some mix. Some may cater to particular student demographics. Educational programs might also be characterized by special features such as industrial experience, accessibility to working engineers, etc. Our students need a good preparation for life, including the ability to communicate in written and oral form, the desire to continue learning throughout life, a respect for other people, an understanding of different styles of knowledge, an appreciation for the diverse cultures on earth, and the personal strength to cope with life's difficulties.