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Journal of Marketing Practice: Applied Marketing Science Customer satisfaction and the internal market: Marketing our customers to our employees Nigel F. Piercy

Article information: To cite this document: Nigel F. Piercy, (1995),"Customer satisfaction and the internal market", Journal of Marketing Practice: Applied Marketing Science, Vol. 1 Iss 1 pp. 22 - 44 Permanent link to this document: http://dx.doi.org/10.1108/EUM0000000003878

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Customer satisfaction and the internal market

Marketing our customers to our employees Nigel F. Piercy

Introduction The purpose of this article is to re-examine one of the most central foundations of modern marketing management: the belief that customer satisfaction lies at the heart of all the endeavours of all organizations (and that if it does not, then it should). We will see that this fundamental principle is shared by many approaches to management, but that most theories ignore a very simple truth: that it takes more than advocacy by management writers or coercion by management to put customer satisfaction issues genuinely at the top of people’s real working agendas.

The specific objectives of this article are to:

● show how the issue of customer satisfaction has become central to many and varied approaches to management and strategy over the last several decades;

● examine the available literature concerned with measuring and using customer satisfaction to manage a business, showing it to be concerned mainly with analytical techniques, and to almost totally neglect the practical organizational realities of the implementation of a customer satisfaction strategy;

● address those practical realities by analysing the organization as an internal marketplace, where the satisfaction of the external customer depends in part on the satisfaction of the internal customer, suggesting some of the real barriers and risks we face in driving customer satisfaction issues through the organization;

● demonstrate that the practical realities of using customer satisfaction measurement as a management tool are complex and largely ignored;

● look at the implementation problem as an inter nal marketing issue, where a customer satisfaction strategy needs to be positioned and marketed in a positive way, if we are serious about the implementation of customer satisfaction management – this brings together the customer satisfaction issue, barriers in the internal market, and strategy in the external market, as a framework for management action.

Journal of Marketing Practice: Applied Marketing Science, Vol. 1 No. 1, 1995, pp. 22-44. © MCB University Press, 1355-2538

Received April 1994 Revised November 1994

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The focus of management on customer satisfaction It is striking that one of the few things that links many of the otherwise disparate recommendations made to managers over the past several decades has been the need to focus on customer satisfaction, as a route to sustained high performance. Consider the following examples:

● General management gurus – One of the earliest of the moder n management gurus was, and is, Peter Drucker, who was writing nearly 40 years ago about the central purpose of the business being to “create a customer” (Drucker, 1958). His example has been followed by many management writers since then (e.g. Johnson and Scholes, 1992).

● The marketing concept – Similarly, for more than 30 years, the advocacy of the marketing concept to focus all corporate efforts on customer satisfaction has been to the fore in the marketing management literature (e.g. Kotler, 1968; Levitt, 1960), and as a result has become central to management development and qualification programmes and courses in marketing management.

● The pursuit of excellence – Perhaps the most widely-read management books of all time were In Search of Excellence (Peters and Waterman, 1982) and Passion for Excellence (Peters and Austin, 1985), where lessons from what were believed to be the most “excellent” and “successful” companies in the world were associated with principles such as “getting close to the customer”, and using measured customer satisfaction as a management tool.

● Market-orientation – The 1990s have seen renewed attention, largely sponsored by the Marketing Science Institute in the USA, to identifying the characteristics of market orientation and the links with commercial success (Kohli and Jaworski, 1990; Narver and Slater, 1991). In these studies the identification of customer satisfaction levels and the dissemination of this information throughout the company, as a basis for action, is shown to be critical to achieving market orientation.

● Quality and service – In much the same time period, vast amounts have been written about the Total Quality Management model of management (e.g. Crosby, 1979; Garvin, 1988; Oakland, 1979), as well as the need to measure and manage service quality levels (e.g. Berry and Parasuraman, 1991; Parasuraman, et al., 1988). In both cases customer satisfaction is the stated central purpose of quality and service strategies.

● Market-driven processes – Other strategic management approaches have examined “market-driven strategy” (Day, 1990) and “market-led strategic change” (Piercy, 1992), as ways of allowing customer issues to be reflected in the internal management structures and processes of organizations, and as a route to putting customer satisfaction at the top of the agenda for all members of the organization.

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● Relationship marketing – Most recently much attention has been focused on making relationships and partnerships the dominant model of how we manage the interface between an organization and the outside world of the marketplace (e.g. Christopher et al., 1992; McKenna, 1991), where the most important relationship is with the customer, and the goal is a satisfied customer and a productive, enduring relationship (e.g. Gummesson, 1994).

● Marketing control – One conclusion which has been drawn from such developments has be en that measuring and monitoring customer satisfaction is central to marketing control (e.g. Band, 1988; Bearden and Teal, 1983), and this control mechanism has been strongly recommended to management (e.g. Lele and Sheth, 1988).

It can be seen that in all these approaches, one enduring and shared factor is the focus on customer satisfaction, as the most important route to high and sustained marketing performance.

However, this conclusion raises a number of critical questions. If it is apparently obvious that customer satisfaction is central, then why do observations, now confirmed by our workshop and survey findings, suggest that relatively few organizations routinely measure customer satisfaction, and even fewer companies use those measurements in planning, evaluation and control in marketing (Piercy and Morgan, 1995). The paradox is that the widespread agreement about the attractions of the benefits promised by the management experts above, does not appear to have led to serious attention to the one thing they all agree about.

Perhaps the answer is that the practical problems of implementing this customer satisfaction strategy, and of using customer satisfaction measurement in a practical setting, have been almost totally ignored. What follows is an attempt to get to grips with the real problems of implementing a customer satisfaction focus in an organization, specifically through the mechanism of measured customer satisfaction, and the use of that measurement to run the business.

Measuring, evaluating and managing customer satisfaction The measurement of customer satisfaction has certainly proved one of the most resilient products for market research agencies during the recession (Coleman, 1992). Indeed, scanning the market research industry shows it to be replete with those who will sell us customer satisfaction surveys, focus groups to evaluate customer satisfaction, standardiz ed p ackages for monitoring customer satisfaction, the computer software to analyse customer satisfaction data, and so on.

Indeed, if we examine the technical literature provided to support customer satisfaction philosophy, it is dominated by the techniques and systems for

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customer satisfaction measurement and reporting. It has been primarily concerned with issues like the following:

● the theoretical problems of defining different types of customer satisfaction, and then developing suitable customer satisfaction constructs which can be validly and reliably measured, although this is far from resolved as yet (e.g. Griffen and Hauser, 1992);

● the design of customer satisfaction data collection and reporting systems (e.g. McQuance and McIntyre, 1992);

● the institutionalizing of customer satisfaction measurement into organizational control systems (e.g. Lele and Sheth, 1988);

● developing ways of analysing and responding effectively to customer dissatisfaction and customer complaints (e.g. Richins, 1987).

However, virtually no serious attention has been given to the underlying process of customer satisfaction measurement or, more importantly, the use of such information by management to improve marketing performance. There has been little or no effective consideration of the possible impact that customer satisfaction measurement and management action may have on the organization itself. One exception is the untested assertion that the “happy employe e” leads to the “happy customer” (Berry, 1991; Gale, 1992) – an assumption we will be challenging shortly.

In short, while there has been a lot of development work undertaken in the area of customer satisfaction measurement techniques and systems, no real attention has been given to implementation, or the possible effects on the “internal market” represented by the company itself, and hence the impact on marketing performance.

The following sections will discuss the possible damage that can be done by poor implementation of customer satisfaction measurement systems and management use of those systems, and will examine evidence about the real implementation barriers that marketing and general management should consider in approaching this issue, before proposing an internal marketing approach that can be used in managing this process.

Analysing the internal market Increasingly, it has been recognized that companies face two kinds of markets and customers: internal and external (e.g. Piercy, 1992). This view, which has be en successfully adopted by many organizations to manage the implementation of their strategies (Thomson, 1991), has important implications for the customer satisfaction issue both in analysing the barriers we may face, and in designing effective implementation strategies.

The attraction of the internal marketing framework for studying problems of implementation and change is that we can use exactly the same models and methods inside the organization as we do in the external marketplace.

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Internal and external customer satisfaction Figure 1 takes the dimensions of customer satisfaction as they have been identified by Berry and Parasuraman (1991). These dimensions suggest that if we are to understand customer satisfaction, then first we should consider our customers’ expectations, how they perceive the delivery of the product or service relative to these expectations, and whether this confirms their expectations or not. These factors will lead to satisfaction, or dissatisfaction and either complaint (to us or others) or to word-of-mouth recommendations. In the familiar setting of the external marketplace, we are generally comfortable with these ideas – as suggested in the left-hand side of Figure 1.

However, the real point of this is that there is a direct mirror-image of these same dimensions in the internal marketplace of the company itself (the right- hand side of Figure 1). Here expectations are to do with anticipations by people inside the company of external customer preferences and behaviour, rather than the external customer’s view of product/service characteristics. In the internal market, perceived delivery is about differences between internal and external criteria of what matters – priorities in the “back-office” or the factory compared to those in the exter nal customer marketplace. In the inter nal market the confirmation/disconfirmation issue is now not about the consumption of the

Figure 1. Customer satisfaction dimensions in internal and external markets

Anticipated product/service characteristics

Expectations Anticipated/ stereotyped customer preferences and priorities

Product/service capabilities at point-of-sale and in use

Perceived delivery of product/service

Internal priorities and criteria compared with external

Disappointed/ disillusionment versus positive outcome with the product/service

Confirmation/ disconfirmation

Judgements about customers and attitudes affecting future behaviour, role stress and ambiguity

Capacity to cope with and turn around negative feedback

Complaining behaviour

Hostility towards complaining customers and rejection leading to antagonism, self- protection and conflict

External market issues

Dimensions of customer satisfactiona

Internal market issues

a Adapted from Berry and Parasuraman, 1991

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product, but rather the judgements that people inside the company make about the external customer, and whether these expectations are met or not. When customers “disappoint” employe es by their adverse reactions or even complaints, this is likely to affect their future behaviour and their “comfort factors” inside the company.

For example, consider the purchase of computing equipment. Many industry commentators suggest that exter nal customers are frequently highly dissatisfied with the products and services they receive in this complex high- technology market: products do not carry out the promised functions, they are difficult to use, customer service is hard to come by, and harder to understand, and the observable result is often that the products do not deliver to their full potential and customers are unhappy. However, it is also observable that this situation does not seem unduly worrying to many computer company personnel. Too often company personnel seem to cling to stereotypes of what the rational customer would (or should) want, which fly in the face of what the real human customers actually se em to ne ed. Inter nal criteria of high technology, and ever-increasing sophistication and computing power, dominate over customer ne eds for basic assistance in solving problems, and comprehensible product support in manuals and advice. Far from guilt over their inadequacies as service suppliers, we see computer companies sneering at the stupidity and lack of sophistication of their customers – almost as though they think that customers are not good enough to own the great products!

If this seems far-fetched, consider a recent article in the business press, where computer company personnel recounted stories of their most stupid customers: the purchasers of personal computers attempting to use the computer ‘mouse’ as a foot-pedal to tur n the computer on; users who respond to the screen message “press any key” by phoning the company to complain that their keyboards are faulty because they have no button marked “any”; customers who roll floppy disks through the typewriter to type on the label; and people who cannot locate the computer power switch in spite of the “extensive” documentation and manuals provided with computers. (Carlton, 1994).

These anecdotes are extremely amusing to the computer-literate reader, at least until we do a second-take and then recoil in horror from the spectacle of major companies adopting such a supercilious and objectionable attitude to their paying customers rather than hanging their heads in shame at their own shortcomings as service suppliers.

However, the main point of this is actually not the well-known inadequacies of computer suppliers in supporting their products – it is the divergence of customer satisfaction issues in the inter nal and exter nal markets which illustrates a massive implementation problem.

Often this divergence comes down to very simple but very important differences in perceptions. In the CIGNA health insurance group the company had for many years prided itself on its speed in paying-out on claims, and saw this as a major competitive strength. Only when the marketing department introduced customer visits to the company did the technical insurance

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specialists find that corporate customers placed very little value on speedy pay- outs – what was causing them much aggravation, however, was the number of paperwork errors and extra work caused by the quest for speed!

Internal and external quality and service Indeed, we can take the same “mirror-image” argument further. In Figure 2 we have listed the factors that are believed to create the perception that external customers have of the quality of the service they receive. These factors are reliability (or dependability of the product/service); tangibility of the service; responsiveness of the supplier in handling customer feedback; assurance about the product or service; and empathy with the supplier. The manifestation of these issues in the external marketplace is familiar, as shown in Figure 2. But exactly the same framework can be applied to the mirror image: the internal market.

The issue may now be how management evaluates and responds to external customer satisfaction results. The questions suggested are: whether customer satisfaction measurements are believed to be fair to employees (reliability);

Figure 2. Customer satisfaction and quality/service perceptions in internal and external markets

Physical aspects of the product or service

Tangibility Does customer satisfaction measurement produce actionable outcomes or rumour/innuendo?

Product/ service dependability

Reliability Do customer satisfaction measurements fairly reflect what we do?

Supplier speed and efficiency in dealing with customer feedback

Assurance Do we trust customer satisfaction measurement and how it is used by management?

Caring aspects of suppliers

Empathy Is customer satisfaction measurement about diagnosis and support or management control?

External market issues

Quality/ service perceptionsa

Internal market issues

a Adapted from Berry and Parasuraman, 1991

Trust and confidence in product/service

Responsiveness Does management listen to and respond positively to our explanations

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whether measurement systems produce actionable conclusions, or just rumour and innuendo about who is doing well and who is not (tangibility); whether management listens to, and deals with, the reasons for customer feedback (responsiveness); whether people trust management’s integrity in this matter (assurance); and, whether customer satisfaction measurements are used positively or coercively (empathy).

For example, in discussions with managers and employees about customer satisfaction measurement and how these measurements are used in companies, such problems as these have been commonly described:

● measurement systems which are little more than customer popularity polls for the members of the salesforce, where “popularity” is rewarded and “unpopularity” is not;

● measurement approaches which are wholly negative and encourage customer complaint and criticism, but do not capture positive feedback or praise for what is good;

● reporting systems where hard data are seen only by senior management, and only “conclusions” are communicated to employees – often in a negative and critical way;

● the blind use of results by management to attempt to coerce employees to change their behaviour in ways apparently desired by customers (or at least by that sample of customers who have complained most recently and most vociferously).

The relationship between internal and external markets The customer satisfaction result is likely to be along the lines suggested in Figure 3. Here we see customer satisfaction/dissatisfaction in the external market in the familiar way. This involves external customer judgements about their experiences with the product/service, leading to positive or negative outcomes. However, the logic again is that there is a mirror-image in the internal market, but here we are concerned with employee and management judgements about the customer and the company, and this too can have positive or negative outcomes.

The underlying point of Figures 1-3, is that throughout the analysis it is clear that external market issues and internal market issues mirror one another, and are directly connected. In short, our external customer satisfaction is both dependent on, and a contributor to, our internal customer satisfaction. But this is a complex relationship.

For example, one way of looking at this is shown in Figure 4. This suggests that where we see high satisfaction with both internal and external customers, then the quality of the relationship will lead to synergy, while low satisfaction both inter nally and exter nally will have the opposite effect – alienation. However, what of the situation where high internal satisfaction is associated with low external satisfaction – internal euphoria? This describes situations

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where perhaps employees are so socialized, teams are so cohesive, motivation is so high, that people are having too good a time to bother with the paying external customer – employees are ‘happy’, but not focussed on the customer! And what of the situation where low internal satisfaction is nevertheless for the time being associated with high exter nal satisfaction – coercion? The relationship between satisfaction levels in the two types of market which we have to confront – internal and external – is potentially highly productive in building high quality customer relationships, but there are substantial risks as well.

This argument has two significant implications to be pursued here. First, since the issue has been almost totally ignored to date, we need to investigate further the internal market aspects of the customer satisfaction issue. Second,

Figure 3. Customer satisfaction outcomes in internal and external markets

Customer satisfaction/ dissatisfaction

External market issues

Customer satisfaction outcomea

Internal market issues

a Adapted from Berry and Parasuraman, 1991

Customer judgements about product/service experience leading to future priorities or negative outcomes: loyalty and word-of-mouth recommendation versus non-loyalty, complaint and negative word-of-mouth

Employee and management judgements of the customer and the company, leading to their future behaviour with customers and performance in implementing market strategy

Figure 4. Internal and external customer satisfaction

Synergy Internal euphoria

Coercion Alienation

High Low

High

Low

Internal customer satisfaction

External customer satisfaction

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we ne ed to examine how to use an inter nal marketing approach as an operational approach to handle the implementation issues implicit in the customer satisfaction issue.

The practical realities of the internal market This section reviews some practical evidence gathered from management development workshops and a recent company survey, to substantiate the suggestions made above.

What managers say about customer satisfaction One source of insight into this question is discussions with executives held at workshops and similar venues over the past several years. This is far from being scientific research of the conventional type, but it is certainly a good way of starting to get to grips with some of the practical realities of the internal market, as discussed in the last section.

What was discussed with executives from a wide range of organizations was the reasons why they did or did not measure customer satisfaction in their businesses, and if they did, how well it worked. The themes from those discussions are as follows:

● Companies which do not measure customer satisfaction. Many executives’ comments related to the practical problems of customer identification and how to define customer satisfaction so it can be measured. Others showed a lack of conviction that it would add anything to the company’s understanding of the customer, and that it would itself stimulate customer complaints where there were none before. Others saw measuring customer satisfaction as simply “not how we run things in this company”. Others argued that the only real measure of customer satisfaction was sales.

● Companies which trivialize customer satisfaction. In companies where customer satisfaction was measured as a management tool, many executives described this as merely a superficial or tactical issue, significant only at the customer service level for “massaging” customers and dealing with their complaints. Customer satisfaction policies were seen as lip-service and no more than that. For instance, in one company the monthly executive control report consisted of three elements: sales, profit, and customer satisfaction levels, analysed in detail by area, product group, and so on. The management control unit reports that every month there is much heated dispute, argument, conflict, and generally a huge political bun fight, among senior executives regarding the sales and profit figures. But no senior executive has ever been known to dispute the customer satisfaction figures – they simply do not matter to anyone important in the company. Inevitably, this is the example followed elsewhere in the business.

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● Interdepartmental power struggles. Others saw the measurement of customer satisfaction as a weapon used in power struggles between functional departments, in attempts to “prove” to management the inadequacies of other departments – often part of the marketing/ production conflict. Indeed, in one high-technology company visited, when the marketing department implemented a system of customer satisfaction measurement by questionnaires, the technical departments used this as an excuse to withdraw their technical personnel from customer visiting programmes on the grounds that marketing now “owned” the customer “problem”. It remains to be seen how customers will feel about the substitution of satisfaction questionnaires for visits from technical advisers.

● The politics of customer satisfaction. Still others described the games that people play to beat the system, and to avoid being blamed for customer complaints – this involves behaviour not anticipated by management and unlikely to be supportive of market strategies: sales staff conceding high discounts to win “brownie points” with customers; special promotional deals and free products given by product managers to keep major customers “quiet”; maintenance and service resources allocated, not on the basis of ne ed, but according to the customer’s likelihood of complaining; even high grades being awarded by college teachers and trainers to get high scores in student/trainee evaluation questionnaires, and so on.

● A management weapon. Others saw customer satisfaction measurement and evaluation as a wholly negative and somewhat cr ude control mechanism, with coercive overtones, used by management to “police” lower levels of the organization.

● Poor diffusion. Some executives described situations of internal discord, where perceptions of customer satisfaction evaluation, and its goals, vary radically between different parts of the organization. For example, in discussions with one company top managers discussed their crucial “customer mission”, but the salesforce just saw yet another management control device, and the distributors had no idea what all the fuss was about (so in some cases filled in the customer satisfaction questionnaires themselves to save “bothering” the customers)!

It is not possible on the basis of such qualitative data to say how representative such themes are of the status of the customer satisfaction issue in British industry. However, these themes do appear familiar to many managers with whom they have be en discussed, and they do provide a basis for a more systematic analysis of the internal market for customer satisfaction. These insights were recently used to undertake a survey of customer satisfaction management processes in British companies, with the results described below.

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A survey of customer satisfaction management The full technical details of the survey are available on request from the author. In short the study involved a postal survey of a sample of 300 large and medium-sized British manufacturing companies, completed in 1992. The discussion below is based on the 200 companies in this sample that did have customer satisfaction strategies, and did measure customer satisfaction.

Figure 5 summarizes the most important relationships found in the survey. In overview, this shows that in a number of key areas management in these companies attempts to use customer satisfaction data to gain the implementation of the key components of market strategies. However, standing betwe en the use of customer satisfaction data and market strategy implementation are a number of significant internal barriers which need to be recognized and confronted.

The factors uncovered in the survey (using questions generated from the workshops, company visits, and the discussions with managers described above) were as follows:

Managerial uses of customer satisfaction measurements – there were four factors here: quality/operations management (this links variables describing the use of customer satisfaction data used to monitor quality, develop quality strategy, guide R&D, and manage production and quality control); staff pay and promotion (this is customer satisfaction information used to reward and promote operational and management staff); staff training and evaluation (are customer satisfaction data used in decisions on training and evaluation of operational and management staff); and, strategic management control (describing the use of customer satisfaction evaluation to develop company- wide strategy, to control the whole business, and to manage customer service and marketing programmes).

Market strategy components – there were also four factors here: service and quality (involving goals of achieving the highest perceived quality in the market, providing excellent customer service, and achieving high buyer loyalty); competitive differentiation (linking together issues of managing distribution networks, building brand image and differentiation by design and technical specifications); high profit/volume (involving goals of sales growth, higher market share and improved profitability); and, low price/cost (focus on strategic imperatives of being price competitive and minimizing marketing costs).

As expected, we found significant and positive relationships particularly between emphasis on the market strategy components of service and quality, competitive differentiation and high profit/volume, and the use of customer satisfaction information in quality/operations management and in strategic management control.

However, there were also strong and negative relationships between the existence of the internal barriers, described in Figure 5, and the managerial use of customer satisfaction for these strategic purposes. It is the structure of these

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inter nal barriers which is largely ignored when we approach the implementation of customer satisfaction and strategies of market focus.

Internal barriers – these were issues generated from the executive interviews and the literature of strategy implementation, and produced the following factors in the survey.

The internal politics, market simplification and customer fear factor grouped a number of issues together. First, there was a group of variables describing various dimensions of internal politics: perceptions that customer satisfaction

Figure 5. Barriers to the use of customer satisfaction measurement and management

Internal politics market

simplification and customer

fear

Corporate culture

Market complacency

Resources/ capability

Logistics

Cost barriers

Perceived market drivers

Credibility

Quality/ operations management

●

Staff pay and promotions

●

Staff training and evaluation

●

Strategic management control

●

➞

Service and quality

●

Competitive differentiation

●

High profit/ volume

●

Low price/ cost

●

➞

Managerial uses of customer satisfaction measurements

Components of market strategy

Internal barriers

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data generate internal conflict and political squabbles, provide a “hostage to fortune”, mean increased management control, get into areas of customer complaint that are politically sensitive, undermine management, and encourage people to cheat the system. Second, there were variables describing people’s simplified assumptions about the market, which render measuring customer satisfaction pointless: word-of-mouth recommendation is believed to be unimportant, customer loyalty is thought to be non-existent, repeat sales are thought not to matter, the company is believed not to be a service and quality player, the company is thought unable to change what it does, and people do not believe in customer satisfaction. Third, related to this, is a set of variables describing fear of the customer and the customer’s reaction to customer satisfaction measurement: customers will think something is wrong if asked about their satisfaction, asking will itself reduce satisfaction, it will raise unrealistic expectations and invite unwelcome complaints which will be badly received by people in the company.

The second internal barrier factor was corporate culture. This links together such items as a lack of management support for customer satisfaction measurement, a perception that customer satisfaction measurement is not appropriate to this company or market, results are likely to be ignored, there is no customer service policy, there is a low priority for customer satisfaction in this company.

The third internal barrier factor was market complacency. This links a belief that the company already knows what matters in the market and what customers think, and that what really matters is having the best product, rather than inviting unwarranted criticism from customers.

The fourth internal barrier was resources/capability. This linked together the requirements in customer satisfaction measurement for technical expertise, systems, people and time. The fifth factor, logistics, is concerned with the problems of identifying the customer, and the role of distributors. The sixth factor is cost barriers, linking the finance and expense implications of customer satisfaction measurement.

The seventh factor is perceived market drivers, linking beliefs that the company’s market is driven only by technical specifications and price, and the final factor, credibility, is concerned with whether or not people really believe in the results of customer satisfaction measurement.

This is a lengthy and complex factor structure. It includes both “hard” factors of capabilities and resources for measuring customer satisfaction and using the results, but more significantly it includes more covert factors describing the internal politics and cultural beliefs of the company as they relate to the customer. This provides a very different basis for confronting the customer satisfaction issue in companies – but one that is grounded in the reality experienced by our executives rather than the idealized pages of the management textbook.

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It is in confronting our analysis of the internal market and the practical organizational realities faced in implementing a customer satisfaction strategy, that we can apply the tools of internal marketing.

Internal marketing of customer satisfaction This section follows on from the identification of the problems faced in customer satisfaction measurement and management, and attempts two things:

(1) to identify the problem as the process of implementation and to isolate the different dimensions of the process to which we need to pay attention;

(2) to look at internal marketing as a practical operational framework for managing implementation processes in all their dimensions; and, to relate internal marketing to the analysis of the internal market and the identification of internal barriers in the earlier sections.

The process of implementation and change We saw earlier that most attention to the customer satisfaction issue and its measurement is concerned with analytical techniques and formal systems. However, if we turn attention to process issues, then we focus not just on what we do, but how we do it, and the real effects we create throughout the organization. In examining marketing budgeting, marketing planning and marketing control in other projects, we have found it useful to adopt a process model of the type shown in Figure 6. This multidimensional model was developed in earlier studies of marketing budgeting process (Piercy, 1987) and

Figure 6. A multidimensional model of process

Behavioural dimension ●

●

●

Attitudes Perceptions Motivation

Process

Analytical dimension ●

●

●

Techniques Procedures Systems

Organizational dimension ●

●

●

Structure Information Culture

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more recently in studies of marketing planning process (Piercy, 1992; Piercy and Morgan, 1994).

This model suggests that if we look at any process in an organization, we should recognize: its analytical dimension – operational issues of techniques and systems; its behavioural dimension – the feelings, perceptions, attitudes and motivations of the people concerned with the operation and effect of the process; and its organizational dimension – the context of corporate culture, str ucture, infor mation, and the like. We have found that it is success in managing these dimensions consistently with one another that makes the process effective or ineffective.

This model can be applied to the process of customer satisfaction measurement and management, to make sense of the internal barriers we have identified and to plan ways of coping with those barriers.

Internal marketing Alongside the dimensions of process, let us consider the nature of internal marketing. This phrase has been used in a variety of meanings in recent years, but here we are concerned with using marketing analysis and techniques aimed at the internal market of the company itself to make the changes necessary for our external strategy to be effective (Piercy, 1992). Figure 7 illustrates this relationship.

Figure 7. Internal marketing

External marketing programme

●

●

●

●

Product

Price

Communications

Distribution

Key segments in the external market

Internal marketing programme

●

●

●

●

Product

Price

Communications

Distribution

Key segments in the internal market

Market strategy

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Our market strategies lead to a marketing programme of the conventional type aimed at our key target segments in the external market. However, alongside this we need to consider the internal marketing programme. This is aimed at the critical people and groups inside the company, without whose support, the co-operation and involvement the exter nal marketing programme will be ineffective. Here the “product” is the strategy and all that it involves, the “price” is what we are asking people to give up for our strategy to work, the “communications” are the channels of information and persuasion we can use, and the “distribution” is about how we can influence and manage the changes needed.

An internal marketing strategy for customer satisfaction Table I brings together the various strands of the problems as we have identified them so far: the different dimensions of the process, the internal market barriers, the internal marketing strategy and programme needed to attack these barriers.

At the analytical/operational level of the process the major issue is the measurement of customer satisfaction, and the barriers are resources, access, costs, and the like. The internal marketing approach involves the normal planning and presentation of the issue, and its negotiation through the normal organizational hurdles.

This may sound straightforward but there is plenty of scope here for poor implementation causing negative results. In one major phar maceutical company, discussions were held with sales and service personnel and production departments shortly after the launch of a customer satisfaction surveying system by the marketing department. These areas of the company displayed some unawareness, but at the same time much hostility, challenge, and aggressive criticism of the customer satisfaction measurement system. It turned out that at no stage had anyone bothered to inform people what was happening and how the system would affect them, let alone consult them and involve them in making the system effective.

However, at the behavioural level of the process the issues become even more covert and require a different implementation approach. At this level the barriers to our customer satisfaction strategy are about people’s beliefs about the market and the critical issues for customers, their fear of customer reactions and lack of belief in customer satisfaction. In these terms, the internal market product is the change of employee attitudes towards, and perceptions of, the external customer, and the price is the individual’s cost of learning the adjustment. With such goals, communications are more likely to involve education and training, customer visits, customer-based incentives and information dissemination, than formal presentation of plans. The distribution channels are training events, as well as control and evaluation systems, and the like.

For example, at the Palo Alto Research Centre of the Xerox Corporation some 20 per cent of people’s time in this 300-person R&D unit is spent in receiving customers and listening to their presentations and interacting with them, so as

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to understand their needs better, problems, priorities and plans for the future. This is the Xerox investment in a lear ning organization, where technical managers focus on customers not technologies (Graham 1994).

At the organizational level of the process, the internal barriers are internal political struggles, corporate culture in terms of values and norms, and market complacency. At this level the internal market product is the change of shared values and perceptions in the company as these affect the external customer. The “price” is corporate disruption and the costs of change. Communications become about participation of key players in planning, developing new patterns of “ownership” of the customer and the customer’s problems, leadership by senior management example and, at the extreme, possibly the direct involvement of external customers in the internal decision-making processes of the organization. Distribution channels are about teams and team-building, meetings and workshops focused on the customer, developing socialization with customers, maybe restr ucturing the company around the customer marketplace, and the development of networks and partnerships outside the company to gain greater responsiveness to the customer.

For example, consider the experiences of CIGNA Insurance Inc., a major US health insurance group (Miller, 1994). This company faced the problem of downsizing, and simultaneously changing the focus of employe es and managers from technical insurance issues to customer issues, in response to a change of strategic focus from selling health insurance to employers to selling to employe es. The company’s marketing director designed a four-stage approach to getting technical insurance specialists to recognize customers:

(1) Who are the customers? This question is a real problem in an intermediary-dominated industry, but managers were asked to work in groups to answer the question for their parts of the business.

(2) What do they think? Managers and employees discussed and reported what they thought mattered to customers. This was contrasted to the results of customer focus groups, and the substantial differences were fed back to managers in the business units.

(3) Confronting the fear, anger and denial. There is the uncomfortable stage of recognizing that many traditional skills are no longer needed to solve customer problems, and adjusting to that perception and the need to acquire new skills.

(4) Use customers as advisers. Key customers visit the company for three- day working sessions to comment on the agenda for the business in- depth, and to reinforce the customer view of internal structures and processes.

This programme of customer-led change at CIGNA is still in process, but fundamental changes are being implemented in how people in the business deal with customers and work for their satisfaction.

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Inde ed, companies like General Electric, Marriott, DEC, Ford Motor Company, and others have for some time operated systems in which customers play a role in internal decision making on recruitment, selection, training needs, evaluation, and the like, thus using the human resource system as the internal channel of distribution for customer focus and commitment.

In fact, there are two attractions in the internal marketing approach. First, and most obvious, it helps us to develop a programme of action to implement the strategies that matter to our organizations. Second, and possibly just as important, it will give us a view of the real hidden costs of implementation – this may be enough in some instances to change our minds about the attractiveness of the strategy in question for this company at this time.

The schema in Table I is illustrative only. However, it does suggest that if we are serious about customer satisfaction as our strategic focus, to start with we need to measure it – but we need to do far more as well. As we uncover the internal barriers we have to confront at different levels, then we move on from advocacy, negotiation and coercion to implement customer satisfaction measurement systems. We become far more involved in education, in changing internal processes, in participation, in leadership by example, in removing the organizational boundaries that stand between us and our customers.

These are the fundamental issues we have to confront. They are infinitely more difficult than just sending out customer satisfaction questionnaires. However, they are unavoidable and intractable. The challenge to managers is to evaluate the internal barriers to customer satisfaction management in their own organizations, to develop implementation and internal marketing strategies around those barriers, and only then to attempt to measure customer satisfaction and to use it in strategic marketing decision making.

Conclusions and recommendations We started with the observation that one of the things shared by most management theories and prescriptions over recent years has be en the advocacy and insistence on achieving a focus on customer satisfaction in companies. This is shared by writers about the marketing concept, market orientation, market-led change, total quality management, service quality, relationship marketing, and so on. However, what is missing from these various management prescriptions is any serious analysis of the problems of implementing a customer satisfaction focus in market strategy.

W hat we are offered instead is a multitude of me asurement tools and techniques for evaluating customer satisfaction and reporting achievements as a control mechanism. There has been virtually no attention to the practical realities of using such approaches in real organizations to implement a customer satisfaction strategy.

A start can be made on recognizing at least some of these organizational realities by analysing the internal market (the company itself), and comparing the views of the internal customer (employees and managers) with those of the external customer. This involves looking at issues of customer satisfaction,

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service, and quality through the eyes of the internal customer as well as the external customer. This is a valuable source of insight into the potential gains in measuring external customer satisfaction and using those measures to control the business, and the risks that are faced.

We considered evidence from discussions with managers, and from a company survey to identify a range of internal barriers to the successful implementation of a customer satisfaction strategy. The survey suggested that internal barriers found in companies can include the following:

● Internal politics – customer satisfaction measures become part of the “politicking” between departments and groups.

● Market simplification – people make assumptions about the market and customers that make customer satisfaction issues appear unimportant.

● Customer fear – people believe that asking customers about their satisfaction creates customer complaints and dissatisfaction.

● Corporate culture – evaluating and using customer satisfaction measurements is believed to be “inappropriate”.

● Market complacency – people believe they know what customers think and that they have the best product, which is what really matters.

● Resources/capability – problems exist in getting resources and expertise. ● Logistics – problems exist in identifying and reaching customers. ● Cost barriers – finance is not available. ● Perceived market drivers – price and technical specifications are believed

to be what matters, not customer satisfaction.

● Credibility – the results are seen to be ignored. These factors include the operational issues of resources, costs and expertise as barriers, but more formidably address issues of the barriers to customer- satisfaction focus derived from people’s beliefs and attitudes relating to the customer, and the politics and culture of the organization.

Once recognized as important issues, there is a need for an operational approach to implementation that takes them into account. The framework proposed here is for an inter nal marketing strategy, aimed not just at the analytical/operational level of the process, but that also addresses the behavioural and organizational factors identified as barriers to customer satisfaction strategy.

The recommendations to management that come from this analysis can be put in the form of the following agenda for consideration:

● Review the ways in which customer satisfaction is addressed in marketing plans and strategies, and in the operational level of marketing – what does this suggest about the real resolve in this company to satisfy its customers?

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● Examine the “internal market” in the company – try to listen to internal and external customers, and look for synergies in what they say, and potential conflicts of interest. Is there evidence of the types of internal barriers to customer satisfaction identified above? It may be necessary to use marketing research techniques in the internal market in the same way as in the external market, to uncover such issues.

● Use the conclusions you reach to plan an internal marketing strategy for customer satisfaction. This should go beyond the analytical/operational level of measuring customer satisfaction and use this as a control device. It should address the behavioural barriers, and the organizational constraints identified. This will give us a plan of action, or it will tell us that we are being too ambitious – if the hidden costs of implementation are too high, then we may have to reconsider the strategy. We return to the first point and work through again.

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79. Mohammed RafiqLecturer in Retailing and Marketing, The Business School, Loughborough University, Loughborough, UK Pervaiz K. AhmedUnilever Lecturer in Innovation Management, University of Bradford Management Centre, Bradford, UK. 2000. Advances in the internal marketing concept: definition, synthesis and extension. Journal of Services Marketing 14:6, 449-462. [Abstract] [Full Text] [PDF]

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Developing market driven roduct strategies - Reading related to Assignment.pdf