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European Journal of Marketing Internal marketing issues and challenges Pervaiz K. Ahmed Mohammed Rafiq
Article information: To cite this document: Pervaiz K. Ahmed Mohammed Rafiq, (2003),"Internal marketing issues and challenges", European Journal of Marketing, Vol. 37 Iss 9 pp. 1177 - 1186 Permanent link to this document: http://dx.doi.org/10.1108/03090560310498813
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COMMENTARY
Internal marketing issues and challenges Pervaiz K. Ahmed
Wolverhampton Business School, Wolverhampton University, Telford, UK, and
Mohammed Rafiq Business School, Loughborough University, Loughborough, UK
Keywords Internal marketing, Issues, Internal communications, Marketing competences, Relationship marketing
Abstract This commentary discusses the key issues and challenges that face internal marketing research and for the future development of the concept and philosophy. Issues addressed include: the link between employee satisfaction and organisational performance; the need for research on how inter-functional co-ordination can be achieved for the effective implementation of marketing strategies; the need for relationship marketing perspective in internal marketing; the need for research in internal communication strategies; and the role of internal marketing for developing organisational competences.
Introduction In the discussion that follows we provide discussion of key issues and challenges for internal marketing (IM) research. This is not an exhaustive discussion, but we elaborate on what we consider as pertinent features of IM and some of the issues and questions that need to be addressed for the future development of the concept and philosophy. Issues addressed include: the need for research on how inter-functional co-ordination can be achieved for the effective implementation of marketing strategies; the need for relationship marketing perspective in IM; the need for research in internal communication strategies; and the role of IM for developing organisational competences. However, we begin the discussion with the examination of the link between employee satisfaction and organisational performance.
IM, employee satisfaction and performance A key premise underlying Berry’s (1981) “employees as customers” concept in IM is that just like external customers, internal customers desire to have their needs satisfied. The logic of this is that by satisfying the needs of internal customers, an organisation should be in a better position to deliver the quality desired to satisfy external customers. Implicit in this is the assumption that fulfilling employee needs enhances employee motivation and retention, and as a consequence the higher the degree of employee satisfaction, the higher the
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Internal marketing issues
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European Journal of Marketing Vol. 37 No. 9, 2003
pp. 1177-1186 q MCB UP Limited
0309-0566 DOI 10.1108/03090560310498813
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possibility of generating external satisfaction and loyalty. While this assumption is intuitively plausible, evidence supporting it remains sketchy. Papers presented in this issue raise several questions with respect to the nature and meaning of this conceptualisation which merit further empirical investigation. One possible avenue is to examine whether employee satisfaction operates through an intervening variable such as organisational commitment rather than directly on performance (see for instance Brown and Peterson, 1993; Caruana and Calleya, 1998).
IM and cross-functional process approach IM questions traditional organisational structuring whereby companies continue to enact and re-enact functional silos. Business have realised that they cannot continue to arrange work as separate functions. Instead, businesses must structure operations around core business processes, which are driven from the end-customer point of view. IM is based on the understanding that no single management function is effective if it operates in isolation. Multiple operations and people with different skill-sets have to be actively involved in creating and delivering products and services. These cross-functional activities and the people who perform them all have a major influence upon the final outcome. The implication of this is that today’s managers must ensure that every employee in all parts of the organisation is involved in the delivery of quality throughout the customer-supplier chain.
Unfortunately, too little attention has been paid to process organisation and process issues both within research in IM as well as within external marketing. Marketing activities have typically been examined as discrete windows without due recognition of systemic patterns and consideration of the whole. Whilst inter-functional co-ordination has been highlighted as a key enabling feature, both within IM (as the selection of empirical papers in this issue demonstrates) and marketing orientation (Narver and Slater, 1990), the “how” of inter-functional co-ordination remains relatively under-researched (Gray and Hooley, 2002). Indeed, at a conceptual level IM is proposed as a mechanism to facilitate this, but as yet far too little examination of IM’s role in this has been researched. We recommend more research, both qualitative case-based work as well as more rigorous large sample empirical investigation to examine this issue in more detail.
IM and internal relationships Following on from the point above, it is clear that in the twenty-first century companies can no longer afford to maintain barriers between functions and departments. Success is driven by integrating related functions within the organisation – production, sales and distribution, services, advertising, sales promotion, product planning and market research – to achieve the business objectives. As suggested, IM looks to guide all people, functions and
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departments of an organisation by its systematic appreciation of the needs, aspirations and costs of each. This underpins the internal customer-supply chain, which is replayed in organisational interaction by every single employee, from top management to middle managers, all the way down to shop-floor workers. Organisationally, this hierarchy results in a network of relationships within which different collaborations evolve as a consequence of a multiplicity of interaction episodes. Each of these relationships and interactions can be managed, where appropriate, with a formal IM strategy and IM plan.
The task of managing and co-ordinating a web of customer-supplier relationships is certainly not easy. It is important that everyone in the organisation can see the linkage between what she/he does and its impact on the “next customer”. Therefore, creating and aligning internal relationships between departments, functions and employees inside the organisation is necessary to improve the performance of the company and its employees. IM examines and manages the total set of relationships and interactions that bring about additional value-added. Companies must gain an understanding of how to develop and manage these internal relationships, with individuals and groups of individuals. This extends not only to employees, but also to others who fall within the boundary of internal markets, such as suppliers and distributors. It is the management of these organisational sets of relationships that allows the “delivery” to what marketing has promised externally. This raises a key question: “How can the company develop an effective process for structuring and managing internal relationships?”. This area requires considerable further investigation. Relationship marketing provides an obvious theoretical approach to these problems. Moreover the relational approach provides an alternative framework to the transactional marketing approach that has underpinned much of IM thinking (Bell, 1998; Voima, 2000).
IM and strategic alignment: challenge of integration, coherence and focus Organisations are not monoliths. They consist of systems, subsystems and system interfaces. Each system, or sub-system, is founded on specific capabilities and component processes, both within and external to the firm. Only through the integration of these subsystems can the final product/service outcome be successfully generated. The effectiveness of integration can substantially impact on the cost incurred to the total organisational system. If all efforts are integrated, the net result is a continuous stream of value-rich actions and outcomes. Yet, integrated effort is arguably the most important, yet most difficult challenge facing firms.
IM generates involvement and commitment to organisational programmes. Involvement and commitment coupled with clear sense of purpose are pre-requisite for the much needed coherence and focus that are ultimately required to produce successful outcomes. Involvement concerns not only
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people, but also includes all organisational resources such as systems, equipment and information. It is suggested that one primary aim of IM is to assess and help put in place processes to improve effort toward organisational ends. IM in this sense begins to include all individual and organisational functions, activities, communications and elements that a firm uses to create, develop and maintain appropriate inter-linkages that result in the delivery of “quality” expected by the final customer. This raises questions as to what elements engender involvement, commitment, and clarity of purpose. How do these, or other elements, come together to create focus and coherence in strategy implementation? What is the empirical evidence for this?
IM as strategy and IM as philosophy IM is proposed as a co-ordinating philosophy because it considers and coordinates “all” activities – including internal and external relationships, networks interactions and collaborations by examining all activities involved in satisfying customers throughout the internal supply chain. It is a philosophy that focuses attention on customer satisfaction and organisational productivity through continuous attention and improvement of the “jobs” that employees execute and the environment in which they execute them. IM propounds the idea that a major goal of management is to plan and build appropriate, close and flexible, relationships with internal parties to improve internal processes continuously. IM’s view of organisations can be said to be individualistic, in that it stresses the primary importance of the individual within and outside the organisation, as a source of sense making for the organisation, yet it is operationalised through a strategic lens. In this way, IM aligns the individual into a collective unit, performing in concert to the orchestra of strategic coherence and alignment.
IM identifies and removes barriers that divide employees and factionalise organisational action. IM, by building a deeper and clearer understanding of the inside of the organisation, is a key capability to respond to the challenges of a hyper-competitive world. IM harmonises the bits into a whole. The IM approach provides strategic guidance on how to leverage business performance and profitability in an increasingly competitive environment. However, how it does this and the mechanics of this linkage need much further clarification and research investigation. This raises the question, what is IM philosophy? What role does it play in strategy? And if it is a strategy, then what, if any, impact does it have on performance?
IM and the new covenant IM is an interaction process between the organisation and its employees within a given company context. IM works at the level of creating precisely the right type of atmosphere and environment in which employees are encouraged to create, co-ordinate and improve the whole business. This means that IM works
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towards actions, interactions and adaptations that enhance customer satisfaction. This is engendered by creating an environment in which quality enhancing behaviours become a reflexive part of employee action. This environment and the accompanying quality enhancing behaviours by employees are formulated as a fundamental source of competitive advantage. What is the implication of this assertion? At the basic level, it suggests the need to understand and manage all these internal relationships, functions and interactions in an effective and profitable manner so as to gain long-term competitive advantages. However, at a higher level it is suggestive of the fact that employee perceptions of corporate programmes are affected by their perceptions of other elements of the corporate package. Employee motivation to do as the organisation bids is driven by what they are being offered, not just from the programmes they are being asked to implement, but also their perception of the whole company. This higher-level interpretation indicates the need for companies to establish a “high contract partnership” with employees along multiple dimensions. The question then is: “What is the nature of this partnership and what are the tools and mechanisms of establishing this?”. We suggest that IM works by establishing, developing and maintaining successful reciprocal exchange relationships within the organisation through:
. understanding and intimacy;
. trust; and
. commitment.
IM cannot work without the presence of these key ingredients. To attempt IM without these would be disastrous, ultimately leading to employee cynicism and disillusionment.
A necessary condition, from an employee’s vantage is psychological safety. Psychological safety is a state in which people feel safe to be candid in what they think and how they feel. Behaving in new ways and doing things differently can involve some degree of fear. People act transparently and with integrity when they are psychologically safe from threat. This means that IM processes must be conditioned in trust: trust in leadership, trust in the processes and system, and specifically, trust in the “rules of the game” maintained in the organisation. For instance, getting people to share their knowledge requires new processes but more importantly, it requires setting a new covenant between employer and employees. Workers have to be reassured that they will still be valued after they give up their “know-how”. In short, it involves treating the employees as partners in the firm. This requires a big shift from the current reality of organisational practice. A pertinent question here is to probe how many companies have made this shift and how, as well as how well, have they managed this change.
IM is built on “trust”. When people trust that the organisation will do what it says, then it encourages behaviours within the organisation that allow for
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quality to be embedded through the entire supply-chain process. To build trust and commitment a company must intimately know and understand its people and itself. By systematically aligning interactions through explicit considerations to a full set of stakeholder needs, IM helps in the development and growth of trust and commitment among parties. By looking after the needs of the employees, IM provides a clear signal to the internal market that the company values its employees. This begins the circle of reciprocity: when the company can demonstrate that it is committed to its employees, only then is it likely that its employees respond in kind and become committed to its success. Trust and commitment constructs have received considerable attention in the relationship marketing literature (Morgan and Hunt, 1994; Gundlach et al., 1995; Geyskens et al., 1996) but remain under-researched in relation to IM orientation. It is an area highly worthy of further investigation.
IM and organisational anthropology: culture and behaviour Through its focus on “employee”, IM helps the process of identifying current behaviours and probes why they are occurring. Once specific employee behaviour patterns have been established, it is then possible to create specific IM programmes to induce behaviours for enhanced implementation. Through its anthropological focus IM builds an understanding of the organisational environment, organisational hierarchy, organisational politics and structures. Through this understanding, IM aspires to play an important role in the nurturance of the right environment for implementation. IM’s understanding must be shaped by descriptive anthropology of how individuals and their environment receive shape and meaning in their continuous mutual interactions. This implies that IM must examine the irrevocable relationship of employees to themselves, to other people, to the organisation and the world they live in.
IM places people centre stage in the equation of organisational success. Because IM links the employee to strategy, it takes implementation to the very core of its enabling agency: the employee. This direct link helps to cut through the layers that often act as multipliers of confusion, conflict, frustration and eventually inaction. IM links specific strategy programmes to developing competencies, which are in turn linked to each individual’s intelligence, creativity, responsibility and experience. By so doing, IM not only manages the individual, but also the collective that makes up the organisation. IM thus influences the formation of a “corporate identity” and “collective mind”. These influences set in place foundations for an integrated organisation. This means more than just putting together individual qualities and capabilities, however important each individual and personal contribution may be. IM works by bringing the individual into the collective. It is in this combination that individual creativity is transposed to organisational effort and success.
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A number of issues need to be examined in this domain. Illustratively, for instance, how does IM work in uncovering the organisational milieu? How is this understanding used? Is there a link between culture and behaviour to IM practice, and what are contingencies in this link?
IM and internal communication Communication is an indispensable activity in the functioning of all processes, but it is critical in highly cross-functional ones. Undoubtedly, one of the most common IM applications is in the crafting of internal communication strategies. When this is done in parallel with external marketing communications, advertised promises stand better chances of being fulfilled to the required level of performance because staff is better prepared to perform them.
In this respect, IM, by creating messages and appealing to the emotions, can provide firms with a rich source of advantage. Moreover, since employee behaviour is socially constructed, idiosyncratic and largely holistic, it calls for a richer analysis of the employee experience. This requires an immersion in the “consumption” experience of the employees. Companies that just measure aggregate trends and statistics achieve little in the way of insight on how really to motivate their employees. Aggregate employee satisfaction figures are typically lagging measures; often they are out of date pictures of yesteryear’s sentiment. At worse, the aggregations hide the realities of employee dissention and de-motivation. It is important to note that IM itself needs to resort to ethnographic probes of the organisational milieu, otherwise it ends up constructing superficial messages based on superficial insight, resulting in little real impact. IM mandates more than straightjacket appeals for efficiency. IM forces companies to be more empathic in the design of their communications to employees. If companies do not appreciate the existence of different employee segments and their different needs they will continue to produce messages that hold little meaning for the targeted segments. Broad and diffuse messages create distance between the employee and the organisation and in worst scenarios confusion in action.
IM and motivation: ideology of customer care or ideology of control and indifference The historical subjection to mechanistic experience expressed through the precepts of scientific management and in recent years through short-sighted application of business process re-engineering (BPR) and organisational de-layering have played a heavy role in making organisational environments barren and sterile places of work. Applied in their extremes, these philosophies have robotised the workplace and stripped employees of their dignity as thinking beings. While structured planning does posses its merits, it tends to bear down, on the organisation, a machine-like rationality. Acting like this serves only to drive underground the realities and complexities of
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organisational practice, such as those embedded within the power and politics processes, and ignores the fact that action and planning are interactive acts.
Without question the corporate workplace is laden with ideological content. To assume neutrality is naı̈ve. Reality is a construction of a non-ideal, non-neutral state of affairs. Understanding, however, of this status is important but it is not sufficient. It is also necessary to strive forward toward ameliorative action. IM can and should play a role in this. It should question the status quo and look at ways companies can re-engage and motivate employees. If companies want a workforce that is both creative and committed they must think about and set about nurturing the types of relationships that make their business environments conducive ones. Thus far, if at all companies have focussed on building relationships with employees then they have done so at a superficial level, often deploying crude rational inducements. Needs of employees are both rational and emotional.
IM must scrutinise the rational and emotional content to build pictures of the reality of the corporate environment. Only in this way is it able to create “packages” to meet the needs of employees fully. IM must be proposed as an emotionally intelligent philosophy, one based on the understanding that it is through the application of subjective emotions and empathic awareness that employees are able to make judgements that may or may not end-up in the realisation of the long-term corporate interests. The challenge of IM is to force a rounded understanding of the organisational readiness for a particular new initiative by examining the full set of needs of the organisation (demand of organisation on the employees) in direct relation to the full set of needs and aspirations of the employee (demands of the employee on the organisation). Only when there is balance in both these demands do conditions become conducive towards motivated strategy implementation and therefore long-term prosperity.
While these points to some extent paint the extremes they do highlight the need to consider the impact of different contexts on IM application, differences in relevance and perception of IM according to employee levels (middle versus top managers versus employees etc), as well as the need to consider the contingencies arising from different organisational histories and managerial ideologies.
IM and competences IM examines what needs to be done, and by whom. IM can be used to identify the type of role that innovation agents need to play to execute strategies. These roles are contingent to organisational circumstance and situation. Which role is appropriate for whom is dependent upon the individual’s orientation towards the desired end-goal at that specific moment in time. This highlights the link between strategic implementation to the specific skills and capabilities of the individual. By implication, this necessitates first knowing the skills and
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capabilities of each employee before they can be usefully deployed. Within IM this assessment is made more visible, because IM looks at a deployment of individual competence from an opportunity-cost point of view, which is taken from the organisational viewpoint as well as from the employee’s perspective.
To create outcomes from competencies, a corporation must target its competences in specific directions. The problem is that most companies hardly understand their real core competences. Many pay lip service to the concept but few are really able to pinpoint their core competences let alone deploy them. Even worse, fewer still know the source of their competence basin. Nurturing them is even more difficult. IM’s role is to create an assessment of core competences, and plan for their nurturance and deployment. IM, by linking current competences to planned strategies, assesses the gap in competencies to realise the plans. This creates a strategic dialogue which forces strategic competence planning, not just strategy planning. Unfortunately, most organisations stop once they have made strategy plans. They hardly ever successfully make the transition from strategy plans to strategic competences planning, which is at the heart of making actions occur and strategic plans to become realities.
We suggest IM as an enabling agency in building competences. External marketing has already highlighted that marketing orientation holds performance implications, and IM research (papers in this issue, as well as Gilmore (2000) and Gilmore and Carson (1996)) are highly suggestive that IM and (associated inernal marketing orientation (IMO)) is a key enabling competence toward marketing orientation and performance. However, it is not sufficient just to know this. It is necessary to establish clearly what are the antecedent enabling elements (e.g. internal service quality, internal customer satisfaction, employee commitment, organisational socialisation are elements on which some light has been shed by the empirical papers in this special issue) and how these can be built, strengthened and sustained. Much further investigation is required to assess and clarify the impact of IM practice on competence building and business performance.
Summary On their own, calls to mobilise energies of the organisation do little to ensure the survival of companies in the modern era. The new world is filled with flux and demands flexible open structures and understanding. Management hierarchies that characterised the twentieth century have become very dated in the face of new challenges. New approaches based on partnership that incorporate values such as co-operation, caring, creativity, empathy and connectedness are needed in the so-called “knowledge” era. Building and sustaining competitive advantage requires leveraging the collective knowledge base of a company and fostering a “learning organisation”. This demands more than simply investing capital into existing infrastructures and systems of
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management. In such environments, translating meaningful opportunities into market successes means that employees cannot be treated as mindless cogs in a machine or line items on a financial spreadsheet.
IM is an unusually slippery concept, easy to visualise and yet exasperatingly difficult to operationalise. IM is a concept that is socially constructed and context-specific in nature. It cannot be understood without relating the concept to the company, organisation or person who gives meaning to it. Furthermore, IM is holistic. This is, in fact, an argument for IM adoption since it plays a role in all functions and operations in an organisation. It is a “total” managerial approach for co-ordination and integration. Managers practising IM will play an important role in combining and integrating different perspectives. If academics and managers are to use IM as a means to enhance organisational effectiveness and functioning they must, themselves, first build a deeper understanding of IM.
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Internal marketing - key to external marketing success - Reading.pdf
Journal of Services Marketing Internal Marketing: The Key to External Marketing Success Walter E. Greene Gary D. Walls Larry J. Schrest
Article information: To cite this document: Walter E. Greene Gary D. Walls Larry J. Schrest, (1994),"Internal Marketing", Journal of Services Marketing, Vol. 8 Iss 4 pp. 5 - 13 Permanent link to this document: http://dx.doi.org/10.1108/08876049410070682
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VOLUME 8 NUMBER 4 1994
5
Introduction An important ingredient of strategic planning is a firm’s core competency. When properly managed core competency can lead to a competitive advantage for the firm or an increase in market share or increased profits, etc. One form of competitive advantage is customer service and the result is unwavering customer loyalty. How can this be accomplished? Internal marketing is the key to superior service and the result is external marketing success. Internal marketing can be defined as the promoting of the firm and its product(s) or product lines to the firm’s employees. Hence, for this strategy to be successful top level management must fully embrace it. Thus, the idea of internal marketing must originate at the top and be communicated down to the very bottom of the firm. Understanding customer expectations is a prerequisite for delivering superior service; customers compare perceptions with expectations when judging a firm’s service (Parasuraman et al., 1991).
The service industry is only one industry among many that has undergone major change as a result of competitive forces and deregulation, with more of the same promised for the future. Change means opportunity, and the challenge is to capitalize
on that opportunity for the benefit of its customers, shareholders, employees, management, and society.
The extensive change of the recent past is no doubt going to continue, and in fact will probably accelerate in the future. This rapid rate of change is being driven by the opportunities created by deregulation and technology. These changes involve virtually every aspect of the service business: the local, national and global markets; the products and services; the technology surrounding the industry; the structure of capitalization and balance sheets and the professional skills and abilities needed to compete.
This article addresses these important challenges starting with strategic planning from the standpoint of professional imagery that should be cultivated through application of internal marketing. A literature review of strategic planning that affect the institutional and atmospherics imagery is presented as evidence for the creation and expansion of internal marketing. The authors realize that internal marketing is important to all industries, but that it is extremely important to the service industry. This article will address this issue using the financial service sector, specifically banking, for examples and recommendations. However, the concepts and principles apply to all parts of the service industry.
Internal Marketing The Key to External Marketing Success
Walter E. Greene, Gary D. Walls and Larry J. Schrest
Journal of Services Marketing, Vol. 8 No. 4, 1994, pp. 5-13 © MCB University Press, 0887-6045
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JOURNAL OF SERVICES MARKETING
6
Strategic Planning in the Financial Service Sector A major part of strategic planning (for customer) analysis is to assess the consumer’s current image of the bank, its products/ services and its competitors (Kotler, 1980). Whether a bank succeeds or fails depends largely on strategy of which internal marketing is a major substance. For this article, strategy is defined as a bank’s activities and plans, designed to match the bank’s objectives with its mission, and to match its mission with its environment in an efficient and effective manner (Thomas, 1988). People’s attitudes and actions toward an object are highly conditioned by their beliefs about the object (Assael, 1987). Image is the term used to describe the set of beliefs that a person or group holds of an object (Levitt, 1983). In this context, image is the way in which the business professional is defined in the mind of the client. Image attributes are both functional and emotional (Cohen, 1988; Fine, 1990; McGarry, 1958). In addition, all businesses and its employees (banks and bankers) will have an image whether they seek to cultivate one or not. That image will exist at both conscious and unconscious levels for all individuals who are in contact with the bank (Assael, 1987).
● Proposition 1. The phenomenon of image does exist and is an extremely important ingredient in the successful operation of a service organization.
● Proposition 2. A positive image enhances the effectiveness of the service organization at all levels.
● Proposition 3. A negative image of an otherwise qualified representative detracts from all aspects of the service organization.
● Proposition 4. Image is one of the greatest potential enhancers of personal communication; correspondingly, it is one of its most dangerous potential detractors.
● Proposition 5. Image cannot be enhanced in the short term, because long-term customer perception is slow to adapt.
At any point in time, the current image of a bank is likely to lag behind the reality of the bank (Wheatley, 1983). For example, a particular bank may continue to be seen as the market leader long after its quality has started to slip. Another bank might have a second-class image long after it has transformed itself into a first-class institution. Images can be five to ten years obsolete in the same way that we are not seeing a real star in the sky but an image of that star as it was earlier, since light takes time to travel (Kotler, 1980). Image persistence is the result of people continuing to see what they expect to see, rather than what is. This means that it is very difficult for a bank to improve its image in a short time, even given a willingness to spend a great deal of money.
Furthermore, a bank cannot change its image simply through communications effort. The image is a function of good deeds, good words, good actions, and good appearance. The bank must live out what it wants to be and must use communications to tell the story. Some banks attempt to create phony images through slick communications campaigns, but this rarely succeeds because there is too much discrepancy between the message and the reality.
The components of image one can most directly program and manage include written communication programs, institutional contacts between prospects (customers) and one’s bank, personal visits to one’s branch offices, evaluation of the atmospherics, relationship (involvement) between him/ herself and prospects, and finally, the way in which one interacts with prospects.
● Proposition 6. Environmental forces tend to be the leading and lagging indicators which affect a service organization’s image.
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VOLUME 8 NUMBER 4 1994
7
Institutional Contact Before one ever has an opportunity to develop a professional image, other forces have already begun to shape that image. One’s professional referral sources, the comments of existing customers, the message conveyed through one’s printed image all have an impact on shaping what the prospective client will perceive when he/she finally comes face to face. At the very minimum, one’s prospect will walk in, make telephone, or written contact to request an appointment or set up a meeting. Personal selling and image building begin anew at this point. Therefore, it is essential that the receptionist/contact person be selected based on the warmth, friendliness, professional demeanor, and helpfulness to staff employees.
This sensitivity to all individuals who make contact with the bank or banker is a critical ingredient at the switchboard and reception desk (contact person). This is no place to economize. Should one need help, it is available, ranging in scope and cost from the free brochures of the phone company on telephone etiquette to customized personnel training programs conducted by experienced consulting organizations. Evaluation of the institutional contact function should be part of any marketing audit one undertakes.
In a recent conversation with a local banker, she revealed how she was able to win successfully a potential competitor’s customer. According to her, when the potential client called by mistake, the receptionist, rather than saying simply “wrong number,” was extremely helpful. One basic principle ought to be followed in the bank and management of the customer contact function: wherever and whenever possible, separate the reception and operations functions. For example, the personality, appearance, dress, and efficiency of customer contact people must be an established part of one’s personal communications program.
● Proposition 7. Atmospherics may prove difficult to control because it is all encompassing.
Atmospherics In his text Marketing Management, Analysis, Planning, and Control, Philip Kotler (1980) uses atmospherics as an umbrella concept for all the signs communicated by an organization through its physical facilities, printed materials, product packaging, executive and sales staff appearance, and so on. Focus for a moment on the messages conveyed in the staging area – one’s bank lobby, outer offices, or reception/waiting room. Does it enhance a favorable image for one’s bank prior to direct contact between the banker and the prospect.
There are several topics to be considered when programming the atmospherics for one’s facility. These include bank location, layout, decor, sound and light level, and the professional financial service advisor’s individual office. The details of layout and decor are topics better left to architects, designers, and interior decorators. Design or the physical arrangement of a room and the style, quality, texture and arrangement of furnishings convey subtle but important image cues to clients. Sound and light levels must also be controlled. There should be no glare or “interrogation effect”. These variables are associated with certain costs and to the extent possible one should give him/ her every advantage in setting the stage for client contact.
Marketing Services The special characteristics of services present a number of implications concerning their marketing. Although many marketing concepts and tools are applicable to both goods and services, the relative importance of these concepts and tools, and how they are used, are often different, and the advertising
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of each must reflect these differences. This article presents six guidelines for services advertising based on some of the special characteristics of services.
Internal Marketing – Promotion In what Chase (1978) calls “high-contact” service businesses, the quality of the service is inseparable from the quality of the service provider. High-contact businesses are those in which there is considerable contact between the service provider and the customer, e.g., banks, health care, financial services, and restaurants. Human performance materially shapes the service outcome and hence becomes part of the “product”.
Just as goods marketers need to be concerned with product quality, so do services marketers need to be concerned with service quality, which means (in labor- intensive situations) special attention to employee quality and performance. It follows that in high-contact service industries, marketers need to be concerned with internal, not just external, marketing.
Internal marketing means applying the philosophy and practices of marketing to the people who serve the external customer so that the best possible people can be employed and retained and they will do the best possible work. Therefore, the phrase internal marketing refers and concerns marketing to employees. More specifically, internal marketing is viewing employees as internal customers, viewing jobs as internal products, and (just as with external marketing) endeavoring to design these products to meet the needs of these customers better.
Although most executives are not accustomed to thinking of marketing in this way, the fact is that people do buy jobs from employers, and employers can and do use marketing to sell these jobs on an initial and ongoing basis. To the extent that high-contact service firms use the concepts and tools of marketing to offer better, more satisfying
jobs, they upgrade their capabilities for being more effective service marketers.
The relevance of marketing thinking to personnel management is very real. The banks and insurance companies adopting flexible working hours are redesigning jobs to better accommodate individual differences, which is market segmentation. For example, Indiana National Bank’s recent “Person-to- Person” advertising campaign featuring its own personnel was designed to motivate employees as well as external customers and prospects.
The crucial matter is not that the phrase “internal marketing” has attracted some attention, but rather the complication of the phrase be understood; i.e., by satisfying the needs of its internal customers, an organization upgrades its capability for satisfying the needs of its external customers. This is true for most organizations and is certainly true for banks and financial service organizations. As Sasser (1976) pointed out, “the successful service company must first sell the job to employees before it can sell its services to customers”.
The most fundamental difference between a good and a service is that a good is an object and a service is a performance (Lovelock, 1983). The quality of the service rendered is inseparable from the quality of the service provider. A rude teller means a rude bank to the consumer.
Not unlike goods advertising, services advertising will normally be directed toward one or more target markets. When the performances of people are what customers buy, the advertiser needs to be concerned, not only with encouraging customers to buy, but also with encouraging employees to perform. Well-developed and cultivated advertising not only shapes the perceptions and expectations of consumers by promising helpful banking service, but also helps define for employees management’s perceptions and expectations of them – namely, that we think of him or her
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as professionals and expect him or her to perform as professionals.
In order for “internal marketing” to be effective, the successful bank must first sell the idea to employees before it can sell its service to customers. Advertising is an important tool for selling products/services; it is a tool for motivating, educating or otherwise communicating with employees.
Interdependence of Promotion The labor intensiveness of bank services introduces a degree of variability in the service provided which is not present when equipment dominates the production process. The ever-present potential for variability in the provision of bank services is well understood by those who consume financial services, and contributes to the important role that word-of-mouth communication plays in the selection of financial service suppliers. The importance for word-of-mouth communications in bank markets suggests the opportunity to use advertising to capitalize on this propensity.
When the consequence of buying (consuming) a bank service is perceived to be important, the consumer is often interested in the opinions of others with appropriate previous experience. Making a conscious effort in advertising to leverage word of mouth might involve a satisfied customer or an inspired employee (i.e., developing communication materials targeted at opinion leaders or featuring comments of satisfied customers or excited employees in the advertising itself). What is important and possible is to design non-personal communications which capitalize on the bank service consumer’s receptivity to more personal, word-of-mouth communications. For example, E.F. Hutton emphasizes the importance of word-of-mouth communication: “People stop and listen when they know one’s broker is E.F. Hutton”.
Importance of Image Clues Although a bank service is intangible in the sense that a performance rather than an object is purchased, there are tangibles associated with the bank service offered (for example, the facilities of a bank where the service is performed), and these tangibles can provide meaningful evidence concerning the service itself. Through innovative building design banks (i.e., buildings that are civic spirited, stylish yet steady or conservative yet innovative) have found clever ways to invite customers in, attract attention, and fit into their communities at the same time (Levitt, 1983).
Shostack (1977) has written about the need to use tangible clues in bank services advertising: “It is clear that consumer product marketing often approaches the market by enhancing a physical object through abstract associations. But a service is already abstract. To compound the abstraction dilutes the reality that the marketer is trying to enhance, that is, reliance must be placed on peripheral clues.” For example, prior to his death, actor John Wayne was successfully used as an advertising spokesman for California’s Great Western Savings and Loan Association. Well known for his strong personal views as well as for his film characterizations of a rugged and honest cowboy who always stood tall against evil, Wayne represented tangibility and credibility in Great Western’s advertising. The tangibles that a bank may use provide implicit evidence about the service that the service itself cannot provide.
Making Bank Services Understood One of the problems arising from the intangibility of bank service is that they are often difficult to define or grasp mentally. Services that bring customer and service provider into direct contact present the opportunity to “custom-fit” the bank service to the customer. Giving customers what they
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want is marketing’s oldest and most important idea (Berry, 1987).
Unfortunately, banks and other service organizations often shackle their contact employees with thick policy manuals or strict sets of rules concerning the handling of specific transactions or non-routine requests. The end result is more standardized services that are also more inflexible; more “by-the- book” services that are also more regimented. Good bank services marketing involves giving service providers the freedom to serve (Berry, 1987). Most bank employees would rather provide good service than bad service, would rather be a hero to the customer than a villain.
Managements of bank services would do well to take a good look at the extent to which policy and procedure tie the hands of bank personnel. They would do well to take a hard look at the rule book. At the same time, bank managements would benefit from considering the possibilities of “symbolic management”. Symbolic bank management involves the use of symbols to nurture shared values in a bank which guides employees’ behavior while preserving their freedom to serve the customer truly (Berry, 1987).
At Wachovia Bank and Trust, bankers respond to a customer complaint or problem before the sun goes down on the day the complaint or problem surfaces. This value is known within Wachovia as the “sundown rule” (Berry, 1987). At Wells Fargo Bank, a new manager of the cash management division remodeled the division’s offices soon after assuming his new responsibilities. When asked why this was so important, he said: “The offices looked bad, and I felt this is now how the best looks” (Berry, 1987). Wachovia and Wells Fargo are using symbolic management to shape values that in turn guide bank employee behavior.
● Proposition 8. Differentiation in the service sector is extremely difficult to
achieve unless coupled with long-term strategic management advertising commitment.
Advertising Continuity The intangibility of bank services undoubtedly adds to the frequent difficulty which competing banks have in differentiating themselves. Whereas goods can often be made physically distinctive on the basis of design, packaging, and branding, services have no physical appearance. Moreover, physically distinctive goods can be shown in advertising and associated with various forms of imagery.
Although differentiation is not easily attained by banks, its achievement is by no means impossible. Advertising continuity is an important strategy in this regard because it involves the continual use in advertising of certain distinctive symbols, formats, and/or themes to build and reinforce the desired image, regardless of any changes in specific advertising campaigns. For example, McDonalds’ advertising consistently sends out the same signals: “We are fast and efficient, we are friendly, we are super-clean, we offer value, we are a family restaurant”. Another example of advertising continuity is also epitomized by Harris Trust and Savings Bank in Chicago, which has used its cartoon lion mascot, Hubert, in its consumer advertising since the 1950s. Hubert is a device for tying Harris’ past advertising efforts to its present campaign; Hubert is a means for “branding” Harris’ advertising, and, in the process, for helping the bank to attain a distinctive image.
Advertising continuity gives a bank’s advertising a recognizability which continually communicates and reinforces its image. Ideally, consumers should be able to associate a specific firm with its advertising even if the firm’s name is inadvertently left off a specific advertisement.
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Promising What is Possible Since bank customers have only fulfilled promises to carry away from the service transaction, it is especially important that service firms deliver on advertising promises. Accordingly, when making promises in bank services advertising, prudence and caution should rule. In advertising in general, and bank services advertising in particular, it is better to promise only that which can be delivered for a very high percentage of the time.
Managerial Implications and Conclusion There are four areas where banks and financial service organizations should place particular effort in order to enhance internal promotion: product/service focus, reward systems, marketing support, and organizational harmony.
Product/Service Focus The introduction of new products/service should be introduced at intervals (spacing) according to a set schedule. The schedule should be based on the similarities between new and existing products/services in order to ease the absorption process and to ensure that ongoing successes lend credibility to the overall internal promotion strategy. Another important consideration is that certain segments of the distribution channel may be more effective and efficient with internal promotion because of distributor’s (branch, satellite, or subsidiary) sophistication, unique location, or customer base. Focusing on the most promising segments will increase the return on investment by minimizing the cost of training, product support literature, and other materials.
Reward Systems Many internal promotion strategies fail simply because existing reward systems do
not encourage the sale of the new product/ service. Because financial sales personnel are quick to reject new financial products/ services if the amount of effort required to sell them outweighs the financial rewards available, a compensation scheme that does not directly reward internal promotion will merely maintain the organization’s focus on its core products/services. Of course, there is more to a reward system than compensation. Psychological rewards often influence bank and financial service personnel’s behavior and can determine the success of the internal promotion strategy.
Marketing Support Internal marketing must also be supported by marketing programs such as training, collateral materials, and information systems. Training is particularly vital. For internal promotion to succeed, the bank or financial distribution channel must be technically proficient and confident in its ability to sell the existing and new products/services. The hallmarks of effective collateral materials are simplicity, consistency, and effective media. But, innovative media such as videotapes can be far more effective than written material.
Information systems are critical to internal promotion by supporting product relationships, potential customer needs, and even competitive trends. Advanced internal marketing strategies, such as life event marketing, must be driven by effective information systems.
Organizational Harmony Finally, effective internal marketing depends on good co-ordination among all parties involved, including CEOs, managers, marketing personnel, branches, and the bank or financial service organization’s frontline selling personnel. Two organizational problems often emerge that stifle internal marketing: internal politics and home office
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seclusion. Internal politics must be minimized at the outset by establishing organizational and compensation structures that will support the strategy and avoid conflict.
Home office seclusion, widespread among financial services firms and bank branches, is characterized by marketing product/service managers and support personnel who work in a home office environment that is detached from the day-to-day culture of the distributor or branch. Typical problems include a lack of timely response to inquiries, ineffective and uninformed advice, and literature that is unusable for marketing purposes. To combat this phenomenon, successful institutions often require greater exposure of home office personnel to branch or distribution channel.
Summary We Americans live and work in a service- centered, service-sensitive economy. In North America, 80 percent of the jobs and 60 percent of the gross national product come from the performance of services rather than the production of products (Zemke, 1992). Organizations that deliver high-quality service increase or maintain market share and have a higher return on sales than do their competitors.
Yet most of us find out every day that service in North America is, at best, mediocre. Some banks tell us, “Put it in the mail or use the ATM or phone it in, but do not talk to me, pal, I am too important to deal with customers.”
Service firms must reach out for the brass rings of strategic planning and internal marketing to meet the ever-increasing competitive challenges of the 1990s and beyond the year 2000. The firms that do not or will not embrace the issues of internal marketing and incorporate those ingredients into their strategic marketing plan will see their market share and profit base erode.
Internal promotion can create a positive and/or superior image of the firm and its product in the mind of the customer.
n
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Walter E. Greene is Professor of Management at the University of Texas/Pan American, Texas; Gary D. Walls is Production Supervisor at Fleetwood Homes, Lexington, MS; and Larry J. Schrest is Professor of Economics at Sul Ross State University, Alpine, Texas, USA.
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44. Yafang Tsai, Ta-Wei Tang. 2008. How to improve service quality: Internal marketing as a determining factor. Total Quality Management & Business Excellence 19:11, 1117-1126. [CrossRef]
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46. ISIL TURKOZ, AYSE AKYOL. 2008. Internal Marketing and Hotel Performance. Anatolia 19:1, 149-154. [CrossRef] 47. Spiros GounarisAthens University of Economics and Business, Athens, Greece. 2008. Antecedents of internal marketing
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50. Yafang Tsai, Shih-wang WuInternal Marketing, Organizational Commitment and Service Quality 1292-1298. [CrossRef] 51. Heh Jason HuangDepartment of Business Administration, National Sun Yat‐Sen University, Taiwan, Republic of China
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Internal Marketing - Making marketing happen - Reading.pdf
Marketing Intelligence & Planning Internal Marketing: Making Marketing Happen Nigel Piercy Neil Morgan
Article information: To cite this document: Nigel Piercy Neil Morgan, (1990),"Internal Marketing: Making Marketing Happen", Marketing Intelligence & Planning, Vol. 8 Iss 1 pp. 4 - 6 Permanent link to this document: http://dx.doi.org/10.1108/EUM0000000001069
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4 MARKETING INTELLIGENCE & PLANNING 8,1
Marketing is not confined solely to the external world of customers but must be employed internally also within the organisation.
Internal Marketing: Making Marketing Happen
Nigel Piercy and Neil Morgan
Introduction Perhaps one of the few areas of firm agreement among marketing executives, consultants and business school academics in marketing is the need to focus on the problems of implementation and change in marketing. There seems to be opinion on many sides that agrees that our understanding of the techniques of marketing strategy formulation and planning has outstripped our ability to put marketing into action, in all too many situations.
We have a wide knowledge of the problems inherent in organisational change, and all the prescriptions of the advocates of "excellence" and culture change, but we often seem to lack the mechanism for mobilising strategic change in marketing in the practical setting.
It is for this reason that clever marketing plans simply "sit on the shelf" and are never put into effect. It is for this reason that our carefully prepared marketing strategies are let down by the quality of implemention. It is belatedly becoming apparent that marketing success is often dependent on employees who are far removed from the excitement of creating marketing strategies — service engineers, customer services departments, production
and finance personnel dealing with customers, field sales personnel, and so on.
At the same time, we have learned that, while there is no one "right" strategy in a given product-market situation, there are good and bad ways of delivering marketing strategies which determine whether they succeed or fail. The critical issue is consistency between strategies, tactics and implementation actions. This suggests that real culture change is a central part of planning.
The suggestion in this article, based on our experiences with a large number of companies and managers who have problems with "making marketing work", is that typically marketing executives do not plan for internal marketing to make their external marketing strategies work. We will back up this assertion with some research evidence shortly, but first let us consider what is meant by internal marketing, and what this offers the marketing executive.
Those familiar with the Cardiff Business School work on the "corporate environment" for marketing and the power and politics of marketing may be interested in why we have arrived at the concept of internal marketing. Quite simply, we have worked with managers using the words "power and politics" to describe and analyse their implementation problems — and the words have frequently got in the way because of their negative connotations. We have instead adopted the words structure and process to discuss the similar issues needed to arrive at an agenda for change, and managers have found these concepts dry and off-putting. We have found that managers are far more comfortable using the term "internal marketing" to focus attention on the elements of the corporate environment inside the company that need to be changed in order to implement marketing plans, and that this terminology provides an acceptable framework for unpacking the issues in the company.
The Need for Internal Marketing Our experiences suggest that all our training in marketing has, quite rightly, oriented all our thinking and attention at the world of customers, distributors and competitors in the world outside our companies. However, while analysing markets and developing strategies to exploit the marketplace is our central focus, it is frequently not enough on its own to achieve the implementation of marketing strategies.
In addition to developing marketing programmes aimed at the external marketplace, in order to achieve the organisational change that we need to make those strategies work, we have to carry out the same process for the internal marketplace in our companies.
The reality in many organisations is that the assumption made by marketing executives that marketing plans and strategies will "sell" themselves, is just as naive as making similar assumptions that products will sell themselves to customers if they are good enough. Once we had reached the point of adopting this view of internal marketing, and working on it with managers, again and again we were.
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INTERNATIONAL MARKETING: MAKING MARKETING HAPPEN 5
amazed that people who had been trained and developed to cope with such problems as "irrational" behaviour by buyers, the problems of managing power and conflict in the channel of distribution, the need to negotiate with and persuade buyers through a variety of communications, and to try and outguess competitors, had taken so long to arrive at the conclusion that these same issues had to be coped with inside the company.
The underlying purpose of what we are calling internal marketing is to develop a marketing programme aimed at the internal marketplace in the company, that parallels and matches the marketing programme for the external marketplace of customers and competitors.
In practical terms, we suggest that those same techniques of analysis and communication which we use for the external marketplace should be adapted and used to market our plans and strategies to important targets within the company.
The goals of the internal marketing plan are taken directly from the implementation requirements for the external marketing plan and the sorts of goals we might be pursuing, depending on the particular circumstances, would include:
• gaining the support of key decision makers for our plans, and all that the plans may imply in terms of the need to acquire personnel and financial resources, to conflict with established company policies, to get what we need from other functions like operations and finance departments;
• changing the attitudes and behaviour of employees and managers who are working at the key interfaces with customers and distributors, to those required to make marketing plans work profitably;
• gaining commitment to making the marketing plan work and ownership of the key problem-solving tasks from those units and individuals in the firm, whose working support is needed; and ultimately
• managing incremental changes in the culture from "the way we always do things" to "the way we need to do things to be successful", and to make the marketing plan work.
Internal Marketing Programmes Our view is that the easiest way to make progress with internal marketing, and to establish what it may achieve, is simply to use the same structures as we use for planning external marketing. This means that we should think in terms of integrating the elements needed for an Internal Marketing Mix, based on our analysis of the opportunities and threats in the Internal Marketplace, represented by the company with which we are working.
The Internal Marketing Programme The Product. At one level the "product" is the marketing strategies and the marketing plan in which they are contained. However, what is implied is that the product to be sold is those values, attitudes and behaviours which
are needed to make the marketing plan work. These hidden dimensions of the product may range from increasing marketing budgets, to changing the control systems used to evaluate marketing performance, to changing ways of handling customers at the point of sale.
The Price. The price element of the internal marketing mix is concerned with what we are asking our internal customers to "pay", when they buy into the product. This may include the sacrifice of other projects which compete with our marketing plan, but more fundamentally the psychological cost of adopting different key values and changing the way jobs are done. The price to be paid by different parts of the internal marketplace, if the marketing plan is to be implemented successfully, should not be ignored as a source of barriers and obstacles.
Communications. The most tangible aspect of the internal marketing programme is the communications media used to inform and to persuade, and to work on the attitudes of the key personnel in the internal marketplace. This includes written communications, such as plan summaries and reports, but also face-to-face presentation to individuals and groups who are important to the success of the plan. Broadly we should remember that to assume that simply "telling" people will get them on our side is likely to be as naive inside the company as it is outside. We should consider the full range of communications states and associated goals, as we would with normal customers, and we should not forget to budget the time and financial costs which may be associated with these activities.
Distribution. The distribution channels element of the mix is concerned with the physical venues at which we have to deliver our product and its communications: meetings, committees, training sessions for managers and staff, seminars, written reports, informal communications, and so on. Ultimately, perhaps the real distribution channel lies in human resource management, and the lining-up of training and recruitment behind strategy.
Finally, as with the external marketing programme, we should not neglect the importance of measuring pay-offs wherever possible. This may be in terms of such criteria as people's attitudes towards the marketing plan and their commitment to putting it into practice, or customer percep- tions of our success in delivering our promises to them.
Internal Marketing Targets Again, in exact parallel with the conventional external marketing plan, our internal marketing programme should be directed at chosen targets or segments within the market.
The choice of key targets for the internal marketing pro- gramme will depend on the goals of the external marketing programme, and the types of changes needed to implement marketing strategies. We may segment the internal market- place by the job roles and functions played by groups of people, e.g. top management, other departments, and marketing and sales staff. Alternatively, we might look
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6 MARKETING INTELLIGENCE & PLANNING 8 , 1
beyond job characteristics and look at the key sources of support and resistance to the external marketing plan, to identify targets for reinforcement, or for persuasion and negotiation. Perhaps at the deepest level we might choose our targets on the basis of the individual's attitudes towards the external market and customers, and the key values that are communicated to customers, together with people's career goals.
Our suggestion is that the conventional marketing-planning process should be expanded in the way shown in Figure 1.
Research Evidence Cardiff Business School has recently commenced a pro- gramme of research into the pursuit of "marketing-led strategic change". One of the first studies, financed by the Strategic Marketing Development Unit, Marlow, has produced the following early results relating to internal marketing:
• the term "internal marketing" is rarely used by marketing executives and planners, and is normally not seen as part of the marketing-planning process;
• the communication of marketing plans and strategies to other departments, and even to marketing and sales staff is incomplete and patchy;
• marketing executives responsible for marketing planning do not normally recognise the need to "sell" their marketing plans within their companies; and
• these facts seem to be reflected in the effectiveness of marketing planning within the companies concerned.
It would seem that the way is wide open to develop internal marketing within organisations as part of marketing planning, because relatively little effort is currently expended on these vital processes of gaining acceptance and commitment for marketing plans.
Summary and Conclusions We have argued in this article for greater attention to be given to the need for marketing executives to allow for the obstacles and barriers to marketing plans and strategies, which exist within their companies. This is one part of the answer to the problems faced in making marketing effective, and successfully implementing marketing plans.
Our argument is that marketing planners should formalise the internal marketing programme into product, price, communications and distribution issues, using this framework to set goals and plan actions which parallel the same structure in planning for customer markets. In the same way that the external market is segmented into key groups, the internal marketplace should be segmented into different groups with different needs and characteristics, an the internal marketing programme developed around this framework.
Our experience in working with managers suggests that this mechanism is capable of opening people's eyes to the real problems faced in making marketing work in their companies, and at the same time giving them a systematic framework for developing their plans for the internal as well as the external market.
The available evidence suggests that few companies are currently exploiting this approach or finding ways of addressing the issues involved. We believe that this suggests an unfulfilled potential, and a programme of action which will be attractive to many marketing managers.
Nigel Piercy and Neil Morgan are both based at Cardiff Business School, University of Wales College of Cardiff, UK.
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Measuring Internal Marketing activities - Reading.pdf
Journal of Services Marketing A holistic management tool for measuring internal marketing activities Yu-Ting Huang Sharyn Rundle-Thiele
Article information: To cite this document: Yu-Ting Huang Sharyn Rundle-Thiele , (2015),"A holistic management tool for measuring internal marketing activities", Journal of Services Marketing, Vol. 29 Iss 6/7 pp. 571 - 584 Permanent link to this document: http://dx.doi.org/10.1108/JSM-03-2015-0112
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A holistic management tool for measuring internal marketing activities
Yu-Ting Huang Department of Hotel and Leisure Club Management, Sun Yat-sen University, China and Department of Marketing,
Griffith University, Nathan, Australia, and Sharyn Rundle-Thiele
Department of Marketing, Griffith University, Nathan, Australia
Abstract Purpose – The purpose of this paper is to synthesise internal marketing measures in two service settings across both Western and Eastern backgrounds. Well established views of internal marketing have emerged with more than 200 papers on the topic. To date, no clear accepted measure for the concept has emerged. The developed scale provides a new way of thinking drawing together a diverse range of measures to deliver a practical measure offering marketing managers a diagnostic tool to measure the degree that internal marketing has been applied (or not) inside their organisation. Design/methodology/approach – Conceptual and operational definitions of internal marketing were analysed to generate an item pool for testing. Generated items were then tested in one higher education organisation (n � 205) and in the tourism and hospitality industry with Australian and Taiwanese employees (n � 458) using both English and Traditional Chinese survey versions. The data were analysed with SPSS 19.0 and AMOS 19.0. Reliability analysis was first undertaken to assess the hypothesised internal marketing factor structure followed by confirmatory factor analysis. Findings – A 16-item, three-factor structure was obtained for internal marketing. This research suggests that internal marketing practice is a three-dimensional concept ideally consisting of internal market research, training and communication activities. The findings suggest that further research may be warranted to further expand academic definitions of internal marketing to encompass the varied activities undertaken by practising internal marketers. Originality/value – This study provides a new measure of internal marketing practice for use in future that captures the majority of the activities undertaken by internal marketing practitioners.
Keywords Higher education, Internal marketing, Tourism
Paper type Research paper
Introduction Internal marketing programmes have gained momentum in services markets in recent years based on our understanding that internal marketing is a strategic weapon that can assist service marketers to achieve high quality service delivery and customer satisfaction (e.g. Bruhn and Georgi, 2000; Quester and Kelly, 1999). Since internal marketing was first defined (Berry et al., 1976) there has been a great deal of debate about the construct. The generally considered definition of internal marketing is that internal marketing is a cultural framework and an instrument to achieve strategic alignment between employees’ actions and marketing’s brand positioning in the target consumer’s minds (Ahmed and Rafiq, 2003). For some, internal marketing is viewed as a collection of human resource policies and procedures that treat employees as members of an internal market that needs to be informed, educated, developed and motivated to serve clients more effectively (Grönroos, 1997; Bennett and Barkensjo, 2005) while others view internal marketing as an internal communication function. The literature
contains a multitude of different measures, yet there have been few attempts to consolidate these measures.
Two perspectives have dominated internal marketing thinking. The critical difference between Grönroos’(1983) approach and that of Berry (1981) is that Grönroos (1983) focuses attention on creating customer orientation in employees through a process of influence rather than satisfying and motivating employees as recommended by Berry (1981). Arguably definitions and measures originating from Grönroos (1983) are externally oriented while definitions and measures arising from Berry’s (1981) thinking are internally focussed. In the 1990s, Rafiq and Ahmed (1993) developed a hybrid approach to internal marketing which attempted to draw external and internal orientations into one. While scales have been defined previously, many scales may not be capturing the full extent of internal marketing. For example, the Foreman and Money (1995) internal marketing scale overlooks several dimensions of the construct as defined by Parasuraman et al. (1991) and Berry et al. (1991). This flaw was similarly mentioned by Carruna and Calleya (1998). Lings (2004) scale focusses on improving transaction quality rather than taking a longer term relational and co-creation view.
The current issue and full text archive of this journal is available on Emerald Insight at: www.emeraldinsight.com/0887-6045.htm
Journal of Services Marketing 29/6/7 (2015) 571–584 © Emerald Group Publishing Limited [ISSN 0887-6045] [DOI 10.1108/JSM-03-2015-0112]
Received 5 March 2015 Revised 15 May 2015 1 June 2015 Accepted 4 June 2015
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The differing orientations for internal marketing, namely external and internal (Arnett et al., 2003; Lings, 2004; Proctor, 2010; Abzari et al., 2011), and the diverse perspectives viewing internal marketing at a range of different levels from philosophical (Grönroos, 1983; Varey and Lewis, 1999) to tactical (Rafiq and Ahmed, 1993) have resulted in a plethora of measures of internal marketing, making it difficult to understand which items are clear and valid indicators of internal marketing (and therefore, which items are not clear measures). While there are many internal marketing definitions (see Table I for some of the many definitions), there are fewer operational definitions of internal marketing and many resulting inconsistencies in the measurement of internal marketing. As far as the authors are aware, the relationships between different internal marketing measures have not been explored in the same paper. This study seeks to synthesise existing conceptual and operational definitions used in the past 30 years to identify measurement items that can capture internal marketing practice (the tactical things that marketers can do). The unique contribution of the current paper is the development and validation of an internal marketing practice scale that draws from a wide array of items that have previously been used in internal marketing research. Items drawn from internal marketing research are then empirically tested using confirmatory factor analysis (CFA) techniques in two service settings.
Literature review The concept of internal marketing has been studied for more than 30 years to understand how marketing principles can be directed towards employees (Berry et al., 1976) based on the understanding that the marketing success of a firm is partly determined by employees. Forty-three definitions spanning more than three decades have been offered by researchers. Definitions of internal marketing started with Berry et al. (1976) who defined “employees as internal customer and jobs as products”. The most recent definition of internal marketing was put forward by Munir et al. (2015). Since internal marketing was first defined, there has been a great deal of debate about the construct. The crux of these discussions largely centre on identifying whether internal marketing is a human resource (Rafiq and Ahmed, 1993) and/or marketing (George and Grönroos, 1989) function and whether internal marketing is a philosophy or a set of initiatives and activities for implementation (see Table I).
Table I illustrates the diverse viewpoints surrounding internal marketing. A review of the literature shows a multitude of definitions of internal marketing with some authors indicating that internal marketing is a philosophy or a way of thinking (Abzari et al., 2011; Varey and Lewis, 1999), a strategic approach that can guide managerial decision
Table I Selected definitions of internal marketing
Author (Date)
Google scholar
citationsa Definition of internal marketing (IM)
Berry et al. (1976) 178 IM is a marketing strategy and programme based on communication with employees, the development of their potential and motivating-remunerating those who offer excellent service (also used by Berry, 1981; 1987)
Grönroos (1983) 2,018 IM is a strategy for creating a “state of mind” in personnel that will allow customer service effectiveness under a broader relationship management paradigm
Gummesson (1987) 1,201 IM is implemented through communication with personnel and culture change mechanisms (also used by Tansuhaj et al., 1988)
George and Grönroos (1989) 411 Employees in the internal market, where marketing-like activities are used internally, are best motivated to be service-minded and customer-oriented through an active marketing-like approach
Ahmed and Rafiq (1993) 322 IM is a planned effort through the application of marketing techniques along with human resource management practices to facilitate the implementation of the organisational market objectives (also used by Ahmed and Rafiq, 2000; 2003; Bennett and Barkensjo, 2005)
Ballantyne et al. (1995) 91 IM is considered to be the process of creating market conditions within the organisation to ensure that internal customers’ wants and needs are met
Piercy and Morgan (1995) 188 IM is a targeted effort aimed at removing interdepartmental barriers and achieving strategic alignment between consumer-affecting employees and marketing
Varey and Lewis (1999) 202 IM is the philosophy and the behaviour that allow rapid organisational change in response to the company’s macro and micro environments
Arnett et al. (2003) 420 IM is referred to managers can alter the culture of their organisation by hiring, training and motivating employees that are consistent with the new vision
Lings (2004) 334 IM embodies treating front-line employees as customers and improving their transaction quality
Proctor (2010) 5 IM is an idea to put employees in the first place for gaining of the organisational purposes Abzari et al. (2011) 6 IM is a philosophy of human resources management to develop jobs as products Munir et al. (2015) 0 IM advances the notion that the discipline is more than communication tactics – such as
workplace posters and employee meetings – or a way to build employee satisfaction
Note: a Citation numbers were taken from Publish or Perish Source: www.harzing.com/pop.htm on 17 February 2015
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making (Berry, 1987) or a set of initiatives and activities for implementation (Tsai and Wu, 2007; Rafiq and Ahmed, 1993). For internal marketing to be practically relevant, consideration of internal marketing as a set of initiatives and activities for implementation as a focus to synthesise internal market research measures that have been previously applied is warranted (Rafiq and Ahmed, 1993; Tsai and Wu, 2007). The literature review and practitioner community present a wide range of ideas that could be held under the term “internal marketing practice”.
There are 20 different internal marketing scales available in the literature, as shown in Table II, indicating that there are multiple internal marketing measures. Synthesis of measures that have previously been applied by internal market researchers can assist to provide some clarity for researchers new to the field. The majority of scales have been administered in Western settings (Barnes et al., 2004; Lings and Greenley, 2005; Peltier and Scovotti, 2005). Several researchers have used one scale with multiple factors to examine internal marketing (Naudé et al., 2003). Moreover, some researchers operationalise internal marketing as one factor, namely training, which is composed of multiple dimensions (Farzad et al., 2008). However, a large number of authors address internal marketing as multi-dimensional (Jou et al., 2008; Karasa et al., 2008) (see Table II). Lings and Greenley (2005, 2010) argue that internal market orientation should replace internal marketing and consequently operationalise internal marketing as a set of internal market-oriented behaviours.
Without a functional understanding, we are unable to guide marketing practice on the activities required to improve employee and/or customer satisfaction. For this reason our paper will concentrate on the functional aspect of internal marketing or an initial set of internal marketing activities. A synthesis of operational definitions of internal marketing yields three clear initial functions, namely internal communication, training (cultural change mechanisms) and market research (requisite for understanding employees’ needs and wants). These three internal marketing functions will now be considered in turn.
Internal communication The traditional tools of promotion, such as advertising and personal selling, are frequently used to communicate with the customer. These communications would typically be directed at what Berry (1981) regards as an organisation’s employees. Table II shows that internal communications is the most commonly measured dimension of internal marketing. A consideration of internal communication should be a significant dimension of internal marketing.
Several scholars have drawn attention to the impact of communication on employee development by either changing employee attitudes or increasing customer satisfaction (Freeman and Varey, 1997; Gummesson, 1987; Piercy and Morgan, 1995). Varey and Lewis (1999) have also concluded that internal communication is a new employer-employee contract between managers and employees. The new “employer-employee relationship” may well require managers
Table II Summary of dimensions of internal marketing (1990-2010)
Author ICa Tb IMRc Additional dimensions measured
Chang and Chang (2008) ✓ ✓ ✓ Jou et al. (2008) ✓ ✓ ✓ Empathy and consideration
Benchmarking Lee and Chen (2005) ✓ ✓ ✓ Lings and Greenley (2005) ✓ ✓ ✓ Beatson et al. (2008) ✓ ✓ ✓ Naudé et al. (2003) ✓ ✓ ✓ Tsai and Tang (2008) ✓ ✓ ✓ Bennett and Barkensjo (2005) ✓ ✓ Ewing and Caruana (1995) ✓ ✓ Foreman and Money (1995) ✓ ✓ Karasa et al. (2008) ✓ ✓ Peltier et al. (2006) ✓ ✓ Wildes and Parks (2005) ✓ ✓ Internal service quality Barnes et al. (2004) ✓ Farzad et al. (2008) ✓ Hogg et al. (1998) ✓ Judson et al. (2006) ✓ Peltier and Scovotti (2005) ✓ Experiences with facilities Punjaisri and Wilson (2007) ✓ Mukherjee and Malhotra (2006) ✓ Supervisory
Consideration Team support role clarity Participation
Total number 17 14 9
Notes: a IC � internal communication; b T � training; c IMR � internal market research
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to rethink their role, and to recognise the processes by which value is profitably created for employees (Varey and Lewis, 1999). The literature on internal communications concurs that a variety of benefits could accrue to an organisation from the effective management of its (internal) communication processes (Piercy and Morgan, 1995).
Training The scope of internal marketing is reflected in various definitions emphasising different aspects of the field (Lings, 2004). However, most definitions are related to the application of marketing techniques with human resource management practices to continuously improve the methods of satisfying employees and customers (Kotler and Amstrong, 1991; Joseph, 1996; Wildes and Parks, 2005). Some scholars including Rafiq and Ahmed (1993), Arnett et al. (2003) as well as Abzari et al. (2011) define internal marketing as a human resource management function.
Previous research has investigated the conceptual underpinnings of the training component of internal marketing, which can be divided into four main categories, namely service standards, training, development programmes and rewards (Papasolomou and Vrontis, 2006). Lee and Chen (2005) borrowed from Tansuhaj et al. (1988) conceptualisation and defined internal marketing as having five functions: recruitment, training, incentives, communication and retaining employees, all of which are human resource management functions.
Apart from focussing on the “internal customer” concept, 11 of 42 internal marketing definitions are driven directly from a training perspective, and nine definitions refer to human resource strategies. Collins and Payne (1991) identified the management of human resources and employee training as basic internal marketing activities, while Paraskevas (2001) cited employees with the skills and information needed to perform as key in implementing internal marketing. Consequently, internal marketing is a process combining employee know-how and autonomy to ensure that employees’ wants and needs are met (Ballantyne, 1997).
Internal market research Market research represents an effective tool in any industry to analyse the types of customers and to understand their needs and wants. Internal market research has a similar function, whereas market research is used to analyse and understand employees. If organisations are not aware of the existence of different employee segments and their different needs, they will continue to produce messages that hold little meaning for the targeted segments (Rafiq and Ahmed, 2003).
Most scholars define internal marketing as any marketing activity which is targeted towards the internal market, namely employees (Bekkers and Van Hasstrecht, 1993; George and Grönroos, 1989). Furthermore, Rafiq and Ahmed’s (2000) framework of internal marketing has found a broader acceptance and synthesis in the current literature and we acknowledge its importance. However, we agree only partially with his conceptualisation of the elements of internal marketing, as internal market research is an important element in understanding how to implement both marketing-like and human resource management approaches.
Taken together, the results of our literature review indicate that internal marketing has been variously defined and differently understood. Ongoing research attention is warranted to clarify what internal marketing is (and hence what it is not). Three clear internal marketing practice dimensions were evident in our synthesis of the internal marketing literature, namely training, market research and communications (see Figure 1).
Methodology
Overview A fundamental element of this study involves the examination of the internal marketing practice measure in two service settings. This measure was constructed using items that had previously been frequently used by internal marketing researchers. This research involved employees in the higher education and tourism sectors and employees from two culturally diverse backgrounds, namely Australia and Taiwan. The data were collected using an online survey instrument.
Samples The 2010 study was conducted in the higher education sector from September to October 2010. Due to cost and time limitations, Study 1 was conducted based on convenience sampling. Mailing lists were provided by the human resource department of one higher education institution. In total, 770 email invitations were sent to service workers to participate in Study 1. One month later, a reminder message was sent. No incentives were offered. Out of the 770, a total of 205 completed questionnaires were returned and this represented a 26.6 per cent response rate.
The 2012 study was conducted in the tourism and hospitality industry over a three-month period from December 2011 to February 2012. Mailing lists were purchased from the Prospect Shop for Study 2. A total of 2,800 people were emailed an invitation to participate in Study 2, and 121 surveys were returned undelivered. A total of 388 completed questionnaires were returned of which 12 did not have tourism and hospitality work experience, and 7 did not fit the research target group of this study. It was anticipated that the high percentage of turnover in the tourism and hospitality industry would not be an exclusionary condition. Reminder emails were mailed one month after the first mailing. Several people sent emails advising they were no longer employed in the tourism and hospitality industry and therefore they had no intention of answering the survey (refused to participate). Furthermore, 11 participants answered the same options (i.e. neutral option) too often
Figure 1 Research model – internal marketing
Holistic management tool
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( � 80 per cent) and were removed prior to analysis. The useable response rate was 13.8 per cent (369 out of 2,668). To extend the sample to meet sample size recommendations for data analysis, this study was extended. Intercept surveys were undertaken to ensure a quota was met for Study 2. The intercept survey yielded 89 responses at a 100 per cent response rate to reach the targeted sample size (n � 400). The final sample consisted of 220 Australian and 238 Taiwanese participants, a level that was deemed appropriate for data analysis.
Internal marketing practice measure A useful starting point of generating survey-based internal marketing practice measures is in previous studies. An example demonstrates that, as shown in 3, a wide range of internal marketing practice measures have been applied across different internal marketing studies most of which were in Western contexts (Karasa et al., 2008; Lings and Greenley, 2005). A list of items was adapted form items previously used in the literature, an example of internal marketing measure modified into this research: 1 Original item:
● supervisors clearly state what their expectations are of others (Bearden and Niemeyer, 1999);
● I receive enough feedback from my supervisor on how well I am doing (Bearden and Niemeyer, 1999);
● my supervisor clearly states his/her expectations of me (Bearden and Niemeyer, 1999);
● my supervisor does a good job of sharing information (Bearden and Niemeyer, 1999; Naudé et al., 2003; Tsai and Tang, 2008);
● communication is weak between department and employees (Barnes et al., 2004; Lings and Greenley, 2005; Peltier and Scovotti, 2005);
● employees can reach managers easily (Karasa et al., 2008; Chang and Chang, 2008); and
● I have a solid understanding of the ways the organisation evaluates my work performance (Lings and Greenley, 2005; Karasa et al., 2008; Chang and Chang, 2008).
2 Adapted item: ● employees at all levels understand the direction and
key priorities of my organisation.
In regards to determining an appropriate number of items for our measure, there must be a balance between adequate domain sampling and parsimony to obtain content and construct validity (Cronbach and Meehl, 1955). Scales with too many items may lead to respondent fatigue and response bias (Anastasi, 1976). Very long scales can tap into another domain. The process of scale development involved synthesising previous items into three dimensions, namely internal communications, training and internal market research. Items were then reviewed and duplicates were removed. Translation and back translation was next undertaken following procedures outlined in (Pena, 2007). Translation and back translation procedures compared the original and back translated version to ensure that conceptual equivalence was maintained. The procedures we followed resulted in the list of 18 scale items which are presented in Table III.
This research adopted five-point Likert scales, the scale anchors were strongly disagree (1) to strongly agree (5). The results of the internal marketing scale were subjected to reliability and validity tests. Reliability measurement was performed in the current study by analysing Cronbach’s alpha, squared multiple correlation and composite
Table III Internal marketing practice item pool
No. Item
Internal communication 1 My organisation communicates a clear brand image to me 2 There is an internal communication program for all employees in my organisation 3 All communication materials reflect a consistent style in my organisation 4 Employees at all levels understand the direction and key priorities of my organisation 5 In my organisation, communications are appropriate 6 Messages that I receive are aligned with business wide communication
Training 7 My organisation focuses efforts on training employees 8 My organisation provided an orientation program for me 9 The training in my organisation has enabled me to do my job well
10 My organisation teaches me why I should do things 11 Skill and knowledge development happens as an ongoing process in my organisation 12 My organisation provides support to develop my communication skills in order to achieve organisational goals
Internal market research 13 My organisation gathers employee feedback 14 My organisation regularly seeks employee suggestions 15 My organisation collects data on employee complaints 16 My organisation does a lot of internal marketing research 17 My organisation talks with me to identify issues that I may have 18 My organisation surveys employees at least once a year to assess the quality of employment
Holistic management tool
Yu-Ting Huang and Sharyn Rundle-Thiele
Journal of Services Marketing
Volume 29 · Number 6/7 · 2015 · 571–584
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reliability (Table IV summarises cut-off thresholds employed in the current study). In addition, the square root of the average variance extracted estimate (AVE) was used to assess discriminant validity following the Fornell and Larker (1981) procedure. The results of AVE and composite reliability permit assessment of convergent validity (Kline, 1998).
Given that the statistical theory of structural equation modelling (SEM) is asymptotic, it is assumed that larger sample sizes are needed to produce stable parameter estimates (Bentler, 1995). Some researchers recommend that SEM analyses have sample sizes greater than 200 (Kline, 2005). The participant to observed variable ratio exceeded the 10 cut-off suggested by Bentler and Chou (1987). The structure pattern of the remaining items was then evaluated through a CFA using AMOS 19. It is likely that 18 correlated items measuring a single factor would likely have correlated measurement errors (error covariances), which are estimated in SEM. Furthermore, since this scale was composed of 18 items, the impact of correlated errors would be multiplied (Brown, 2006). In applied CFA research, there is a predominant focus on indexes that are sample-size independent (Marsh et al., 2004). Goodness of fit measures used to assess model fit and cut-off thresholds are summarised in Table V. The Akaike Information Criterion (AIC) allows models of varying complexity to be compared (Kline, 1998). The AIC is a modification of the goodness-of-fit �2 statistic that includes a “penalty” for complexity by adjusting for the number of parameters in the model (Kline, 1998).
Results
The 2010 study Reliability results The Cronbach’s alpha for all three dimensions demonstrated relatively high reliability of more than 0.80 (internal communication � � 0.84, training � � 0.86 and internal
market research � � 0.87). Corrected item to total correlations were next assessed and all values exceeded the 0.3 correlation value, with values ranging between 0.55 and 0.75. The items for the three dimensions of internal communication, training and internal market research were deemed to be reliable. The next step was specification of the theoretically expected three-factor solution using a structural equation model CFA procedure.
Internal marketing practice In the internal marketing practice model, three dimensions were specified as latent variables: 1 Internal Communication (IC). 2 Training (T). 3 Internal Market Research (IMR).
The initial model contained 18 items and the revised model contained 16 items (see Table VI). Firstly, the revised model indicated all the factor loadings to be greater than 0.50 (Hair et al., 2010), ranging between 0.61 and 0.86, with 9 of 16 items exceeding a factor loading score of 0.7, and 3 items receiving a factor loading of 0.68 or 0.69. The analysis indicated the data was a good fit to the tested model �2 (101) � 155.17, p � 0.000. Moreover, the resulting goodness-of-fit statistics were a Tucker-Lewis index (TLI), comparative fit index (CFI) and goodness-of-fix index (GFI) greater than 0.90, demonstrating a satisfactory model fit. The range of root mean square error of approximation (RMSEA) as 0.05 to 0.08 was deemed a fair fit (RMSEA � 0.05), and also the smaller the root mean square residual (RMR) the better the model (RMR � 0.05). Based on the criterion suggested in the earlier section, this model represented a good fit to the data (see Figure 2).
Validity and reliability The reliability coefficient, squared multiple correlation statistic for the revised model indicated that these 16 items are reliable measures of the underlying constructs.
Table IV Criteria of reliability and validity
Indices Criteria
Cronbach’s alpha � 0.70 (Pallant, 2005) Composite (or construct) � 0.70 (Hair et al., 2010) reliability � 0.50 (Fornell and Larcker, 1981) Factor loading � 0.50 (Hair et al., 2010) AVE � 0.50 (Fornell and Larcker, 1981) (for convergent validity) � 0.45 (Netemeyer et al., 2003) � newly developed scales AVE for two factors � the square of the correlation between the two factors (for discriminant validity) Hair et al. (2010)
Table V Criteria of goodness-of-fit statistic
Goodness-of-fit statistic Accept level
Goodness-of-fix index (GFI) � 0.90 (Kyle, 1999) Tucker-Lewis index (TLI) � 0.90 (Kyle, 1999) The Bentler comparative fit index (CFI) � 0.90 (Kyle, 1999) The root mean square residual (RMR) � 0.06 (Hu and Bentler, 1998) the Steiger-Lind root mean square error of approximation (RMSEA) � 0.05 � good
(Brown and Cudeck, 1993; Hu and Bentler, 1998)
Holistic management tool
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Table VI Confirmatory factor analysis results– higher education
Construct/item Loadingb Standard
error
Squared multiple
correlation t-value
Internal Communication 1. My organisation communicates a clear brand image to me 0.61 0.14 0.37 7.03�
2. There is an internal communication program for all employees in my organisation
0.61 0.15 0.37 7.03�
3. All communication materials reflect a consistent style in my organisation
0.73 0.14 0.53 8.00�
4. Employees at all levels understand the direction and key priorities of my organisation
0.74 0.15 0.54 8.07�
5. In my organisation, communications are appropriate – – – – 6. Messages that I receive are aligned with business wide communication 0.66 0.13 0.43 7.48�
Training 1. My organisation focuses efforts on training employees 0.68 0.11 0.46 8.23�
2. My organisation provided an orientation program for me 0.64 0.13 0.41 8.23�
3. The training in my organisation has enabled me to do my job well 0.78 0.12 0.60 9.73�
4. My organisation teaches me why I should do things 0.72 0.12 0.51 9.09�
5. Skill and knowledge development happens as an ongoing process in my organisation
0.73 0.12 053 9.22�
6. My organisation provides support to develop my communication skills in order to achieve organisational goals
0.77 0.13 0.59 9.65�
Internal Market Research 1. My organisation gathers employee feedback 0.77 0.07 0.60 12.71�
2. My organisation regularly seeks employee suggestions 0.86 0.09 0.74 12.71�
3. My organisation collects data on employee complaints 0.72 0.08 0.52 10.41�
4. My organisation does a lot of internal marketing research 0.68 0.08 0.46 9.76�
5. My organisation talks with me to identify issues that I may have 0.69 0.09 0.78 9.97�
6. My organisation surveys employees at least once a year to assess the quality of employment
– – – –
Notes: a The estimates reported are from a bootstrapped MLS solution using AMOS; b this is the standardised loading estimate
Figure 2 The second-order confirmatory factor analysis (CFA) model of Internal Marketing (IM) (standardised estimates)
Holistic management tool
Yu-Ting Huang and Sharyn Rundle-Thiele
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Volume 29 · Number 6/7 · 2015 · 571–584
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Additionally, the CFA model parameters were estimated, and reliability was once again analysed. The results of AVE and composite reliability revealed adequacy of internal consistency and convergent validity (Kline, 1998). Average Variance Extracted (AVE) of internal communication (AVE � 0.45), training (AVE � 0.52) and internal market research (AVE � 0.56) were also found to be within the recommended range of acceptability in the literature (� 0.45) (Netemeyer et al., 2003). The AVE values calculated according to the formula presented must be compared with the correlation coefficients of each construct with the other constructs (Table VII). AVE values are above 0.45 and, moreover, are above the correlation coefficients for each dimension. These results provide evidence of discriminant validity between the three proposed dimensions of internal marketing practice.
In this study, convergent validity was assessed by factor loading, Composite (Construct) Reliability (CR) and Average Variance Extracted (AVE) (Fornell and Larcker, 1981). Table VIII shows the standardised factor loading of all items on their constructs are more than the acceptable level ( � 0.5). Composite reliability is a measure of the internal consistency of items in a scale. All components have the acceptable level of AVE between a range of 0.45 to 0.56. Composite reliability statistics also are greater than the recommended threshold of 0.6 (Fornell and Larcker, 1981). The CR for internal communication is 0.81; training is 0.87 and internal market research is 0.86. Hence, three conditions for convergent validity based on factor loading, AVE and CR were met. Estimates of the covariance matrix of the internal marketing practice model reveal many diagonal elements, indicating three dimensions of internal marketing practice. By looking at the variances and covariances accounted for by the model, it shows how closely the model comes to replicating the observed covariance matrix (Diamantopoulos and Siguaw, 2000). This statistic ranges from 0 to 1 with larger samples increasing its value.
Common method variance To test for common method bias, this study employed Harman’s one-factor test (McFarlin and Sweeny, 1992). The rationale for this test is that if common method variance poses a serious threat to the analysis and interpretation of the data, a single latent factor would account for all manifest variables (Podsakoff and Organ, 1986). A worse fit for the one-factor model would suggest that common method variance does not pose a serious threat. The one-factor model yield a �2 � 164.115 with df � 98 (compared with the �2 � 155.167 and df � 101 for the three-dimensional measurement model). The fit is considerably worse for the uni-dimensional model,
suggesting that common method bias is not a serious threat in this study.
The 2012 tourism and hospitality study Reliability results The 2012 tourism and hospitality study sought to extend upon the earlier 2010 higher education by examining employees from two culturally diverse backgrounds to understand whether the Internal Marketing Practice scale could be generalised beyond higher education and Western contexts. Once again high reliability among the three dimensions of internal marketing practice with Cronbach’s Alpha ranging from � � 0.91 to � � 0.94 (see Table IX) was observed. An analysis of the inter-item correlation matrix also demonstrated that the items for each dimension exceeded the thresholds of 0.30 for item-to-total correlation thus indicating that the items are reliable (Nunnally and Bernstein, 1994).
CFA Results The model of internal marketing practice was once again tested with three constructs and 16 indicators. The resulting statistics were factor loadings higher than 0.5 that ranged from 0.76 to 0.90. The CFA model of internal marketing indicated an overall fit of �2 � 387.58, df � 101, p � 0.000, GFI � 0.90, TLI � 0.94, CFI � 0.95, RMSEA � 0.08. The overall fit indices were satisfactory, thus no further specification was performed (Figure 3).
In summary, there was evidence of satisfactory fit for a three-dimensional model of internal marketing practice, involving internal communication, training and internal market research in two services marketing contexts and more importantly in both a Western and Eastern context.
Discussion The internal marketing practice scale synthesised from previous internal marketing studies draws together a wide range of work that has been undertaken over the past 30 years. A multitude of internal marketing definitions are present in the academic literature. These definitions have served to stimulate debate on the internal marketing construct, and as a result we understand that internal marketing crosses the organisational functions of marketing and human resource management and that internal marketing has previously taken both external and internal viewpoints. The current study is internally focussed with the activities and initiatives forming the focus of measures included in the current synthesis. The internal marketing practice scale tested in two services contexts with employees
Table VII AVE analysis with correlation/co-variance matrix result
Internal communication Training Internal market research
Internal communication 0.45 (0.59)
Training 0.64 0.52 (0.41) (0.71)
Internal market research 0.64 0.60 0.56 (0.42) (0.44) (0.75)
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from culturally diverse backgrounds provides a succinct instrument that enables marketers to understand employee’s perceptions of the extent that internal marketing is practised in an organisation. As such, the scale provides a measure that is actionable by marketers. Sixteen items involving three dimensions of internal marketing practice were identified in the current study. The results of the current study indicate that internal marketing practice may be considered as training, internal communication and internal market research. Additional research to extend upon the dimensions described in the current paper and to further validate the internal marketing practice scale is warranted.
This study extends our understanding of internal marketing by identifying in two service settings that internal marketing is a multi-dimensional construct comprising a minimum of three dimensions, namely internal communications, market research and training, that may be captured by 16 items. This confirms empirical evidence to support the internal marketing practice structure as a three-dimensional concept. The results of the current study support Ahmed et al. (2003) who described internal marketing as the internal marketing mix which means internal marketing is a controllable element of organisational management that may be used to motivate and
influence employees. Furthermore, the current study supports Chang and Chang (2008) and Jou et al. (2008) who empirically established internal marketing as a multiple-dimension construct suggesting that internal marketing is far more than one dimension as operationalised by Barnes et al. (2004) and Punjaisri and Wilson (2007). The results of this research suggest that studies using one dimension of internal marketing practice are not fully capturing internal marketing practice and a broader understanding of internal marketing practice can be gained from viewing internal marketing practice as a multi-dimensional concept.
Management implications A reliable and valid measure of internal marketing practice that has been used consistently by researchers was not evident in our review of the literature. We sought to undertake a study to synthesise previous studies enabling a range of internal marketing dimensions to be identified. The present study provides a measure of internal marketing practice that is composed of 16 items across three dimensions, namely internal communication, training, and market research, all of which have been previously
Table VIII Results for the internal marketing modela
Construct/item Loadingb Standard
error
Squared multiple
correlation t-value
Internal communication 1. My organisation communicates a clear brand image to me 0.76 0.05 0.58 17.06�
2. There is an internal communication program for all employees in my organisation
0.78 0.06 0.62 17.06�
3. All communication materials reflect a consistent style in my organisation
0.82 0.06 0.67 17.84�
4. Employees at all levels understand the direction and key priorities of my organisation
0.79 0.06 0.62 17.15�
5. In my organisation, communications are appropriate – – – – 6. Messages that I receive are aligned with business wide communication 0.81 0.06 0.66 17.67�
Training 1. My organisation focuses efforts on training employees 0.87 0.05 0.75 23.34�
2. My organisation provided an orientation program for me 0.83 0.04 0.69 23.34�
3. The training in my organisation has enabled me to do my job well 0.82 0.04 0.68 22.84�
4. My organisation teaches me why I should do things 0.82 0.04 0.68 22.86�
5. Skill and knowledge development happens as an ongoing process in my organisation
0.87 0.04 0.75 25.13�
6. My organisation provides support to develop my communication skills in order to achieve organisational goals
0.86 0.04 0.74 24.88�
Internal market research 1. My organisation gathers employee feedback 0.82 0.04 0.67 22.80�
2. My organisation regularly seeks employee suggestions 0.88 0.05 0.78 22.80�
3. My organisation collects data on employee complaints 0.90 0.05 0.81 23.50�
4. My organisation does a lot of internal marketing research 0.79 0.06 0.63 49.54�
5. My organisation talks with me to identify issues that I may have 0.82 0.05 0.67 20.42�
6. My organisation surveys employees at least once a year to assess the quality of employment
– – – –
Notes: a The estimates reported are from a bootstrapped MLS solution using AMOS; b this is the standardised loading estimate
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identified as part of the internal marketing function. This study provides both academics and practitioners with a measure that can be used to assess employee perceptions of the internal marketing function.
Internal marketing has been linked to various outcomes, including employee satisfaction and customer satisfaction. Marketing managers seeking to understand how customer satisfaction can be further improved need benchmark data
Table IX The results of confirmatory factor analysis in tourism and hospitality (n � 458)
Items Mean (SD)
Corrected item-to-total
correlation
Internal Communication (� � 0.91) 1. My organisation communicates a clear brand image to me 3.7 (1.1) 0.71 4. Employees at all levels understand the direction and key priorities of my organisation 3.7 (1.1) 0.76 5. In my organisation, communications are appropriate 3.5 (1.2) 0.76 2. There is an internal communication program for all employees in my organisation 35 (11) 0.74 3. All communication materials reflect a consistent style in my organisation 3.5 (1.0) 0.76 6. Messages that I receive are aligned with business wide communication 3.5 (1.0) 0.77
Training (� � 0.94) 5. Skill and knowledge development happens as an ongoing process in my organisation 3.5 (1.2) 0.82 4. My organisation teaches me why I should do things 3.5 (1.1) 0.79 1. My organisation focuses efforts on training employees 3.4 (1.3) 0.83 2. My organisation provided an orientation program for me 3.4 (1.2) 0.81 3. The training in my organisation has enabled me to do my job well 3.4 (1.2) 0.80 6. My organisation provides support to develop my communication skills in order to achieve
organisational goals 3.4 (1.1) 0.82
Internal market research (�� 0.94) 2. My organisation regularly seeks employee suggestions 3.0 (1.2) 0.83 5. My organisation talks with me to identify issues that I may have 3.0 (1.1) 0.79 1. My organisation gathers employee feedback 3.0 (1.1) 0.78 3. My organisation collects data on employee complaints 2.9 (1.2) 0.86 6. My organisation surveys employees at least once a year to assess the quality of
employment 2.8 (1.3) 0.81
4. My organisation does a lot of internal market research 2.8 (1.2) 0.78
Figure 3 The second-order confirmatory factor analysis (CFA) model of Internal Marketing (IM) (standardised estimates)
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for internal marketing. Benchmark internal marketing data enables managers to compare and contrast internal marketing performance to diagnose areas where internal marketing efforts can be improved to further contribute towards improved customer and employee satisfaction. Our study offers an initial benchmark for internal marketing practice.
Limitations and future research directions A potential limitation of the 2010 Study is that the sample size (n � 205) was small. Furthermore, only one organisation was involved in the 2010 Study. As such, there is a limit on how far the study’s findings can be generalised. The results of the 2010 Study cannot be generalised beyond the organisation and context considered. Ideally a random sample of sufficient size for statistical testing should be taken from all Australian higher education institutions (n � 38), and this offers an opportunity for future research.
The 2012 Study is also not without limitations. The absence of a database of tourism employees in Australia made it difficult to verify the sample and distribute the survey. Samples were accessed from the Prospect shop but the population were not necessarily employees in tourism and hospitality; this limited the full sample size needed for data analysis, and a different sampling approach may need to be employed. Therefore results must be viewed in light of this limitation. The effective respondent rate was low and, as such, the findings of the 2012 Study cannot be generalised beyond the sample. Additionally, Study 2 is smaller than guidelines suggested by Iacobucci (2010). Further research is recommended using a representative sample to enable generalisability.
This paper represented a first attempt at synthesising measures that had been previously used by internal marketing researchers identifying a three-dimensional measure of internal marketing practice. Additional research is recommended to extend our understanding further. As noted in the literature review, dimensions of training were evident, which suggests additional dimensions of internal marketing practice may exist. Factor loadings were observed from 0.61 to 0.86. Ideally factor loadings should be 0.7 and higher and we recommend that further scale development work be undertaken to establish a robust internal marketing practice scale to extend upon the initial synthesis undertaken here.
Future research needs to establish content and nomological validity. We recommend that future researchers use an independent panel to evaluate each item as appropriate against the given definition of each construct dimension. Selection/deletion at the first stage is better based on a subject expert rating. We then recommend initial model estimation as presented in the current study. We next recommend further research to extend our understanding of dimensions further. Sufficiently high goodness of fit indices as presented in the current study indicate that the given model need not be rejected. However it does not indicate that there could be no alternate models. Future research is recommended to extend upon the initial synthesis presented in the current paper. Estimation of alternate models are recommended to compare and
contrast a single factor model, or a model with correlated latent factors and a second-order factor model with dimensions to further examine the structure of internal marketing practice. Determination of nomological validity for the superior model is then recommended by measuring and relating the construct to theoretically speculated other variables.
The 2010 Study scrutinised the internal marketing practice measures that were originally developed in a Western context in the higher education sector while the 2012 study extended into an Eastern context to ensure applicability beyond Western contexts. Such a finding provides a solid basis for a significant body of future research. Researchers can use the internal marketing practice measure outlined in the current study in future in both Western and Eastern services contexts. Further research is recommended to assess a range of organisations to assess the extent to which each dimension of internal marketing practice impacts customer and employee satisfaction. Organisations performing high on all three dimensions of internal marketing practice may exceed customer expectations, while organisations that rank low on two of three dimensions may fail to meet customer expectations. This understanding would provide further empirical evidence for the impact of internal marketing to achieve outcomes such as employee commitment and customer retention.
Finally, the first study is based on sample from one organisation and therefore the variance is contributed by perceptual and attitudinal differences among respondents. In the second study, the participants are from a multitude of organisations. Here the variance could be attributed to differences among organisations. Future research is warranted to examine the effect of organisation further. Techniques, such as multi-level modelling, which partition variance at the organisation level, permit data to be examined at the individual level taking organisational effects into account. Multi-level modelling enables assessment of both employee and organisational differences within one model.
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Further reading
Zikmund, W.G., Black, W.C., Babin, B.J. and Anderson, H. (2010), Marketing Research, Cengage Learning, Victoria.
Corresponding author Yu-Ting Huang can be contacted at: [email protected]
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Holistic management tool
Yu-Ting Huang and Sharyn Rundle-Thiele
Journal of Services Marketing
Volume 29 · Number 6/7 · 2015 · 571–584
584
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- A holistic management tool for measuring internal marketing activities
- Introduction
- Literature review
- Methodology
- Results
- Discussion
- Management implications
- Limitations and future research directions
- References
Using organisational culture to design internal marketing - Reading.pdf
Journal of Services Marketing Using Organizational Culture to Design Internal Marketing Strategies D.J. Wasmer Gordon C. Bruner II
Article information: To cite this document: D.J. Wasmer Gordon C. Bruner II, (1991),"Using Organizational Culture to Design Internal Marketing Strategies", Journal of Services Marketing, Vol. 5 Iss 1 pp. 35 - 46 Permanent link to this document: http://dx.doi.org/10.1108/08876049110035468
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Users who downloaded this article also downloaded: (2003),"Internal marketing issues and challenges", European Journal of Marketing, Vol. 37 Iss 9 pp. 1177-1186 http:// dx.doi.org/10.1108/03090560310498813 (2000),"Advances in the internal marketing concept: definition, synthesis and extension", Journal of Services Marketing, Vol. 14 Iss 6 pp. 449-462 http://dx.doi.org/10.1108/08876040010347589
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USING ORGANIZATIONAL CULTURE TO DESIGN INTERNAL MARKETING STRATEGIES D. J. Wasmer Gordon C. Bruner II
Concern in recent years on improving and stabilizing service quality has led to an acute awareness of the pivotal role played by front- line employees—those who personally provide services to customers. "Internal" marketing strategies have therefore been playing a major role in producing higher levels of service provider performance. This article draws on the emerging organizational culture literature to develop a practical method for identifying segments within the service organization that can then be the target of internal marketing strategies. The basic premise is that to enhance service quality, the service marketer needs to view employees as yet another group of "cus- tomers" who can be analyzed by means of established marketing techniques.
Marketers have become increasingly interest- ed in ways to improve the quality of offerings and productivity. Service marketers, in particu- lar, have an interest in enhancing the quality of services they deliver, since high service quality has been found to be positively correlated to profitability, productivity, and market share.13 However, because of several unique characteris- tics of services marketing, traditional methods of enhancing productivity and product quality are often not available to the service marketer. The result is that the performance of services varies across service-providing employees and among customer transactions, prompting marketing management to take a more active role in the management of "production" personnel than is normal in conventional goods marketing.
D. J. Wasmer is an Assistant Professor of Marketing at Saint-Mary-of-the-Woods College. His research interests are ser- vices marketing, nonprofit marketing, and segmentation strategies. He has published in the area of segmentation and has served as a consultant in the computer and health care industries.
Gordon C. Bruner II is an Associate Professor of Marketing at Southern Illinois University. He received his B.B.A. and M.S. in Marketing from Texas A&M University and graduated in 1983 from the University of North Texas with a Ph.D. in Marketing. His published research has appeared in the Journal of Marketing, Journal of Consumer Marketing, Journal of Retailing, Journal of the Academy of Marketing Science, and other journals as well as conference proceedings.
Vol. 5 No. 1 Winter 1991 35
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This article examines the management of the service-performance gap that exists between service quality specifications and the service actually delivered.13 The problems associated with m a n a g i n g s e r v i c e e m p l o y e e s will be explored and recommendations offered. The basic premise is that the service marketer needs to view employees as yet another group of "customers" who can be analyzed by means of established marketing techniques.
A Model of Services Marketing
To aid this discussion of organizational cul- ture's role in internal marketing programs, a c o n c e p t u a l model of services marketing is employed (Figure 1). This model illustrates 'hat because of the unique characteristics of ser- vices marketing, additional relationships must be managed as compared with traditional goods marketing. The model takes the form of a trian- gle, emphasizing the three key participants in service marketing: the customer, the firm's mar- keting management, and the service provider.*
The relationships among these participants can be characterized by six distinct "flows" (Figure 2):
Flow 1: The offer. This represents the flow of information from the firm's marketing manage- ment to the customer. The consumer's expecta- tions regarding service quality are formed on the basis of the information c o m m u n i c a t e d through the firm's promotional activities.
Flow 2: Internal communications. This rep- resents the flow of information from the firm's marketing management to those employees personally involved with providing the ser- vice. Management's expectations of service quality are communicated to employees via procedures, policies, and training.
Flow 3: Service specifications. This repre- sents the flow of information from the cus- tomer to the employee providing the service. The information can be used by the employee to guide the exact nature of the service per- formed (e.g., a patient describing symptoms to the physician).
Flow 4: Service performance. This repre- sents activity flowing from the employee to a particular customer. It is in this flow that the service performance-gap manifests itself.
Flow 5: Customer feedback. This represents the flow of information and/or activity from the customer to the firm. Complaints would typify negative information flowing back to the company whereas repeat business would indi- cate a flow of positive activity.
Flow 6: Employee feedback. This represents information flowing from employees to man- agement. The information might travel through informal channels (comments, observation) or more formal means (reports, research).
There are several of these flows that can lead to poor service quality. Though some sugges tions will be made, it is not the purpose of this article to discuss all of the many tactics for changing organizational values. Such recom- mendations can be found elsewhere.17 Instead, the focus here is on improving internal com- munications (Flow 2) by more effectively col-
* "Service provider" is a phrase common in the service literature to refer to the employee who personally inter- acts with the customer and performs the service.13
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USING ORGANIZATIONAL CULTURE TO DESIGN INTERNAL MARKETING STRATEGIES
lecting and using information from t h e employees who perform the service (Flow 6). We propose that segmentation techniques that currently being utilized by service marketers in external marketing can also be applied in the management of human resources within the service organization (internal marketing).
The Centrality of the Service Provider
Because of the unique nature of services, the employee performing the service has a critical role in facilitating the service exchange. While the importance of contact personnel has been acknowledged in the service literature, only recently has it been viewed as an important "marketing" issue.7,10 Marketers have typically dealt with activities such as product develop- ment, pricing, distribution, and promotion.
The marketing major in college is taught much about u n d e r s t a n d i n g customers, but leaves academia with little in-depth instruction con- cerning management of employees other than professional salespeople.9 Such study, instruc- tion, and activity have been historically viewed as personnel management, not marketing.
A realization of the critical role employees play in services marketing leads to the internal marketing function. The goal of such a pro- gram is to create an environment in which ser- vice providers work for the firm rather than just for t h e m s e l v e s or a p a r t i c u l a r outlet.6 Internal marketing attempts to promote a com- mitment to the organization's goals by "sell- i n g " t h e s e r v i c e p r o v i d e r s on t h e s e r v i c e offering. It does so by helpng the employees understand the need for the service and the rationale behind management's decisions con-
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cerning service delivery. Internal marketing also implies the fostering of shared attitudes c o n c e r n i n g s e r v i c e q u a l i t y a n d a c e r t a i n amount of employee input into service deliv- ery decisions.4
Marketing shared values should place particular emphasis on customer con- sciousness and service quality.
How should such internal marketing pro- g r a m s be d e v e l o p e d a n d i m p l e m e n t e d ? Following a brief review of organizational cul- ture concepts, we will address that question and then conclude with recommendations.
Organizational Culture Organizational culture has been a hot area in
the management literature for several years, as well as a t o p i c of i n t e r e s t in t h e p o p u l a r press.14 However, marketers have only recently begun to explore the role organizational cul- ture plays in management of activities of par- ticular interest to them. This is not to say that the topic has been entirely ignored. In fact, a few have boldly suggested that future develop- ments in marketing p l a n n i n g must include organizational culture.11
While culture can be viewed several ways, the perspective taken here is drawn from the contin- gency management research stream. This line of reasoning treats organizational culture as a man- ageable internal variable. Therefore, organiza- t i o n a l c u l t u r e refers to the set of n o r m s , attitudes, values, and behavior patterns that form the core identity of an organization or an operating unit within an organization.5 Further, organizational culture usually involves the goals of the organization, the preferred means to reach the goals, the expected behavior patterns of employees, and a set of principles which main- tain the identity and integrity of the organiza- tion.16 In other words, organizational culture could be viewed as the internal equivalent of consumer lifestyles which marketers are accus- tomed to considering when formulating strategy.
This last point is the central issue on which this article turns: marketers, with well-devel- oped methods of measuring attitudes and val- ues via p s y c h o g r a p h i c profiles, are better prepared than they might think to study orga- nizational culture and use these findings to develop internal marketing strategies. It is pro- posed that as far as marketing management is concerned, particularly in service organiza- tions, what is important is the communication and channeling of a firm's culture in directions that give employees guidelines and incentives that promote a system of strongly held, shared values. In services marketing these shared val- ues should place particular emphasis on cus- tomer consciousness and service quality.
Organizational culture can be man- aged and changed.
An excellent example of an organization that has benefited from such a program is Disney.12 It has m a d e a c o n c e r t e d effort to g r o u n d all employees in the importance of guest enjoyment of the theme park visit. As one part of its train- ing program, Disney puts all employees through its "Traditions I" experience. This amounts to an all-day program in which they are taught the guiding philosophy of the organization.
Organizational Culture and Internal Marketing
Although the idea is not universally accept- ed, it is assumed here that organizational cul- ture can be managed and, therefore, changed. Thus the service marketer has the opportunity to integrate internal marketing programs into the firm's overall h u m a n resources manage- ment strategy. The starting point for internal marketing strategies is the setting of goals for the program. Specific goals will vary from business to business, but at least two are appli- c a b l e to m o s t s e r v i c e f i r m s : c o n v i n c i n g employees of the value of customer service, and fostering positive employee attitudes con- cerning service quality.
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By achieving shared organizational values concerning consumer service and service quali- ty, the service marketer will reduce the service- performance gap that leads to dissatisfied customers. In other words, because of the cen- tral role that employees play in seeing that the service is up to specified quality levels, it is necessary that they have positive attitudes con- cerning those quality specifications. A service provider who has accepted these goals should strive to meet them and is likely to achieve higher levels of customer satisfaction. In con- trast, an employee who does not either under- stand or accept the service quality levels is unlikely to achieve them and thereby brings about customer dissatisfaction. Indeed, one of the fastest ways to irritate customers is to build up their expectations with enticing promotion (Flow 1) and then fail to meet those expecta- tions with the actual service provided (Flow 4). So, for example, Delta Airlines is creating high expectations for flyers with its "We love to fly and it shows" campaign. If the quality level suggested by that slogan is not understood or achieved by ticket agents, stewardesses, pilots, a n d baggage h a n d l e r s , t h e n flyers a r e , in essence, being set up for a fall. In fact, the air- line may experience greater customer dissatis- faction than if expectations had not been raised to such high levels in the first place.
Internal Marketing Research Once marketing managers have established
the goals of the internal marketing program, the next logical step is to gather information from w i t h i n the o r g a n i z a t i o n . This can be viewed as an internal marketing research func- tion and does not necessarily have to be a for- mal process. Through their experience and skill, top managers may intuitively understand the current organizational culture.3
However, there are several reasons for aug- menting intuition and insight with data collec- tion. First, as with icebergs, the core values of an organization are unlikely to be well under- s t o o d w i t h o u t a p e n e t r a t i n g e x a m i n a t i o n beneath the surface. Second, intuition may provide a top manager with an adequate idea
of the overall culture but is likely to fail in distingishing between numerous subcultures within the organization. In a similar vein, the difficulties associated with informal observa- tion are compounded in a large service organi- zation with multiple sites and thousands of employees. Such a situation would seem to n e c e s s i t a t e a formal i n t e r n a l m a r k e t i n g research program.
Organizational culture could be viewed as the internal equivalent of consumer lifestyles.
A key concern at this point would be defin- ing the questions which the research should address. The information that is required par- allels the type of data gathered for segmenting consumer markets. Behavioral data is needed for an understanding of individual as well as group work performance. Some of this would be internally generated data and would be more easily compiled than behavioral informa- tion on consumers. For example, it is easier to assess the number of months in their positions or the frequency of poor p e r f o r m a n c e for employees than it is to determine the history of service use and satisfaction among a represen- tative sample of customers.
The psychographic data needed for develop- ing internal marketing strategy requires the rather precise measurement of organizational culture. The type of information that should be gathered in this step is directly related to the goals to be achieved and will vary from firm to firm. Two issues that are known to have an impact on service quality and that should be assessed are employees' sense of shared mis- sion and their loyalty to the firm. Other possi- ble values to examine are listed in Table 1. When designing the research program, top management should not be overly concerned with the general nature of its organizational culture, but should stress examination of the issues most relevant to the problem being addressed. Focusing only on those pertinent attitudes and values of interest to management
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will expedite the research process and help to minimize financial and time costs.
Internal Research Approaches The service marketer has several approaches
for g a t h e r i n g p s y c h o g r a p h i c d a t a . O n e approach is to use observational techniques to identify organizational psychographic profiles. This is a mors formalized method of using experience and intuition that is typical with expert judgment.1 This unobtrusive approach may be adequate for many small service firms and can be viewed as a starting point for a manager wishing to use organizational culture concepts in the design of internal marketing.
Should observational techniques fail to pro- vide sufficient information to aid the design of an internal marketing program, the manager will need to use a more objective approach. One such approach would be a standardized culture survey instrument designed to measure a broad spectrum of organizational constructs in a variety of settings. An example of a pub- l i s h e d s t a n d a r d i z e d i n s t r u m e n t is t h e Kilmann-Saxton Culture-Gap Survey.8 Though previously constructed instruments such as this minimize the costs of developing a survey, their major drawback is a lack of specificity in understanding a particular organization.
A preferable approach is to develop an organi- zation-specific questionnaire.2 This approach
allows top management to identify important organizational values as well as the degree to which these values are shared among organiza- tional members. Thus, the survey can be focused to address specific questions concerning shared organizational values that are pertinent to the development of an internal marketing strategy. For example, if the goals of the internal market- ing program relate directly to the implementa- tion of a c h a n g e in strategy, t h e s u r v e y instrument can be designed to address organiza- tional values relating to the new strategy and to the change itself. The improved efficiency and effectiveness of an organization-specific survey instrument seems to tip the scales in favor of this approach compared with others. A simple pro- cess for measuring shared organizational values is presented in Table 2.
Using Organizational Psychographics The next step in the internal marketing pro-
gram is to try to make some sense out of the data generated by the organizational culture research. One possible outcome would be the identification of segments within the service firm that share certain values and behaviors. This prospect seems most likely in firms that have multiple-site locations, with the likelihood of finding diverse cultures being related to the geographic separation of the operating units.15 A possible set of employee segments and potential managerial responses are provided in Table 3.
Table 1 Shared Organizational Values
Organizational Pride
Customer Service
Service Quality
Innovation
Short-term Profitability
Technological Leadership
Sense ofMission
Entrepreneurship
Outperforming Competition
Internal Competition
Respect for Other Employees
Striving for Excellence
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Table 2 Shared Organizational Values Measurement Process*
Step 1:
Step 2:
S t e p 3 :
Develop List of Organizational Values
Given goals provided by marketing management, make a tentative list of desirable shared organizational values. Express the values so that they should be understand- able to all service providers. The list can be fine tuned via qualitative techniques such as focus groups or depth interviews.
Survey Service Providers
Based on the final list of organizational values, construct a survey instrument and administer it to service-providing employees. Measurement scales should be used to provide a quantitative indicator of a person or group's degree of organizational value acceptance.
Analyze Results
Evaluate the data gathered from the survey to determine such things as value con- gruency within service locations, between service locations, and between service providers and marketing management. This information can be used to identify employee or service outlet clusters which can then receive differential treatment.
* Adapted from Badovick and Beatty2
Table 3 Strategic Response Matrix
Service-Provider Behavior
Status Evidence
Heros
Erratics
Black Sheep
Employee(s) consistently meet or exceed assigned service goals
Employee(s) exhibit inconsistent achievement of assigned service goals
Employee(s) rarely achieve assigned service goals
Managerial Response
Strategy
Maintenance
Enhancement
Turn-Around
Tactics
Awards Promotions Raises
Change in incentives Goal Clarification Personnel Adjustments
Terminations Retraining Lower expectations for short run
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The m a n a g e r may find c e r t a i n l i n k a g e s between a performance measure and a shared organizational value. An example of such a linkage would be a relationship between con- sistent customer satisfaction with service and employee attitudes that favor customer service. The internal marketing strategy developed should focus on reinforcing these attitudes and the desired behaviors. In addition, the service firm can use exemplary operating u n i t s as models for other outlets. The major thrust of the internal marketing strategy is to under- stand and then modify attitudes in the "worst" units to approach those of the "best" units. In this way the service firm can increase the like- lihood of consistent service quality and cus- tomer satisfaction. This is the central reason for including organizational culture concepts in internal marketing strategies: It gives service marketers a h a n d l e on a previously uncon- trolled variable that influences service quality.
Top managers may i n t u i t i v e l y understand the current organiza- tional culture.
This technique can also be applied when a service firm is attempting to implement new strategies. The internal marketing research program may reveal that those segments with- in the organization that successfully imple- m e n t e d t h e n ew s t r a t e g y s h a r e d p o s i t i v e attitudes toward innovation. Once again these operating units could be used as models for changing attitudes in other units or the entire organization to enhance the implementation of new strategies.
Yet another outcome of the internal market- ing research program might be the identifica- t i o n of i n c o n g r u e n c e s b e t w e e n t h e w a y employees think the organization should be run and how they perceive it is actually being run. It has been suggested that such a signifi- cant gap between desired and actual condi- tions often manifests itself in role stress, job d i s s a t i s f a c t i o n , frustration, and e m p l o y e e turnover.18 This problem is of particular con-
cern to the service marketer because of the critical role of the service-providing employ- ee. A dissatisfied e m p l o y e e often delivers poor service, causing dissatisfied customers. The information generated through internal marketing research can be used to design an internal marketing strategy that narrows the gap between service quality expectations and actual performance.
A change in top management is often necessary to adapt the organi- zational culture to a changing busi- ness environment.
These are just a few examples of the strategies that can be developed based on the information gathered via internal marketing research. A more specific illustration of how such research could be conducted and put to use is presented in the Appendix. In general terms the internal marketing strategy can be used to change orga- nizational culture in such a way that shared organizational values are consistent with orga- nizational goals. Above all, the service marketer should be aware of the important role internal communications and incentives play in estab- lishing employee expectations and reinforcing organizational values.
One other point that can be drawn from the organizational culture literature is the impor- tance of role models in the development and changes of organizational culture. The example of using top performing units as examples is one type of such modeling. However, top man- agement seems to be the most important role model for developing a strong organizational culture.1519 This is particularly true in "young" organizations still headed by an entrepreneuri- al CEO. An example is Apple Computers, an organization that Internalized many of the val- ues of its founder, Steven Jobs. In this case a change in top management was necessary to adapt the organizational culture to a changing business environment.
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Recommendations and Implications
The service marketer who wishes to develop an internal marketing strategy as a means of managing the firm/service provider relation- ship (Flows 2 and 6) should consider the fol- lowing process:*
1. View the employees performing the ser- vice as an intervening set of "customers" who require individualized treatment apart from other customer or employee groups.
2. Establish specifications regarding desired levels of service quality.
a. Marketing management should deter- mine the primary objectives it would like to achieve with the customers.
b. With such objectives in mind, manage- ment should formulate performance stan- d a r d s for t h e e m p l o y e e s a n d s h o u l d consider their input.
c. When a set of performance standards are finalized they should be written down and communicated clearly and frequently to the service-providing employees.
3. Conduct internal marketing research that consists of two major components
a. Managerial intuition and insight as well as internally generated data on employees' per- formance, experience, attitudes, and so on.
b. Organizational culture data concerning shared values such as customer service, service quality, teamwork, and desire for excellence (Table 1). Research tools famil- iar to the marketer (e.g., surveys, depth interviews, focus groups) are appropriate means for gathering this information.
4. Segment the population of service-provid- ing employees and identify those organization- al v a l u e s a n d a t t i t u d e s t h a t are l i n k e d to desired outputs such as customer service and service quality, illustrated in Table 3.
5. Tailor specific internal marketing strate- gies for each employee segment. These strate- gies could take on two extreme forms:
a. Segments that have strongly held values concerning customer service and service q u a l i t y . T h e y e x h i b i t a c l o s e m a t c h between actual service quality and speci- fied service quality, so they may require only reinforcement of currently held atti- tudes and behaviors.
b. Segments that lack strongly held values concerning customer service and service quality and that also exhibit a large ser- vice-performance gap. They require more extensive internal marketing strategies. Tactically these might involve increased employee-directed promotion, formal pro- grams to motivate employees to identify with and take pride in the organization, personnel adjustments, employee involve- ment in service development, and greater use of membership symbols such as but- tons, badges, and uniforms.
6. Conduct follow-up research to determine the extent to which the performance has been u p to set s t a n d a r d s . D e p e n d i n g u p o n the degree of achievement, marketing management could either:
a. Adopt a "maintenance strategy" so that an already satisfactory level of perfor- mance will continue and improve. b. Reassess the internal marketing strategy and the performance standards to deter- mine which requires adjustment in order to reduce the service-performance gap.
Finally, to say that the shared values that compose organizational culture play an impor- tant role in achieving customer service goals does not deny the role of training. In fact, train- ing is likely to be the most important formal process that communicates to them the culture and all the values, attitudes, performance stan- dards, and so on. As important as formal train- ing is, however, service marketing managers must realize that their job of inculcating corpo- rate culture to employees is an ongoing activity
* For an example of how such a program might be implemented, please refer to the Appendix.
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that continually goes on outside the confines of the formal training session.20
Conclusions Corporate culture has gained the interest of
both p r a c t i t i o n e r s a n d a c a d e m i c i a n s . Organizational culture can be a useful concept for the service marketer wishing to manage the firm/service provider relationship through the use of internal marketing. By identifying shared
organizational values that are related to service goals, the service marketer can attempt to create and maintain an appropriate culture to reduce the gap between desired and existing organiza- tional culture. Just as psychographic profiles aid in the development of effective promotional appeals to consumers, the information gathered by studying a firm's shared organizational val- ues will also enhance the effectiveness of a ser- v i c e firm's c o m m u n i c a t i o n s t o , a n d management of, service-providing employees.
APPENDIX Illustration of How an Internal Marketing Strategy Could be Formulated
A service firm with twelve geographically sepa- rate outlets has found a high degree of variability in service quality across the various service loca- tions, measured by the number of customer com- plaints. Assuming that goals concerning service quality have been previously established and that data on each outlet's achievement of these goals are available, the service manager would next gather data from each outlet concerning particular organizational values of interest. Examination of employee attitudes regarding the importance of customer service and loyalty to the company are likely to be measured (see Table 1). This may be accomplished via observational or survey-based techniques. For this example it will be assumed that a firm-specific survey was employed.
After analysis of the data, the manager iden- tified three groups of outlets:
• Heroes (three outlets). These outlets are staffed primarily with employees who consis- tently attain service quality goals. In addition, the majority of service employees in the three outlets indicate having a high regard for cus- tomer satisfaction. They express great pride in the organization and believe their purpose is to satisfy customers' needs as well as possible.
• Erratics (six o u t l e t s ) . The majority of employees in these outlets fall somewhat short
of achieving service quality goals or at least meet them inconsistently. The employees hold shared organizational values concerning cus- tomer satisfaction but not as strongly as do the Heroes. The Erratics also don't seem to be as proud of the firm as the Heroes.
• Black Sheep (three outlets). These outlets are staffed by service providers who consis- tently fall short of service quality goals. They exhibit low interest in customer satisfaction and have little pride in the firm. This assess- ment is supported by the fact of this group's higher than average turnover rates.
The manager is faced w i t h three distinct employee segments, all exhibiting different service-performance gaps and psychographic profiles. As when marketing to three distinct segments of consumers, the service marketer would have to develop three distinct internal marketing strategies, one for each employee segment.
A Maintenance strategy would seem to be appropriate for the Heroes outlets. This might consist of little more than a reinforcement of presently held values concerning customer sat- isfaction. It could be in the form of rewards, s u c h as p r o m o t i o n s a n d r a i s e s , t h e r e b y increasing the likelihood that such desired
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USING ORGANIZATIONAL CULTURE TO DESIGN INTERNAL MARKETING STRATEGIES
behaviors will be repeated. The Erratics would appear to require an Enhancement strategy that has as its goal the improvement of currently held values concerning customer service. This could take the form of placing emphasis on customer service in communications to these outlets, possibly using the Heroes as models. The firm would also want to build this group's loyalty to and pride in the organization.
The development of an internal marketing strategy for the Black Sheep would be a more difficult task. A Turn-Around strategy would require much more time and effort. It may prove necessary to alter outlet performance directly through termination of ineffective personnel. Another less drastic measure is retraining of problem employees and possibly their supervi- sors as well. Management might even be forced to lower their performance goals temporarily.
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3. Baker, E. "Managing Organizational Culture," Management Review, 69 (1980), 8-13. 4. Booms, B., and M. Bitner, "Marketing Strategies and Organization Structure for Service
Firms," in The Marketing of Services, ed. J. H. Donnelly and W. R. George. Chicago: American Marketing Association, 1981, pp. 47-50.
5. Denison, D., "Bringing Corporate Culture to the Bottom Line," Organizational Dynamics 13 (1984), 4-22.
6. Feinberg, M., and A. Levenstein, "It's Not My Job, Man," in Managing Services: Marketing Operations and Human Resources, ed. Christopher Lovelock. Englewood Cliffs, NJ: Prentice- Hall, 1988.
7. Hoyt, F. and K. Beverlyn, "Services Marketing: A Conceptual Model," Journal of Midwest Marketing, 2 (1987), 195-199.
8. Kilmann, R. and M. Saxton, The Kilmann-Saxton Culture-Gap Survey, Pittsburg, PA: Organizational Design Consultants, Inc., 1983.
9. Lovelock, C , "Business Schools Owe Students Better Service," in Managing Services: Marketing Operations and Human Resources, ed. Christopher Lovelock. Englewood Cliffs, NJ: Prentice-Hall, 1988.
10. Magrath, A. J., "When Marketing Services, 4 Ps Are Not Enough," Business Horizons, 29 (1986). 44-50.
11. Mahajan, V., P. Varadarajan, and R. Kerin, "Metamorphosis in Strategic Market Planning," in Contemporary Views on Marketing Practice, ed. G. Frazier and J, Sheth. Lexington, MA: Lexington Books, 1985.
12. Meister, J., "Companies Weave the Disney "Magic" Into Their Own Businesses," Marketing News, February 5, 1990, 12-13.
13. Parasuraman, A., V. Zeithaml, and L. Berry, "A Conceptual Model of Service Quality and Its Implications for Future Research," Journal of Marketing, 49 (1985), 41-50.
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THE JOURNAL OF SERVICES MARKETING
14. Peters, T., and R. Waterman, In Search of Excellence from America's Best-Run Companies New York: Harper & Row, 1982.
15. Schein, E., "Coming to a New Awareness of Organizational Culture," Sloan Management Review, 25 (1984), 3-16.
16. Schein, E., "Organizational Socialization and the Profession of Management," Sloan Management Review, 30 (1988), 53-65.
17. Schneider, B., "Notes on Climate and Culture," in Managing Services: Marketing Operations and Human Resources, ed. Christopher Lovelock. Englewood Cliffs, NJ: Prentice-Hall, 1988.
18. Schneider, B., J. Parkington, and V. Buxton, "Employee and Consumer Perceptions of Service in Banks," Administrative Science Quarterly, 25 (1980), 252-267.
19. Wilkins, A., "The Culture Audit: A Tool for Understanding Organizations," Organizational Dynamics, 12 (1983), 24-38.
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