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Internal marketing

  1. 1. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION International Journal of Marketing Research AUGUST 2013 VOL.1, No.6 Internal Marketing: A Spreading Tool within Organizations 1 Haritz Gorostidi Martinez (Corresponding author) & 2Xue Lu Wang 1. Glorious Sun School of Business & Management, Donghua University, 1882 Yan’an Road West, Shanghai 200051, China 2. Shanghai First Maternity and Infant Hospital,536 Changle Road Jing’an, Shanghai 200040, China Accepted 16 August 2013 Abstract Internal Marketing is an important but still an under researched aspect of service marketing about customer-consciousness of frontline employees. As it is gradually getting more attention from researchers and practitioners, this study reviews the internal marketing (IM) literature throughout different industries. Papers were retrieved from all databases of ISI Web of Knowledge during years 1950-2013. Main highlighted areas in the IM topic include; health care industry (with a 48% of the retrieved records), service industry (21%), technology industry (8%), education industry (6%) and financial industry (4%). Other individual sectors (13%) have also tried to implement internal marketing schemes within their organizations. Well motivated and committed employees, with a clear vision about the service imply customers being well served. Results in the literature also show that a good internal marketing strategy depends on the affection and commitment towards the organization by their members. Hence, it’s important to understand the staffs’ needs and expectations. Recent research on internal marketing includes broader concepts as happiness in workplace and total service quality for customers. We find research gaps in this matter and provide directions for further investigation. Key Words: Literature review, Internal marketing, Service marketing, Internal customers, Strategic marketing, Health care 1. Introduction Literature on marketing, services marketing, total quality management, operations management, human resource management, corporate strategy and organizational development revealed a body of work referring to an internal marketing concept or internal customer concept. This seems to have grown out of an organizational internal communications perspective with the notion of an ''inner market'' in the organization, comprising what is called ''internal customers'' (Varey, 1995). One theme that has emerged consistently in the recent services marketing literature is the importance of frontline employees in service delivery. Internal marketing concept is based on the belief that a firm's internal market/employees can be motivated to strive for customer-consciousness with a market orientation and a sales-mindedness through the application of accepted external marketing approaches (Boshoff & Tait, 1996). 206
  2. 2. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Negative staff attitudes affect quality of care, and at the same time patient and staff negative word of mouth affects the effects of marketing campaigns (Cooper & Cronin, 2000). Internal marketing embraces the notion of where the employees of the firm become internal customers. As with external customers these too have requirements that need satisfying. Thus, through management satisfying the needs of internal customers, employees become more motivated and committed to the cause, which at the same time leads to external customers being well served (Barnes, Fox, & Morris, 2004). Such a marketing concept challenges traditional marketing methods, which focus on serving external customers only. At the same time, internal marketing should promote job performance (C.-S. Chang & Chang, 2007). Influence of internal marketing on frontline employees' performance depends on their affection and commitment to their own organization, as well as their job satisfaction (Wang, Cong, & Yan, 2008). Mendoza, Hernandez and Tabernero performed a literature review analyzing the orientation to the so called internal clients as a central element of internal marketing but differentiating it from the market orientation (Mendoza Moheno, Hernandez Calzada, & Tabernero Urbieta, 2011). Among other industries, a specially significant amount of health care organizations have been researching the benefits and the applicability of internal marketing (C.-S. Chang & Chang, 2007; C. S. Chang & Chang, 2009; Cooper & Cronin, 2000; Hafer & Joiner, 1984; P. Lee, Gombeski, & Doremus, 1991; J. W. Peltier, Boyt, & Westfall, 1997; Tsai & Tang, 2008). 2. Literature review 2.1. Service employee internal marketing Initial internal marketing investigation studied transaction cost perspectives, of how internal marketing can be measured and whether it is a necessary concept or not (Pitt & Foreman, 1999). It was found that there are at least two types of existing internal customer within the firm, and they use different criteria to evaluate the quality of the service which they receive from their internal suppliers (Brooks, Lings, & Botschen, 1999). The concept and the tool of internal marketing schematic (IMS) comes from tried and tested management tools identifying process that deliver quality services internally and externally providing for measurements of the service quality. These measures are used to develop and improve targets within all groups of an organization (Lings, 1999). Internal marketing theory is continuously expanding its application in enterprise internal management (J. Huang & Wang, 2003). There are significant issues with the way a total quality management (TQM) is being implemented due to the negative feelings and a reduced level of interest that can arise. It is claimed that TQM has lost its way (Longbottom, Osseo-Asare, Chourides, & Murphy, 2006). Service employees are reported to influence negatively in the development of a market orientation, making difficult the service company's effort to become a more customer centric organization. A way to overcome this barrier would be the implementation of the mentioned internal marketing strategy. Nevertheless, the extent literature reports that the number of companies practicing marketing internally is disproportionally small comparing to the number of companies trying to adopt the market orientation strategy only (Gounaris, 2008). As a proposal for a broadened internal marketing concept is the incorporation of happiness in the workplace (HWP) it’s a wider concept than the internal marketing concept (IMC). Given the nature and meaning of work for human beings, it should be treated as a channel where people could improve their self-esteem and could fulfill themselves through their tasks on the job as well as feel happy (Vasconcelos, 2008). Internal marketing is also seen fundamentally as a process in which leaders instill into followers a sense of oneness with the organization, formally known as the "organizational identification" (OI), both employees' and sales managers' OI are positively related to their business units' financial performance (Wieseke, Ahearne, Lam, & van Dick, 2009). Wu & Cheng developed a conceptual model to evaluate the optimal internal marketing 207
  3. 3. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION strategy in services under open economy, verifying the effect of this kind of marketing strategy on the satisfaction of marketing channel members (W.-Y. Wu & Cheng, 2009). Service companies have tend to use friendly flexible working practices in large proportions, but there is a small negative relationship between unfriendly practices and service quality suggesting that some service organizations tend to create more supportive environments offering flexible work arrangements (Podnar & Golob, 2010). Paliaga and Marco researched the characteristics of internal marketing of companies working in the Croatian market researching the implementation degree of its principles and the internal marketing concepts (Paliaga & Strunje, 2011). 2.2. Financial sector internal marketing Internal marketing initiatives in UK retail banks showed that, although internal marketing attempts to function as a culture change mechanism, result rather than being homogenous and united around the imagery of the consumer and service quality, show ambiguity and differentiation throughout the several organizational stakeholders (Kelemen & Papasolomou-Doukakis, 2004). In a study of non-life insurance in Taiwan results showed significant correlations among internal marketing, organizational culture, job satisfaction, and performance of non-life insurers (Shiu & Yu, 2010). 2.3. Technological organization internal marketing The need for more flexible short term type of organizations in high technology has resulted in an increase of use of teams and project groups using their special know how and their experience in marketing activities. The handling of these intra organizational relationships between the different units in industrial high tech companies is a key prerequisite for the successful management of their customer relationships. The development of these internal marketing units, the establishment of good communications between them as well as the coordination of their activities present big challenges (Moller & Rajala, 1999). From a study of 238 telecom companies, environmental quality positively impact interactive quality and interactive quality positively impact outcome quality. As the intermediate variable, the concept of trust has a positive influence on work satisfaction and commitment, and therefore it affects internal customer/employees’ loyalty (P. Huang, Huang, & Chen, 2008). Internal marketing, job satisfaction and service attitude all have significant and positive effects on job performance. In other words, efforts in any of these key aspects can help improve the overall performance of a high-tech organization (M.-Y. Wu & Lee, 2011). A study of a publicly owned power company in Taiwan also showed that internal marketing has a positive effect on organizational citizenship behavior (OCB) (C.-C. Chang, Tseng, & Chen, 2012). 2.4. Health care organization internal marketing Hafer & Joiner (1984) addresses the role conflict and image problems that nurses have with role partners, discussing that if those problems were corrected, nurses could be valuable assets in a “team selling” effort to help hospitals build their images. A first internal marketing communication model was discussed to identify factors and relationships influencing the internal diffusion and implementation for innovative services. It presented an opportunity to apply the marketing concept to the implementation of innovative services and meanwhile helping the organization achieve good external market position (Hassan & Foltz, 1990). In order to take good care of the employees, offering health care programs hospitals could develop and improve several offerings and at the same time help the health care cost for a country (Busbin & Self, 1991). 2.4.1. Not taking advantage enough of internal marketing An increasing pressure on health care providers from health care industry resulted in reduced revenues. It was found that health care marketers and public relations managers should reassess their internal marketing 208
  4. 4. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION efforts due to a public opinion study suggesting that health care provider organizations are not taking advantage of several important public relations and internal marketing channels to educate the public through their employees (P. Lee, et al., 1991). Furthermore, hospitals seeking to become more aggressive often introduce programs prematurely neglecting internal marketing and not ensuring internal coordination prior to introduction of a service product (Thomas, Farmer, & Wallace, 1991). Thus, to maximize internal marketing quality, services, as well as services added in the office and the increase of the understanding of the needs of patients should be emphasized (Nacht, 1993). For pediatric dentists, making a commitment to an internal marketing program that projects a positive image to patients and accomplish some practice benefits as; higher patient retention, lower staff turn-over and higher fee-for service, pediatric dentist would have greater potential for profit and an improvement on the total job satisfaction (Nacht & Trupkin, 1993). As we said, to attain organizations’ goals, organizations must not only apply the marketing concept to external targets but also plan and control internal facets of their operations, this is to say a Total Service Quality (TSQ) based on an Internal Marketing Approach (IMA) (Shank & Gilbert, 1993). Managerial recommendations were offered regarding to ensure effective employee support and participation in a total quality management (TQM) applications, improving internal communication and the effective application of modern internal marketing tools and methods (Karasa, Akinci, EsatoElu, Parsons, & Sarp, 2007). Health care managers should also understand that an intense focus on internal marketing factors would lead to a quality experience for employees that will ultimately have a positive effect on the patient experiences (Masri, Oetjen, & Rotarius, 2011). There are significant positive relationships between internal marketing practices and service quality. Training programs have also a strong association with service quality. There is no relationship of performance incentives with service quality. Consequently, to deliver excellence service to patients, hospitals must provide training programs and establish a clear vision about service excellence to nurses (Tsai & Tang, 2008). Designing internal marketing strategies with strong emotional appeal is the key to attracting more cosmetic patients. Like this, dentists who use cost-effective and highly targeted internal marketing strategies would appeal to a broader range of patients (Levin, 2007). 2.4.2. Promoting job loyalty, commitment and job satisfaction Some of the early studies in this matter show that to promote physicians’ loyalty, one approach management can take to reduce turnover, is by treating employees as an important customer segment through a more developed internal marketing orientation (J. W. Peltier, et al., 1997). Nurse loyalty and retention are critical in healthcare industry. A lack of continuity in nursing staff affects quality of care, resulting in high costs and leading to patient concern about the facility. On the other hand, with motivated and committed nursing staff there is a solid foundation for implementing initiatives and improve healthcare quality enhancing nurse loyalty through internal marketing efforts. Financial, social and structural bonds with employees have also significant although different impacts on nurse loyalty (J. Peltier, Nill, & Schibrowsky, 2003). Job satisfaction has positive effects on organizational commitment and at the same time, nurse perceptions of internal marketing can have positive effects on job satisfaction. Finally nurse perception of internal marketing has positive effects on organizational commitment (C.-S. Chang & Chang, 2007; Pantouvakis, 2012). Internal marketing has also an impact on both, organizational commitment and service quality and organizational commitment acts as the mediator between internal marketing and service quality (Tsai & Wu, 2011). As we have pointed out, one of the most critical problems facing worldwide health care industry is the shortage of qualified nurses. Organizational structural bonding, social bonding, and financial bonding activities should be analyzed. 209
  5. 5. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION Quality of care affects how well nurses are satisfied with their job and their commitment to the organization. Quality of care is what most impact nurse satisfaction and loyalty, followed by structural, social, and financial bonds (James W. Peltier, Pointer, & Schibrowsky, 2008). As other authors found, internal marketing is associated with increased organizational commitment. The concept of communication management has the greatest influence on organizational commitment and external activity concept has the smallest impact on organizational commitment. So it can be said that the best way to retain outstanding nurses and reduce turnover costs and personnel problems, is for employers to understand the needs and expectations of their nursing staff (C. S. Chang & Chang, 2009). In northern Greece, internal marketing was found to have positive effect on the job satisfaction of hospital staff. Doctors and male personnel showed higher levels of job satisfaction showing that staff with time-defined work contracts with the hospital are more satisfied than permanent staff, and as the staff grew older there is only a slight decline in job satisfaction (Iliopoulos & Priporas, 2011). Organization commitment, job stress control, as well as internal marketing concept play important roles in the turnover intention of nurses. other managerial interventions reducing nurses' turnover intention would imply; a career development system as an organization commitment management strategy, an innovative promotion policy to change conservative organizational climates and a balance of effort-reward (H. Lee, Kim, & Yoon, 2011). Internal marketing significantly influences market orientation (Tsai, Wu, & Chang, 2012). Internal marketing was found to have an influence on relationship quality and patient loyalty through the mediation of market orientation. In order to enhance relationship quality and patient loyalty, hospital managers should focus their efforts improving employees' market orientation and reducing patients' perceptual market orientation gap (Tsai, et al., 2012). 2.4.3. Other related health care researches There is other internal marketing literature related with health care organizations, for example a system wide geriatric care marketing initiative (Barron & Jackson, 1988). An outline plan for the introduction of an internal marketing program within an hospital trust was proposed, identifying those individuals and departments who should be involved in the planning and implementation of the program (Hallums, 1994). Employee satisfaction is also influenced by the design and equipment used in the facilities and the efficiency of initiating vocational rehabilitation (VR) services. (James W. Peltier & Scovotti, 2004). 2.6. Education sector internal marketing There are potential losses as well as gains to be made from an internal market (Maguire, Ball, & Macrae, 2001). Job involvement and job satisfaction play partial mediating roles in the relationship between internal marketing and organizational commitment and must not neglect the effect of job involvement and job satisfaction in explaining the relationship between school organization's internal marketing and teachers' organizational commitment (Ting, 2011). Those in charge of primary schools need to emphasize internal marketing strategies and realize the effect and effectiveness of job satisfaction and its relationship with internal marketing strategies (Hung, 2012). 2.7. Internal marketing in other industries Management can provide motivation through the use of compensation schemes and development of internal marketing. Profit sharing compensation schemes that reward employees for achieving customer service objectives should be shared with all employees, and optimal effort should be spent on internal marketing. Prasad and Steffes relate their analysis to a successful scheme implemented by Continental Airlines (Prasad & Steffes, 210
  6. 6. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION 2002). A case study exploratory research of a medium sized UK consultancy which provided project management, quantity surveying and contractual advice to engineering industries was done. The research draws on literature from internal relationship marketing and service quality fields, investigating the impact of internal marketing on service quality perceived among employees (Barnes, et al., 2004). Examination of internal marketing relationships and their influence on salesperson attitudes and behaviors in retail store environments investigated the moderating role of customer complaining behavior on the nature of these relationships (Bell, Menguc, & Stefani, 2004). Internal marketing efforts, as manifested by frontline employees' valuation of internal job product, internal price, internal place, and internal promotion, have significant effect on employees' perceptions of performance. The influence of internal marketing on frontline hotel employees' performance depends on their affection towards and commitment to their organization, as well as their job satisfaction (Wang, et al., 2008). In 2009 a research revealed a range of reasons as; monotonous work, stressful work environment, adverse working conditions, lack of career development opportunities and better job opportunities elsewhere emerging as key causes of increase tiring rates in an Indian call center industry (Budhwar, Varma, Malhotra, & Mukherjee, 2009). To establish long term relationships with Avis car rental employees, improving internal communication between managers and employees, promoting mutual respect, trust and concern were proven to be key issue (Roberts-Lombard, 2010). There is also research examining the use of sponsorship linked to internal marketing to conceptualize, communicate and implement corporate identity development and employee performance, helping foster at the same time a collaborative culture (Roberts-Lombard, 2010). 3. Methodology This research review findings from all available research articles of ISI Web of Knowledge mentioning the internal marketing term within the publication period of 1950-2013. After a general literature research, “internal marketing” phrase was used to find articles directly related with enterprise internal marketing implementation cases. It was avoided using other terms than internal marketing. Specific search was created by the use of limiting and refining search criteria. Limiting criteria: ISI Web of Knowledge, all databases and “internal marketing”. Refining criteria included: academic articles as document types and sorted by relevance. Data group folders were created about key focus areas using Endnote 4x software. After reading the titles, abstracts and conclusions, 55 articles were included in the review; from a timespan of 63 years and from the databases of Web of Science, Inspec, Derwent Innovations Index, Chinese Science Citation Database and Medline, all those mentioning directly the internal marketing term in their title. 4. Findings and discussion The current review includes 55 papers published between 1984 and 2013 from Web of Science, Medline and Chinese citation databases including a wide range of areas. Year 2008, 2009 and 2011 show the highest publication rates in internal marketing. Year 2010 shows a slight drop before a sudden increase again on the amount of published internal marketing records (Appendix a). Main found areas among the internal marketing researches include (from highest to lowest); health care (with a 48% of the retrieved records), service (21%), technological (8%), educational (6%) and financial industries (4%) (Appendix b). Other industries (13%) have also tried to apply successful schemes as; spending optimal efforts on internal marketing, using other management practices as profit sharing compensation, trying to find ways to establish tong term relationships with employees or finding key causes for increasing tiring rates. According to the above, authors claim that internal marketing is in general a continuously spreading application in organizations’ internal management. Several fields have revealed a body of work referring to the 211
  7. 7. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION concept of “inner market” or “internal customers” inside organizations enhancing the importance of frontline employees working with customer-consciousness. As employees become internal customers, they have also requirements that need satisfying. If management makes employees well motivated and committed to the cause, this will lead to external customers being well served. However, the influence of a good internal marketing strategy depends on the affection and commitment to the organization as well as job satisfaction from the employees. A good internal marketing strategy should boost a sense of oneness with the organization, more formally known as “organizational identification”, having also a positive effect on the organizational citizenship behavior. There are authors also claiming that the number of companies practicing internal marketing is in general disproportionately small comparing to the companies adopting the market orientation strategy. Service companies tend to use friendly working practices in large proportions, however there is a study too concluding that there is small relative relationship between unfriendly work practices and service quality, suggesting that some service organizations tend to create more supportive environments offering flexible work arrangements. In health care organizations, some studies found organizations not taking advantage enough from important public relations and internal marketing channels to educate the public through employees. Nurses for example are valuable assets in “team selling” to help hospitals build their images. To maximize internal marketing quality as well as service, the increase of understanding of the needs of patients should be emphasized as well as providing good training programs to establish clear vision about service excellence. As authors point out, hospitals often introduce programs prematurely neglecting internal marketing and not ensuring internal coordination prior to introduction of a service product. Organizations should not only focus on the use of marketing externally applying the marketing concept to external targets but also controlling internal facets of their operations, this is to say, a total service quality based on an internal marketing approach. This would ultimately have positive effects on patient experiences. The best way to retain staff is for employers to understand their needs and expectations. Organization commitment, job stress control, as well as internal marketing concept play important roles in the turnover intention of workers; other helpful managerial interventions would include career development systems, innovative promotion policy and a balanced effort-reward. Internal marketing, job satisfaction and service attitude do have significant positive effects in job performance, at least in high-tech organizations, but handling the challenging intra organizational relationships establishing good communication between different units is a key prerequisite. Studies on financial companies showed significant correlation among job satisfaction, internal marketing, and organizational culture, but also differences among organization stakeholders’ view wen trying to building a good imagery around consumer and service quality through internal marketing. There are new studies talking about the incorporation of happiness in the workplace, as a more extensive concept than internal marketing. There is still room for investigation in internal marketing area, as to figure out the right amount of investment for internal marketing strategies in each case. Finally point out that, internal marketing issue appears to get gradually more attention from all levels within organizations. Appendix a) Internal Marketing: Year Wise 212
  8. 8. WORLD ACADEMIC JOURNAL OF BUSINESS & APPLIED SCIENCES-MARCH-SEPTEMBER 2013 EDITION b) Internal Marketing: Literature Review REFERENCES Barnes, B. R., Fox, M. T., & Morris, D. S. (2004). Exploring the linkage between internal marketing, relationship marketing and service quality: A case study of a consulting organization. Total Quality Management & Business Excellence, 15(5-6), 593-601. doi: 10.1080/14783360410001680080 Barron, E., & Jackson, D. (1988). Developing a market research survey. Health care strategic management, 6(9), 10-12. Bell, S. J., Menguc, B., & Stefani, S. L. (2004). When customers disappoint: A model of relational internal marketing and customer complaints. Journal of the Academy of Marketing Science, 32(2), 112-126. doi: 10.1177/0092070303261467 Boshoff, C., & Tait, M. (1996). Quality perceptions in the financial services sector - The potential impact of internal marketing. International Journal of Service Industry Management, 7(5), 5-&. doi: 10.1108/09564239610149939 Brooks, R. F., Lings, I. N., & Botschen, M. A. (1999). Internal marketing and customer driven wavefronts. Service Industries Journal, 19(4), 49-67. doi: 10.1080/02642069900000044 Budhwar, Pawan S., Varma, Arup, Malhotra, Neeru, & Mukherjee, Avinandan. (2009). Insights into the Indian call centre industry: can internal marketing help tackle high employee turnover? Journal of Services Marketing, 23(5), 351-362. doi: 10.1108/08876040910973459 Busbin, J. W., & Self, D. R. (1991). Wellness and prevention programs as internal marketing programs for hospitals: the current status. Journal of hospital marketing, 6(1), 131-148. 213
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