Study of Internal Marketing Criteria on Organization Performance



The intention of this paper is to study the result of internal marketing criteria on organization performance. Internal marketing is a designed effort using a marketing-like approach to defeat organizational resistance to change and to bring into line; this research paper suggests and evaluates a new internal marketing (IM) implementation model as a structure of implementing and executing marketing strategies. The paper proposes the concept of internal marketing inside the organization that can be used successfully of influence employees so that they are Provoked, motivated and act in a customer oriented fashion. In particular the internal marketing was shown to be a trustworthy measure and strongly associated with organization performance. In this model we try to find out the impact on internal marketing on organization performance. The six dimensions of internal marketing that are research upon in this paper are dissemination of information, understanding & differentiation, training, interfunctional coordination, strategic award, and motivation. All these management function, as the hypotheses suggest, effect the performance of organization. A total of hundred bank employees were surveyed to identify what factors have a greater effect on their organization performance. To achieve this, a regression model was developed based on the dependent and independent variables. The model identify that out of the six variable, understanding & differentiation, training, strategic award, and motivation have a significant effect on the performance of organization

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Key words: Internal marketing, organizational performance


The literature on internal marketing is extensive and growing rapidly (see for example Varey, 1995; Piercy, 1995; Sargeant and Asif, 1998; Piercy and Morgan, 1991; Barnes, 1989; George, 1977, 1990; Gronroos, 1981, 1985; Collins and Payne, 1991; Berry, 1981 ;) Still there is little organized work on how internal marketing actually work in practice. Most of the work of internal marketing is of theoretical and conceptual nature. The internal marketing concept has develop from the innovative conceptualization of employee motivation/satisfaction by treating employees as customers and jobs as products for improving service quality ( Sasser and Arbeit, 1976; Berry, 1981) to market orientation/customer orientation and make use of marketing-like approach and marketing-like tools inside the organization to motivate employees (Gronroos,1985) the use of internal marketing for the implementation of external marketing ( Piercy ad Morgan 1991) and the extension of internal marketing to the implementation of any functional strategy ( Rafiq and Ahmed, 1993)

The offered empirical work concentrate primarily on levels of adoption of Internal marketing by organization (Heman and Payne 1995; Sargeant and Asif 1998) or the impact of internal marketing progammes on service quality (Richardson,1986; Tansuhaj, 1991) A number of researches have examined positive relationship between Internal marketing and service quality ( Caruana and calleya, 1998; Boshoff and Tait, 1996). One study (Foreman and Money, 1995) has attempted to develop an IM scale

There are small clear empirical facts of a positive relationship between internal marketing and organization performance. There is even less study investigating the technicalities and mechanics of this linkage. Therefore, it is not easy to generalize about the degree to which the implementation of internal marketing really impact organization performance. To bridge these gaps, this research paper, unlike earlier studies on internal marketing, not only recommend, but also develops and estimate empirically the proposed internal marketing implementation structure or framework in the Pakistani environment

Literature review

The change toward recognizing the importance of Human resource capital in the developed age has directed businesses to Alter their paradigms about persons management. Successful businesses nothing less glimpse workers as a asset whose foremost function is to supply items and services. Instead workers are glimpsed as grave to the capability of service organizations

Internal marketing is handling both customers and employees with identical importance through proactive programs in order to accomplish organizational objectives (Woodruffe, H., 1995) (1)

Payne suggests that the major aims of internal marketing are the improvement of internal and

external clientele perception and the exclusion of purposeful barricade to accomplishing organizational Efficiency and effectiveness (Payne, A., 1993) [2

Lack of engagement from staff can be unsafe to an organization resulting in inferior performance originating from inferior service offerings and higher costs (Caruana, A., P. Calleya, 1998)[3

This resulting in in positive result of internal marketing will midpoint that personnel will input maximum action alternatively minimum, thereby better fulfilling the needs and wants of external customers (Berry, L., 1981; or Sasser, W.E. and S.P. Arbeit, 1980) [4-7].

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Hogg has recommended that where traditional internal communications programs have failed internal marketing could be the response to gaining staff commitment, (Hogg, C., 1996) (8)

Internal marketing (IM) is a pre-requisite for successful external marketing and across its relatively brief history has devised along three rivers of thinking (Schultz, D.E, 2004) [9].

The early advances were proposed by Berry in the 1970s (Berry, L., 1981)  [4]. Berry advanced IM from a customary marketing outlook, focusing mainly on 4Ps. He posited that worker could be advised as interior customer and the job could be glimpsed as the firm's products. He developed customary marketing forms and approaches that were founded on the concept of producing the worker's job appealing and attractive in the conviction that employee satisfaction would lead to clientele satisfaction which would, result into, construct more customer loyalty. Consequently, affinity of the best staff, their keeping and motivation becomes of critical importance

n the 1980s, Gronroos came up with a new approach to Internal marketing (Gronroos, C., 1981; or Gronroos, C.,) [11-12]. In this vision it is not adequate that personnel are encouraged to execute better but they must also be sales minded. Thus, the workforce facing customer were essential to the firm's success Each staff ought be accustomed as a marketer to perform add-on, cross-selling and the like along with buyer holding talents that would enable the makeup of ongoing customer relationships. The company should approve a framework related to that of its external marketing and by applying marketing-like activities internally, stimulate service recognition and buyer oriented behavior among personnel. The critical dissimilarity between Gronroos' approach and that of Berry is that Gronroos focuses attention on creating clients orientation in workers through a method of effecting, as an alternative pleasing and motivating employees [9].

In the 1990s Rafiq and Ahmed evolved a hybrid strategy to IM (Rafiq, M. and P.K. Ahmed, 1993 ; or Rafiq, M. and P.K. Ahmed, 1995 )[13-14].In their strategy, they recommended that interior marketing was inherently tough to apply because of inter-functional clashes between departments, administration and staff and the firm's inherent opposition to change(Schultz, D.E, 2004)[9].

Finally in 2000 Rafiq and Ahmed (Rafiq, M. and P.K. Ahmed, 2000) [15] suggested the next delineation for IM: Internal marketing is a intended effort utilizing a marketing-like approach to overwhelm organizational confrontation to change and to align, inspire and inter-functionally co-ordinate and incorporate workers in the direction of the successful implementation of business and purposeful schemes, in alignment to consign customer satisfaction through a method of conceiving inspired and clientele orientated employees. In fact the staff requires the right kind and level of guidance d0 present their jobs. This can assist to decrease ambiguity surrounding their job and assist employees to rendezvous the desires of clients more competently (Rafiq, M. and P.K. Ahmed, 2000; or Rafiq, M. and P.K. Ahmed, 2003) [15-16 In spite of these findings and well researched streams of ideas, practicing executives still discover internal marketing be a most complicated and difficult task (Schultz, D.E, 2004)

The idea of this study is examine the consequences of internal marketing on organizational loyalty of employees. the key criteria of internal marketing suggest by Rafiq and Ahmed (RAFIQ, M and P.K Ahmed, 2000) ] presented the base for our internal marketing construct. Due to almost similar lack of experience the researchers tried to do this research and match earlier researches in this field

In 1980 Internal marketing was hot but apparently disappeared in the 'go-go' days of the internet bubble of the 1990s (Schultz, D.E, 2004) [9]. Clearly, it is the increasing acknowledgement of both professionals and experts with the growing commoditization of goods and services, where differentiators are usually short-lived or even non-existent. Ongoing clientele connections with the brand and the organization may well be the simply way for the organization to make sustainable, long-term competitive advantage (Knox, S., S. Maklan, A. Payne, J. Peppard and L. Ryals, 2003)

[17]. In supplement, the ongoing failure of techno driven clientele relationship management (CRM) advances reinforces that outlook (Chatham, R.D, V. Weisman, V. Orlov, Nakashimruand F.F. Howard, 2001) [18].

Theoretical background

A drawback of existing internal marketing research is that there is small agreement on what blend of policies can be used successfully to influence employees so that they are motivated and perform in a customer oriented fashion. However, despite a lack of an implementation framework in the internal marketing literature, a number of key fundamentals of what we term as the internal marketing mix ( or the controllable elements within the organization that can be used to influence and motivate employees) can be recognized from the internal marketing literature, including education, training, communication, and information (Gummesson, 1991) developing and motivating, education or training employees (Gronroos (1985) cahill, (1995) Foreman and money, (1995) Varey, (1995); and even attracting, hiring and retaining employees (Berry and Parasuraman, 1991, Foreman and Money, 1995), i.e functions traditionally performed by human resources management (HRM)

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The literature indicates that existing HRM tools with a marketing perspective should be used for internal marketing. George and Gronroos (1989) clearly state that Internal marketing is basically a philosophy for managing the organizations human resources based on a marketing perspective. Tansuhaj et al. (1988, p.32) have specifically mentioned employee recruitment, training, motivation, communication and retention as part of a mix

Hence, we can generalize that the internal marketing mix may include the soft and the hard sides of firm. These both sides of organization, although not clear in the IM literature, are widely indirect as the tools for creating a powerful marketing programmed.

Therefore implementing internal marketing strategy the organization requires the whole range of HRM tools to be added what we call the Internal marketing mix.". Based on the review of the Internal marketing literature the elements of the IM mix used in this study are

Strategic reward

dissemination of information



Understanding and Differentiation








Factor 1 Dissemination of information





1) manager inform employees matter related

to organization





2) manager inform employees aspects

affecting work environment





3) manager inform all the employees at

each level





4) manager inform employees about

work problem that verified earlier





Factor 2 Understanding and






1) offering service according to

employees preferences





2) involvement of employees in

decision making





3) offering services to employees

based on education





4) offering services to employees

based on experience





Factor 3 Training





1) comprehensive employers training





2) capable and experience instructor





Factor 4 Interfunctional.cordination





1) rapid and synchronized flow of information





2) adoption between structure and strategy





Factor 5 Strategic reward





1) our reward system is linked to our

business goals





2) our employees are informed about

how they are rewarded





3) our employees are informed about

why they are rewarded





Factor 6 Motivation





1) job security





2) freedom in job





3) on time salaries and benefits provided





4) autonomy





5) friendly contact with personnel





3 Research Methods:

3.1 Method of data collection

3.2 sampling technique

3.3 sample size

3.4 instrument of data collection

3.4.1 Validity and reliability test

Cronbach's coefficient alpha for IM criteria



Cronbach's Alpha















3.5 research model developed

3.6 statistical technique

For this paper, the research was mostly carried out on basis of surveys and using questionnaires. Two questionnaires were prepared for the paper, one for the employees and one for the customers. Pilot testing was carried out initially to check the reliability of the questionnaires. It meant that out of a hundred customers, 25 employees and 25 customers were chosen. Those test subjects were asked questions from their respective questionnaires. After the answers had been given and the forms had been filled, they were put through the Spss to check for reliability test Cronbach Alpha; hence the reliability of the questionnaire in regards to the research was checked and verified. After the reliability test, the questionnaires were further used for the remainder 80 employees and customers.

The survey was conducted by visiting ten different branches in Karachi, Pakistan. An entire day was spent at each branch. From each branch, five tellers were chosen. And a customer who had come to the teller's windows were also selected. As this research is based on internal marketing, the motivational factors had to be noted of the employees. As a result five tellers were asked questions for twenty to twenty five minutes using the questionnaire already made out for them. The survey was conducted by asking questions on a one on one basis for hundred bank tellers. The technique used to collect the data was self administrated. This meant that neither the employees nor the customers got to see the questionnaires and they were asked the questions and the research team was just put the checks on the responses they got from the candidates. The tellers were asked a series of questions first on a scale of one to hundred. They were again when they had some free time or were on lunch breaks were asked the same series of questions but this time on a scale of one to five. The technique used for asking the questions was a pyramid format. In the pyramid format specific questions where the person had to think and answer were asked first and then more generalized questions were asked where they didn't have to think too much to answer the questions. Like Starts with the most difficult to answer questions and keeps the easiest-to-answer questions (related to personal information) at the end

The customers who were chosen were those two to three random customers who had gone to the selected, interviewed teller's window. Those customers after their work had been completed were asked to spare a few minutes of their time to answer a few questions. The customers were asked a series of questions from the customer questionnaire to determine if they were satisfied by the employees' attitude of dealing and interacting with them. The customers were not given the questionnaires to be filled out and again the self administrative technique for taking interviews, were used. The questions which were asked to the customers were first based on a one to hundred scale and the second time which they were asked instantly was based on a one to five scale. Example, while the customer was ranking a particular topic during the first time that is one to hundred, he ranked a topic ninety and the second time when asked the same question he ranked the same topic two. As a result there was disrupcencies in the answers which the customer gave and the research team asked for the reasons. The research team went forward with the same pyramid approach as the customers used to get restless so they used to ask the important questions first and then move forward with the general questions.

After the data collection was complete, two major techniques were used to analysis the data; exploratory factor analysis, and regression. The exploratory factor analysis was used for summarizing and reducing the data and regression model for test all the hypothesis

Hypothesis of studies

The following hypotheses were created for this study based on the conceptual framework for the study and literature review:

H1: Strategic reward has positive impacts on organization performance

H2: Dissemination of information has positive impacts on organization performance

H3: Training has positive impacts on organization performance

H4: Motivation has positive impacts on organization performance

H5: Understand and Differentiation has positive impacts on organization performance

H6: Interfunctional Coordination has positive impacts on organization performance

Literature review

Kotler (2000) point out that internal marketing is much more essential than conventional external marketing. Further green er al., (1994) explain that the key to successful external marketing and excellent service is internal marketing. These two views give good reason for the exploration of the marketing perception, i.e., internal marketing, within a business organization in the service sector

Treating the employees as an internal customer. Many researchers ( sasser and abeit,1976; berry 1982 ; green et al . 199 cahill 1996 hult et al 2000 ) consider that the job of internal marketing to view the jobs as products and employees as customers

Creating employee customer oriented behavior. Piercy and morgan 1991 concentrate on the application of marketing expertise in the internal marketing of a business they argue that the organization should follow a framework parallel to that of its external marketing and develop a marketing plan aimed at the internal market. The aim would be to stimulate service awareness and client oriented behavior. Many other researchers share the similar view points ( gronroos 1985 heskett 1987 gronross 1994 pfeffer and veiga 1999 condult and mabovdo 2001

Human resource management (HRM) orientation. According to josep 1996 internal marketing should be included human resources management theories principles and technologies' cooper and Cronin (2000) point out that internal marketing is involve of efforts within organization to encourage and train employees to provide better service

Internal exchange. Bak et al (1994) suggest that permitting efficient operation of an exchange relationship between the organization and its employees in the first move to arrive at the organization objectives in the external market. cahill 1996 pit and foreman 1999 share similar comments

Varey, R.J. (1995). Internal marketing: a review and some interdisciplinary research challenges. International Journal of Service Industry Management, Vol.6 No.1, pp. 40-63

Piercy, N.F. (1995). Customer satisfaction and the internal market - marketing our customers to our employees. Journal of Marketing Practice: Applied Marketing Science, Vol. 1 No. 1,

Sargeant, A. and Asif, S. (998). The strategic application of internal marketing - an investigation of UK banking. International Journal of Bank Marketing, Vol. 16 No. 2, pp. 66-79

Piercy, N.F. and Morgan, N. (1991), Internal marketing - the missing half of the marketing program. Long Range Planning, Vol.24 No. 2, pp. 82-93

Barnes, J.G. (1989). The role of internal marketing: if the staff won't but it, why should the customer? Irish Marketing Review, Vol.4 No. 2, pp. 11-21

George, W.R. (1977). The retailing of services - a challenging future. Journal of Reading, Vol. 53 No. 3, pp. 85-98

George, W.R. (1990). Internal marketing and organization behavior a partnership in developing customer- conscious employees at every level. Journal of Business Research, Vol. 20 No. 1, pp. 63-70.

George, W.R. and Gronroos, C. (1989). Developing customer-conscious employees at every level internal marketing. In Congram, C.A. and Freiman, M.l. (Eds), Handbook of Services Marketing, AMACOM, New York, NY.