Internal marketing: review on a broadened concept and its operationalisation

Sebastian Theopold Marc Schacherer DBA Anglia Business School Research Paper 2 2002 Abstract
Over 20 years ago internal marketing was first proposed and has been in a controversy discussion since. However, as yet, few empirical research has been undertaken since organisations have not actually implemented the concept in practice as there does not exist a single unified concept of what is meant by internal marketing. Although most recent research rather concentrates on practical implementation than on definition. The literature review describes three major pillars of the concept, namely employee relationship, market orientation, and strategy implementation. Proposes a synthesis of the different definitions with the aim to illustrate a broader definition of IM.. Introduces relationship marketing and the learning organisation for operationalising IM as part of the most recent influences on the discussion. Summarises suggestions for some themes for possible fruitful research in internal marketing.

ABSTRACT...............................................................................................................................1 1.INTRODUCTION..................................................................................................................2 2.INTERNAL MARKETING..................................................................................................2 2.1.INTERNAL MARKETING AND SERVICE QUALITY...............................................................2 2.2.BALANCED APPROACH......................................................................................................3 2.3.IDENTIFYING THE EVOLUTIONARY PILLARS OF IM............................................................3 3.A BROADER CONCEPT OF INTERNAL MARKETING..............................................4 3.1.EMPLOYEE RELATIONS......................................................................................................5 3.2.MARKET ORIENTATION.....................................................................................................6 3.3.STRATEGY IMPLEMENTATION............................................................................................7 4.LIMITATIONS OF THE IM CONCEPT...........................................................................9 4.1.SYNTHESISING THE FINDINGS AND PROPOSING A DEFINITION FOR IM..............................9 5.INFLUENCES ON THE CURRENT DISCUSSION OF INTERNAL MARKETING 10 5.1.RELATIONSHIP MARKETING............................................................................................12 5.2.LEARNING ORGANISATION..............................................................................................15 6.IMPLICATIONS FOR FURTHER RESEARCH............................................................18 REFERENCES........................................................................................................................18

1. Introduction
During times where the economy decreases and where former predictions about growth, prosperity and development especially in the area of Information Technology (e-Business) no longer matches the reality, enterprises are forced to identify strategies and options that properly adapt to the new circumstances. As about 5 years ago a new wave of companies and entrepreneurs were brought to the market space mainly feed by the utopians of the Internet we find out that during times of consolidation and disillusion only a limited number of this generation still competes within the respected segment. Looking back a few years we recognized fashionable organisations with low hierarchies, flexible working hours, wages above average, trendy products and unlimited growth perspectives. As reality turned back and the economic principals still build the fundament of the economy the entrepreneurial newcomers are turning back to proven concepts with the aim to embed their enterprises in the traditional economic framework. But as unique as the raising of the new companies was the same still holds for the uniqueness of the current situation. More precisely it is to say that especially in the area of business software and software services a significant number of companies are still fighting to overcome the childhood phase with the goal to enter a more mature state. In the first step of the research path two different companies (Virtual Identity, Impress Software), competing within the segment of eBusiness have been analysed in terms of history, current perspective, market forces and strategy. The results have shown that due to the fast development organizational homework has not been done sufficiently. In detail it is to say that internal operations and external intersections (customers, partners and employees) are not clearly defined and do not support the main purpose which is to satisfy the customers needs and wants on a long-term basis through a high service quality. In this paper the model of internal marketing is highlighted with the purpose to clarify its scope and

its strategic role in the implementation of change strategies.

2. Internal Marketing
Since more than 25 years the concept of internal marketing (IM) has been discussed in a wide range of the academic literature, (see for example Sasser and Arbeit, 1976; Berry et al ,1976; George 1977, 1990; Grnroos 1981, 1989; Winter 1985; Flipo, 1986; Richardson and Robinson, 1986; Gummesson, 1987; Piercy and Morgan, 1991; Rafiq and Ahmed, 1993; Piercy, 1995; Cahill, 1995 ; Pitt and Foreman, 1999; Lings, 1999). Despite the increasing interest of several researchers and practitioners there exists a great confusion about the exact definition of IM, its primary domain and the value it delivers to managers and organizations. The variety of approaches and interpretations has brought up a number of relevant perspectives under the meta headline of IM. The confusion has been further increased with the great deal of discussion about the economic concept of internal markets (Fama, 1980; Williamson et al., 1975). As much of the work on IM is embryonic and descriptive or prescriptive this review will attempt to provide a helpful overview about the terms evolution within the economic literature, its current discussion and implications for practical research. The first part of the paper focuses on analysing three major pillars of IM and their purpose for the conceptualisation of the program. The findings are critically examined and the limitations of the concept are discussed before an attempt is started to synthesis the different definitions with the aim to illustrate a broader definition of IM. While the second part examines the current discussion in the field of IM and provides fruitful implications for future research activities.

2.1. Internal Marketing and Service Quality

In consideration of the named differences and the difficulties to define the concept of IM (Piercy and Morgan, 1991, Rafiq and Ahmed, 1993) most writers

seem to accept that IM should create quantitative and qualitative improvements in terms of service quality through the observation and control of service output that is executed by employees (George, 1990; Gummersson, 1987, Berry and Parasuraman, 1991; Grnroos, 1985; Piercy, 1995). The need for sustainable improvement in the organizational capability to deliver high service quality that fits with customers needs and wants, as a basis of competitive advantage has drawn the attention within the academic and professional management literature (Christopher et al., 1991; Wilson et al., 1992). This focus has directed the observation mainly in the field of service providers like health care, financial service, logistics and professional services (George, 1986; Grnroos, 1983; Gummesson, 1991). More general researches have also emphasized that actually all suppliers are service providers and that their service competence is an important factor in creating customer loyalty and distinct competitive advantages (Vandermerwe and Rada, 1988; Reichelt, 1997). This service-centred business philosophy finds its most accurate wording from Vandermerwe and Rand (1988) who call it servitization.

that both internal and external factors have to be considered on an equal footing (Greenley 1995; Foss, 1997). This is in contrast to the conventional understanding of marketing strategies which are executed by executives and mangers who primarily focus on the external environment: customers, competitors, suppliers and markets. The balanced approach brings to the discussion the internal marketing program that considers the internal process for the internal marketplace and internal customers to carry out essentially the same marketplace (e.g. Grnross, 1982; Piercy and Morgan, 1991; Harrell and Fors, 1992; Foreman and Money, 1995; Varey and Lewis, 1999).

2.3. Identifying the evolutionary pillars of IM

The thinking of a balanced orientation in the field of marketing poses the critical question which elements have to be taken into account when tackling the issue and what differences / commonness between the internal and external program can be identified (Piercy and Morgan, 1991). In order to determine the role of an internally executed marketing approach and its balanced input for the overall marketing strategy we will examine and define three different but closely related pillars from the evolutionary context of IM and

2.2.
The

Balanced Approach
tendency towards a service culture in

finally synthesize the findings with the aim to provide a comprehensive definition of IM and adumbrate its scope as boundaries and classification are fundamental prerequisites to marketing analysis (Lovelock, 1983). The pillars to be analysed in the context are: employee relationship market orientation perspective strategy implementation

organizations raises questions about the rigour external view of marketing. As the attention and performance to customers is lived and pursued by employees a pressing need can be identified in the literature to harmonise the balance between internal and external factors (Grnroos, 1985; Gummersson, 1987; Harrell and Fors, 1992; Piercy, 1995;). As mentioned before, the limited focus on customers and competitors only seems not to satisfy an

All of the named perspectives have interrelationships and overlapping moments with business domains outside marketing. For example Human Resource Management, Total Quality Management, Strategic Management and others. This interdisciplinary dimension underlines the opening paragraph where the exact domain of IM is questioned and this in turn should encourage managers and practitioners to

organizations goal to determine a long-term market share and profitability. Gummesson (1991) argues that the management of service quality has to take into account external influences form the market space and internal factors from the organisation. Other authors have pointed out the unapologetic approach of marketing strategy that can adequately satisfy the idea

approach the issue as a company-wide management philosophy (Grnroos, 1985; George, 1990; Keegan et al., 1992). In the ongoing process of this review the different perspectives are analysed and finally concluded with the idea to come forward with a definition that has been synthesised from the findings of reviewed literature. The core difficulty that occurs when defining the relatively independent but relevant perspectives is their limited practical use for the overall conceptual framework, particularly if we aspire to precisely name the domain and value of IM in order to legitimise organisations to make use of strategies that go beyond the external marketing program. In order to tackle the difficulty a synthesis of the definitions form the three pillars is undertaken with the aim to take into consideration the requisite components that are necessary to propose a set of criteria for a general use and understanding of IM.

1985; Tansuhaj et al. 1988; Woodside et al. 1989; Philips et al., 1990; Berry and Parasuraman, 1991; Ostroff, 1993) but there is also a respective number of academics who consider the service quality and its delivery process as a task for the whole organization (George and Grnross, 1989; George, 1990; Heskett, 1992; Rafiq and Ahmed, 1993). With the first group giving the assumption that motivated and satisfied contact-employees are a crucial precondition for the delivery of good service, the second group more or less considers the overall process within the organization as a successive composition of the service output. Richardson and Robinson (1986) for example have highlighted the internal customer-supplier chain as an important factor of good service to external customers. With simultaneous consideration of both perspectives it becomes obvious that by means of this the selection, motivation, competence and performance of employees can significantly influence the service quality and also tangents the customer satisfaction. The aspect of an internal customer orientation is based on the notion that quality of internal operations is a progressive function and therefore will influence the quality output with the external market and satisfy the external customer (Pfau et al., 1991). On the basis of these assumptions and experiences the traditional marketing concept has been extended by a further category the internal customers or the employees.

3. A broader concept of Internal Marketing

Before the named pillars are discussed in detail a broader concept of IM is delineated perusing the goal to determine its scope and definable boundaries which are necessary for a thorough discussion of the subject . As mentioned in the chapter above the concept of IM is descended from the discipline of service marketing (Berry, 1981; George, 1990; Varey and Lewis, 1999). Whereas in contrast to product marketing or the product-centric view of an organisation the service and its output are physically intangible. More precisely, a product can be produced in a constant quality while the service quality of a supplier has an inseparable relation with the person who is executing the service.

The Organization as a marketplace

This leads us to the underlying idea of IM which is to view an organization as an internal marketplace. With this idea all departments of an organization have customers that need to be served with performance either those customers are internally or externally (Grnroos, 1981; Gummersson, 1987; Heskett, 1992; Rafiq and Ahmed, 1993). The idea of internal customers and the ongoing relations between them in terms of service quality, service delivery processes and common goals and values has been carried out form different points of views such as TQM; HRM,

Focus on contact and non-contact employees

Reviewing the literature we find publications and researchers mainly focusing on customer contact personnel in service intensive businesses (Sasser and Arbeit, 1976; Berry 1984 ; Bowen and Schneider,

Strategic Management (Piercy and Morgan, 1990 and 1991; Johnson and Scholes, 1989, 1993; Berry and Parasuraman, 1991; Varey, 1995; Piercy 1995). Those chameleonic disciplines where IM finds its purpose also inherits one of the most challenging tasks, namely the exact definition of its domain and responsibilities. Reichelt (1997) for instance brought up the loyalty effect. He found out the strong correlation of loyalty between organizations to its employees and the positive outcomes that is has on the overall customer loyalty. He further argues that through the high loyalty of its employees and customers the organization can increase its total customer retention rate which brings significantly positive effects on long-term market share, turnover and overall margins.

Payne, 1991; Glassmann and McAfee, 1992). The cooperation and inter-functional integration with the aim to establish a common understanding for success factors as well as organizational culture are treated by Mastenbroek (1991). Barnes (1989) identifies the importance for a marketing-like approach of HRM, in which marketing techniques have a strong impact on recruitment and training. He describes IM as a philosophy for managing the organizations human resources as a holistic management process to integrate the multiple functions of the organization . Grnross (1981) accentuates that IM strives for the integration of business functions and the creation of a customer conscious employee environment. This integrative approach finds further attendance from Stauss and Schulze (1999). They propose a human resource oriented IM approach, which should secure, continue and achieve the external marketing strategy through the fellow employee. Keeping in mind the employee-customer and jobproduct perspective mentioned above the important thing is to satisfy and motivate the needs and wants of internal customers with a marketing like technique. This seems to form a critical element of IM (Tansuhaj et al., 1991). Assuming that customers in service intensive businesses are buying a non insubstantial portion of labour, the performance and with it the motivation and satisfaction of the person who generates it are inseparable (Berry, 1984). The perspective of an internal market place in which employees are treated as customers who buy products, namely jobs from the employers is the basic notion of the first pillar of IM described in this section. This approach mainly is based on the assumption that the level of service quality served to external customers depends on the motivation and satisfaction of the internal customers (Sasser and Arbeit, 1976; Grnross, 1981; Berry and Parasuraman, 1991) and therefore requires an inversed use of marketing techniques (Grnroos, 1981; Gummesson, 1987; Piercy and Morgan, 1991; Rafiq and Ahmed, 1993). Perusing the initial marketing goal to know what needs and wants

3.1.

Employee Relations

The first dimension of IM to be analysed in this section is the management of employee relations. As service quality depends on the human resources who fulfil the service perceptions of the external customers, George (1977) outlined that satisfied customers require satisfied employees within the organization. His idea was primarily tested in the sectors where retail marketing had a strong influence and provided some argument and little evidence. Later publications extended the idea of a link between customer satisfaction and employee motivation but also intended to extend and define the boundaries of IM (Hoffman and Ingram, 1991; Rafiq and Ahmed, 1993; Piercy, 1995). This brings us to the basic approach that has been aligned by Berry (1981, p.34) where he defines IM as viewing employees as internal customers, viewing jobs as internal products that satisfy the needs and wants of these internal customers while addressing the objectives of the organization. Considering the fact that each employee is an individual with different attitudes and perceptions and therefore the problem of fluctuation in output and commitment triggers the need for a convergence of HRM activities and Marketing practices (Collins and

the internal customer has is one part of the challenge (Sasser and Arbeit, 1976; Varey, 1995). The second part requires an inter-functional alliance between HRM and Marketing with the aim to optimise the synergetic potentials in employing motivated and satisfied internal customers by offering internal products (jobs) that are more attractive in comparison to competitors (Grnross, 1981, Stauss and Schulz, 1999). Having identified the initial definition of IM and the perspective of inter-functional collaboration with HR finally leads us to an extended definition from Berry and Parasuraman (1991, p.151) where they state: Internal Marketing is attracting, motivating and retaining qualified employees through jobproducts that satisfy their needs. Internal marketing is the philosophy of treating employees as customers and it is the strategy of shaping job-products to fit their human needs:

acceptance in the academic literature and expresses that organisational attitudes, values and beliefs do influence the behaviour of the firm and its overall performance. Slater (1990) any longer suggests that market orientation consists of two dimensions: customers and competitors (Slater, 1990, Day, 1990). An example of customer orientation would be the attempt customers to monitor needs and employee wants. commitment An example to of customers based on the notion that they understand the competitive understanding would be the behaviour of salespeople when sharing competitive information with other functions and using them to take advantage of competitor weaknesses (Grnroos, 1981 p.237). Generally speaken the management of a market oriented business approach and with it the market oriented response represents the ability to understand and satisfy customers and competitors through a defined contribution of all employees and all departments to collect and disseminate data and design response modes (Day, 1990; Day and Nedungadi, 1994; Slater and Narver, 1994; Kohli and Jaworski, 1990). The consequences of market oriented behaviour are treated for instance by Kohli and Jaworski (1990). They have asserted that it internally impacts on employees and externally on customers. The internal influence is further on supported by Lichtenthal and Wilson (1992) who see significant consequences for organisational oriented and individual are behaviour. Most common internal benefits that occur through market approaches employee commitment (Jaworski and Kohli, 1993; Siguaw et. al, 1994), esprit de corps (Jaworski and Kohli, 1993) and job satisfaction (Siguaw et. al, 1994). Explicit influences of market orientation on sales people have been asserted by Mengc (1996). He found out that sales people show more customer focus, less role ambiguity and less role conflict. A popular tool to measure and educate an organisation in terms of market orientation are reward systems. Jaworski and Kohli (1993) report that organisational reward systems have the strongest impact on market orientation and that intelligently

3.2.

Market Orientation

The second pillar to be identified in the evolutionary context of IM is the dimension of market orientation within the organisation. Taking into account the basic notion of George (1977) that satisfied customers require motivated employees some writers especially in the area of the service marketing literature have analysed the need and methods to make personnel aware of customer-consciousness and salesmindedness in order to maintain and improve the service quality for the sake of the overall performance (for expamle Berry, 1981; Bonoma, 1984; Crainer, 1990; Dyson and Foster, 1982; Flipo, 1986; Grnroos, 1985, Gummesson, 199; Piercy and Morgan, 1991a; Wilson et al.,1992). In an attempt to define market orientation Narver and Slater (1990) suggests that market orientation is a philosophy of doing business and defines it as: The organisational culturethat most effectively and efficiently creates the necessary behaviours for the creation of superior value for buyers and, thus, continuous superior performance for the business. His definition of a guiding philosophy finds a wide

chosen reward systems can help to support the three main elements of market orientation: collecting information, dissemination of data and design of responsive actions. Grnroos (1981) focused in his research on customercontact people and brought to the discussion the point that buyer-seller interactions not only provide important interaction for re-purchasing opportunities but that buyer-seller interactions also provide a marketing opportunity for the organisation. Extending the original view of George (1977) that employees have to be motivated in order to deliver best performance for their customers Grnroos (1981) and collaborators stressed that employees also have to be market orientated or sales-minded (Grnroos, 1981, George 1990, Day and Wensley 1988; Narver and Slater 1990; Kohli and Jaworski 1990). Parasuraman et. al (1988) expresses that failures in customer satisfaction are reduced by a company wide exchange of information on customers perceptions and that it might improve the integration of work activities between all members of the organisation. In order to reach this goal Ballantyne (1991a) treats the importance for an organisation to educate their employees on customer service skills. He further names techniques like quality improvement that can be reached through a market-oriented business philosophy and further on identifies it as a source for competitive advantage and differentiation. order to take advantage of this But in of source

towards

customer-consciousness

and

sales-

mindedness. Drummond (1992) expands this point of view and demands that employees have to be motivated and educated to identify the external customer by thinking backwards from the customers needs and wants to the necessary actions to be undertaken. The importance to make service providers aware of service skills and marketing approaches is addressed by Green et al (1994) who states that the quality of the service is inseparable from the quality of the service provider. Customer orientation as a further facet of IM is dealing with service providers and their delivered quality output through the mechanism of a market orientated assets, business philosophy. and The desired of consequences on the overall performance, return on employee motivation retention customers in consideration of IM aspects and strategies we recommend the definition of Grnroos (1985, p.42) where he states: The internal marketing concept holds that an organisations internal market of employees can be identified most effectively and hence motivated to customer consciousness, market orientation and sales mindedness by a marketing-like internal approach and by applying marketing-like activities internally.

3.3.

Strategy Implementation

The 3rd pillar of IM has recently gained a major attention in the general management literature and more specifically in the marketing literature (Berry, 1981, Bonoma, 1984; Crainer, 1990; Flipo, 1986; Grnroos, 1985; Gummersson, 1991, Stainsby, 1992; Webb and Morgan, 1992; Wilson et. al.1992; Winter, 1985; Rafiq and Ahmed, 1993). The discussion starts form a point where researchers and practitioners have identified a number of difficulties that occur when new strategies and plans have to be implemented within an organisation (Crainer, 1990; Piercy and Morgan, 1991; Wilson et. al. 1992). Supposing that changes to be undertaken effect the organisational culture and therefore provoke strong resistance in terms of cross-functional adoption

differentiation the will of the employees to co-operate and commit is required and it is considered to be an important task of IM to make the employees buy-in the basic belief of a customer-focused quality management philosophy (Barnes, 1989; Ballantyne, 1991b). Influencing and educating the internal market of employees to a customer oriented and sales driven attitude is extensively treated by George (1990) and Grnross (1985). They propose the implementation and use of active marketing-like techniques for the internal customers with the aim to educate employees

in enterprises has been observed. This is due to the fact that changes in terms of strategy often are decided out of context and without consideration of the organisations existing culture (Burke, 1987). Flipo (1986) outlined that the effective implementation of new strategies requires a planned effort to overcome inter-functional conflict and the need to improve internal communication. Other authors have mentioned the failure of managers to integrate the respected employees who are actively influenced by the changes and to communicate the content of their plans (McKenna, 1992; Motyle, 1992; Smythe et. al., 1992). A further problem for the effective planning and implementation of change strategies seems to be the lack of ownership resulting in undefined commitment form different managers (Pettigrew and Whipp, 1991). More specifically Pettigrew and Whipp (1991) observed that differences between senior management in terms of responsibility and distinctions in interest are not treated actively and therefore can have negative influence on the overall process of change. At this point Ballantyne (1991a) argues that IM should provide a vital application enabling decision takers and organizations to close the gap between the formulation and implementation of corporate strategies. His approach finds further support from other writers who extend his view with the necessity to generate knowledge, understanding, involvement and consensus for marketing strategies within the organisation (Christopher et. al. 1991; Gummesson, 1991; Payne; 1988; Piercy and Morgan, 1990, 1991; Piercy and Peattie, 1988). Hence, IM is considered as a mechanism for implementation and a vehicle to integrate cross-functional departments and interests (Rafiq and Ahmed, 2000). The integrative potential of IM is more explicitly clarified by Glassman and Mc Affee (1992). They identify the role of IM in integrating marketing and personnel perspective plus viewing personnel as a potential resource for the marketing function. Especially Ballantyne (1991a) stresses the necessity for marketers to identify the single employee in order to actively influence and motivate them to commonly

anticipate the change process. He further highlighted the importance to implement internal processes to effectively convert marketing plans. At this viewpoint IM appears to be an implementation tool that has a general use for any type of marketing strategy (Piercy and Morgan 1989). Other authors have identified IM as a central program to reduce departmental isolation, inter-functional friction and the opportunity to overcome resistance to change (Martin, 1992; Darling and Taylor, 1989). Addressing the latter findings above Piercy and Morgan (198) expressed that IM can not only be seen within the context of service marketing it further has to be generalized to a broader range of use. Applying the concept for manufacturing firms for example was proposed by Harrell and Fors (1992) . Ahmed and Rafiq (1995) propose IM as a management implementation methodology that is suitable for a diverse range of contexts. Recapitulating the involvement of IM in the field of strategy implementation this section ones again expands the broader scope if IM. Having dealt with employee relations first and secondly with market orientation the 3rd pillar explicitly does also focus on non-contact employees who influence the customer service capabilities through back-office excellence. The wider approach in terms of employees and functions and the suitable link towards strategic changes requires a more generalist approach from managers and enterprises. Considering the integrative approach between changes and functions IM can reach success factors like market orientation, performance, service quality and collaborative support for new strategies. Referring to Wilson and Fook (1990) the sustainable implementation of IM tools that facilitate the change process leading to competitive advantages requires to market the marketing concept and function. Mercer (1992) even concludes that the marketers role is equivalent to those of a change agent. Taking these issues into account and striving for the need to define IM and classify its boundaries we propose the definition of Ahmed and Rafiq (1993, p.222) where they define IM as a planned effort to

overcome organizational resistance to change and to align, motivate and integrate employees towards the effective implementation of corporate and functional strategies. Their definition clarifies that all kind of changes in strategy require an IM effort to bypass organisational obstacles and to motivate employees. As most of or strategic changes they affect several the departments functions emphasize

The discussion of the primacy of customers finds a wide attention among academics form different schools (Grnroos, 1981; Sasser and Arbeit, 1976, Ahmed and Rafiq, 1993). With a rigour focus on the traditional marketing program the only customer that exists is the external customer. Bringing together the ideas of internal customers with external customers raises the question as to weather the needs and wants of which customers have primacy. Tom Farmer, founder and chief executive of U.K. Kwik-Fit plc. said: in any business there are two types of customers internal customers and external customers. The academic literature doesnt give a clear answer to the question. Sasser and Arbeit (1976) for instance propose that human resources are the most influential marketplace for a service driven organization and therefore impart the internal customer primacy over the external customer. Rosenblunth and Peters (1992) argue that the needs and wants of external customers only can satisfactorily be met after those of employees have been successfully met. This point of view indeed would reverse one of the most constitutional presupposition of marketing that the external customer has primacy. On the basis of the argumentation, it is proposed that a common definition of IM avoiding the contradictions cited above, should drop the phrase of employee as a customer

importance of cross-functional integration.

4. Limitations of the IM concept

The outlined model of IM which as been developed from the traditional environment of marketing includes a number of limitations. Applying the concept for the inner market of an enterprise some authors have highlighted considerable aspects in the theoretical dimension as well as in the managerial context. The most fundamental problems occur due to the missing definition of IM. The problem of a missing definition not only leads to confusion in the practical use and implementation, but also create contradictions at the conceptual level with respect to the defined boundaries and precise domain. Despite the variety of definitions the missing of a unified concept prevents to name the purpose and value of IM, what is it supposed to do, how it is supposed to be done and who is supposed to do it. Ahmed and Rafiq (1993) have identified a number of potential limitations in the current set of definitions and approaches. For example unlikely the external marketing dimension the product that employees can buy may in fact be unwanted by them. Secondly they put forward that the employees will not have a choice in the products they select. Considering the contractual nature of employment they argument that employees in the final stage might accept products they do not want. Further they point out the financial aspects of having satisfied employees. And finally the question is raised whether the internal customer or the external customer has primacy when dealing with the notion of the employee as customer.

4.1. Synthesising the findings and proposing a definition for IM

The detailed review of the academic literature has shown that there exist a number of different but closely related areas where the broader concept of IM can be used. Having analysed and identified three independent pillars where IM finds appropriation (employee relationship, market orientation perspective and strategy implementation) the following section attempts to combine the points of views and definitions with the aim to provide a set of criteria to conceptualise the main elements of IM. Summarizing the findings in the evolutional development of IM from the chapters above the

following key criteria of what IM consists can be mentioned: motivating and satisfying employees customer orientation and sales mindedness use of marketing-like approaches internally cross-functional collaboration and integration change strategy and implementation

lacks an emphasise on the change management dimensions and the cross-functional integration. Whereas Ahmed and Rafiq for instance (1993, p.222) suggest that IM involves the following aspects: a planned effort to overcome organizational resistance to change and to align, motivate and integrate employees towards the effective implementation of corporate and functional strategies. Their definition respects the strategic importance and the need to motivate staff but they do not allude the use of marketing like techniques to accomplish. Expanding both definitions and merging with the criteria listed above the following definition of IM is proposed:

Considering the criteria above it is to say that the three main pillars do not include all the headlines simultaneously. In the first pillar for example Berry and Parasuraman (1991, p.151) focus on the motivation and satisfaction of employees that can be reached through job-products that satisfy the human needs. Whereas Grnross (1985, p.42) addresses in the second pillar the importance of a market orientated and sales minded employee who can be educated with a marketing-like technique internally. Finally Ahmed and Rafiq (1993) bring to discussion in the 3 rd pillar the strategic dimension of IM. They point out the need for an effective implementation of corporate and functional Bearing in strategies mind in that order the to lowest overcome common organisational resistance. determination of IM is the aim to improve the overall service quality within enterprises (George, 1990; Gummersson, 1987, Berry and Parasuraman, 1991; Grnroos, 1985; Piercy, 1995) it is inescapable to precise the current definitions to expand the area of application. However it is being realized that the domain of IM includes far more than the traditional implementation of marketing programs it is necessary to name a set of boundaries which include the different perspectives. One definition that gives a very clear and comprehensible picture of IM is proposed by Grnross (1985, p.41). He says that:an organisations internal market of employees can be influenced most effectively and hence motivated to customer consciousness, market orientation and sales mindedness by applying a marketing-like internal approach and by applying marketing-like activities internally. Meeting the criteria of market-orientation and marketing-like techniques on the other hand it

IM is a planned effort using marketing-like techniques internally to overcome crossfunctional resistance to change and to align, motivate and cross-functionally integrate employees towards the effective implementation of change strategies in order to deliver customer satisfaction through a philosophy of creating motivated and customer conscious employees. 5. Influences on the current discussion of Internal Marketing
The review of a wide body of literature of the last two decades has revealed that the academic discourse on internal marketing has shifted its emphasis from defining the nature of internal marketing to finding practical ways of implementing IM strategies or using IM as a practical way of strategy implementation. Varey (1999) has identified a number of themes offering a contribution to the development of a more sophisticated and valuable conception of internal marketing: marketing-oriented service employee management; the scope, nature and purpose of marketing; marketing as exchange; the political economy paradigm;

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organisation as a domesticated (internal) market; the internal market paradigm; internal marketing as a social process; the individual person in an internal market; a relational perspective on communication; empowerment; and internal marketing as a new form of industrial relations.

In the literature on Internal Marketing Rafiq (2000) et al indicate the existence of three separate yet closely intertwined strands of theoretical development of the IM conceptualisation, namely first an employee satisfaction phase, second a customer orientation phase, and third a strategy implementation/change management phase. For Rafiq et al the beginning of the third phase is marked by authors explicitly recognising the role of IM as a vehicle for strategy implementation. Winter (1985) is named as one of the earliest to bring to prominence the potential role of IM as a technique for managing employees towards the achievement of organisational goals. Winter defines IM as: Aligning, educating and motivating staff towards institutional objectives the process by which personnel understand and recognise not only the value of the program but their place in it (p. 69). Rafiq et al conclude that this emphasis appears to have implanted the initial notions of IM as an implementation mechanism. Further he states that the development of IM as an implementation vehicle was also aided by the growing belief that IM has potential as a cross-functional integration mechanism within the organisation recognising that if strategies are to be implemented more effectively then there is a need to overcome inter-functional conflict (Flipo, 1986) and a need to achieve better internal communication. Grnroos (1994) brings into discussion that the marketing mix management paradigm has dominated marketing thought, research and practice since it was introduced almost 40 years ago. Grnroos introduces the evolving paradigm-shift towards relationship marketing and its consequences for internal marketing. He sees relationship marketing develop into a new approach to managing marketing problems, to organising the firm for marketing, and to other areas as well. Ballantyne et al. (1995), taking a relationship marketing perspective, seek to legitimise internal marketing, not by its methods but by its purpose,

Varey (1995) concludes that internal marketing as such can no longer be understood as a specialist functional approach but as a holistic model for market-oriented management that permits a variety of internal change management approaches to enhance the operation of the model. He states The functional distinctions of marketing, personnel, and quality management are no longer helpful in understanding the complexity of strategic management of adaptive organisations. Internal marketing is not the property of a single functional specialism, but includes organisational behaviour, organisational development, strategic management, and other areas (Varey 1995, p.23). Therefore IM really represents the convergence of a number of previously separate management technologies, such as human resource development, management, employee quality relations, management, strategic corporate

communications and macro-marketing. He stresses the rising recognition that managing a business effectively requires the close integration of several functional specialisms, and that management is a continual and complex process and cannot be seen as a sequence of discrete steps or a set of discrete functions. Indeed it is commonly recognised that the work of a manager is not compartmentalised into different areas but is a portfolio of skills which are not functionally distinguishable and which cut across the traditional functions e.g. the manager as negotiator, resource allocator, information disseminator (See also Mintzberg, 1973). Also George (1990, p.64) argues that IM is a philosophy for managing the organisations human resources as a holistic management process to integrate the multiple functions.

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which for them is to channel staff commitment and team-work into market-orientated problem solving and opportunity seeking. They conceptualise IM as: Internal marketing is any form of marketing within an organisation which focuses staff attention on the internal activities that need to be changed in order to enhance external marketplace performance (Ballyntyne, 1995, p. 15). Ballantyne concludes that the common denominator in all internal marketing perspectives is knowledge renewal. He defines knowledge renewal as generating and circulating new knowledge. Also Lings (1999) identifies three phases of approaches on IM. His classification for the third phase is the aiming at marketing and the marketing concept and creating common values amongst all employees. He finds the common denominator of IM conceptualisations is the need of collecting information about the internal market. The next part of this review will concentrate on relationship marketing and the learning organisation which has been brought into the most recent discussion in operationalising internal marketing in the literature reviewed.

literature (Grnroos, 1989, 1992; Jackson, 1985; Gummesson, 1987,1990,1993; et al.). Grnroos sees relationship marketing as a paradigm shift from the traditional 4P marketing mix. Relationship marketing is suggested as one new marketing paradigm. Internal marketing is seen as a process to be integrated with the total marketing function. External marketing, both the traditional parts of it and interactive marketing performance, starts from within the organisation. As compared to transaction marketing situations, a thorough and ongoing internal marketing process is required to make relationship fails. He argues that the four Ps of the marketing mix are not well able to fulfil the requirements of the marketing concept. As Dixon and Blois (1983) put it, ...indeed it would not be unfair to suggest that far from being concerned with a customers interests the views implicit in the four P approach is that the customer is somebody to whom something is done To use a marketing metaphor, the marketing mix and its four Ps constitute a production-oriented definition of marketing, and not a market-oriented or customeroriented one. Moreover, although McCarthy (1960) recognises the interactive nature of the Ps, the model itself does not explicitly include any interactive elements. Furthermore, it does not indicate the nature and scope of such interactions. Especially since these interactions occur between customers and part-time marketers employees who are not considered marketing people. Service providers with tend their to build long-lasting Grnroos relationships customers. marketing successful. If internal marketing is neglected, external marketing suffers or

5.1.

Relationship Marketing

Varey (1999) states that the relationship between marketing and quality at a strategic level, i.e. how to gain sustainable competitive advantage through a customer orientation, becomes clearer. Still the implementation of a practicable marketing approach remains a recurring problem. In the literature, this is often centred on the question of attaining and maintaining effective communicative relationships between organisation members and between work groups and the development of a super-ordinate goal for co-operative working. One leading new approach for relationship building and management has been labelled relationship marketing which eventually has entered the marketing

developed the customer relationship life-cycle model to describe the long-term nature of the establishment and evolution of the relationship between a firm and its customers. He identified that managing this life-cycle is a relationship marketing task due to the fact that full-time marketers with the traditional four P approach only partly determine the

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success of a company with an individual customer whereas the part-time marketers of a service provider may often have a much more important impact on the future purchasing decisions of the customer. Therefore an interactive marketing performance requires that all parts of the firm that are involved in taking care of customers can collaborate and support each other in order to provide customers with a good total perceived quality and make them satisfied. Thus, for a firm pursuing a relationship marketing strategy the internal interface between marketing, operations, personnel and other functions is of strategic importance to success. Grnroos (1990) defines relationship marketing in the following way: Marketing is to establish, maintain, and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfilment of promises.

customers, it is based on interactions and dialogues and the firm is trying to achieve profitability through the decrease of customer turnover and the strengthening of customer relationships. Piercy (1996) refers to relationship marketing as the attention being focused on making relationships and partnerships the dominant model of how we manage the interface between an organisation and the outside world of the marketplace (e.g. Christopher et al., 1992; McKenna, 1991), where the most important relationship is with the customer, and the goal is a satisfied customer and a productive, enduring relationship (e.g. Gummesson, 1994). Varey (following Drucker, 1973) defines

communication as the mode of the organisation, rather than the means. The achievement of goals is seen as occurring within relationships rather than in discrete transactions of discrete individuals or groups. Internal marketing seen as internal relationship management is an integrative process within a system for fostering positive working relationships in a developmental way in a climate of co-operation and achievement. Such an internal customer relationship management system has a number of key features (adapted from Howe et al., 1992): The voice of the customer is incorporated into product/service decisions. Customer commitment is earned in a social contract. There is open exchange of ideas for mutual gain. Employees develop a greater identification with the corporation (just as the supplying corporation must become more customer-oriented). Customers are involved in product design, production and service. There is close partnership between suppliers and customers. Customers are viewed as individual people and so are value providers. There is continuous interaction and dialogue between suppliers and customers. There is a focus on discovering, creating, arousing and responding to customer needs. Relationships are viewed as enterprise assets. There is systematic collection and dissemination of customer information (detailing and

Berry (1983) views relationship marketing as a strategy to attract, maintain and enhance customer relationships. Rapp and Collins (1990) say that the goals of relationship marketing are to create and maintain lasting relationships between the firm and its customers that are rewarding for both sides. Christopher (1991) marketing an et al consider relationship that aligns marketing,

approach

customer service and quality, with a focus on customer retention, an orientation on product benefit, a long time-scale, a high customer service orientation, a high customer commitment and a high customer contact as well as on the notion that quality is the concern of all. Blomqvist (1993) et al. offer the following key characteristics of relationship marketing: every customer is considered as individual, activities of the firm are predominantly directed towards existing

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negotiating requirements, expectations, needs, attitudes and satisfaction). Communications in the internal market are targeted through segmentation analysis

that internal customers wants and needs are met (e.g. Bekkers and Van Haastrecht, 1993). He sees this relationship between internal customers and their internal suppliers as the focus of the internal marketing effort. By identifying internal customers and suppliers as part of the internal marketing campaign, interactions between internal suppliers and customers can be identified and the communications associated with these interactions can be examined to identify possibilities for improvement. The value chain (Porter, 1985) is used to develop an internal customer structure of the firm, which differentiates between different types of internal customers. Morgan and Hunt (1994) identify the need to manage relationships between internal customers and their internal suppliers simultaneously with the management of supply chain relationships. It appears that the management of supply chain relationships may have important similarities to the management of internal value chain relationships and that the tools for the identification and management of internal suppliers and their internal customers may also be useful in the management of suppliers and customer in the supply chain relationship. As each department identifies its internal and external customers and suppliers a relationship network is identified. Lings concludes that such networks can be expected to be complex and as such the responsibility for the management of these interactions should be that of the departmental manager rather than the marketing function. In this way the whole organisation becomes responsible for the creation and maintenance of marketing relationships in which individuals in different departments can physically relate to their customers. This provides all individuals in the firm with easily identifiable customers, both internal and external, and a clear responsibility to maintain the quality of the service, which is provided to those customers. Handfield and Nichols (1999) identify several elements of trust between the firm and the supply chain partner, which include reliability, competence,

Also Sargeant (1998) identifies the integrative element of communication and relationship management as key since it shifts the emphasis in internal marketing away from the organisations relationship with its employees to the relationships that employees have with each other. Enhancing the quality of integrated customer-supplier relationships is thus seen as a key role for marketing to perform. Ballantyne (2000) concludes that internal marketing is a strategy in action for developing relationships between employees across internal organisational boundaries challenging any internal activities that need to be changed. The intention is to enhance the quality of external marketing relationships. Further he states (following Gummesson) that all marketing is grounded in interactions within networks of relationships, regardless of defining industry groups and regardless of legal-rational company borders. On this basis, all internal marketing is potentially relationship marketing turned inward. The strength of internal marketing is its intent coupled with trusting employees and being trustworthy. Interpersonal relationship development within internal marketing, based on these fluxing behavioural intentions, is interpreted as the evolution of a series of cognitive re-appraisals along a personal path to customer consciousness. Lings (1999) links the applicability of internal marketing approaches to the management of external relationships. He examines the relation between internal marketing, supply chain relationships and service quality. His arguments are based upon the view that the internal market consists of groups communicating to other groups within the organisation and internal marketing is considered to be the process of creating market conditions within the organisation to ensure

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openness and the importance of the primary interface. These factors in the development of trust between supply chain partners are similar in nature to those identified by Parasuraman (1988) et al. as important components of service quality. Grnroos (1994) calls the promise concept an integral element of the relationship marketing approach. It includes giving promises and thus persuading customers as passive counterparts on the marketplace to act in a given way in order to attract new customers and initially build relationships. Fulfilling these promises is equally important as means of achieving customer satisfaction, retention of the customer base, and long-term profitability. Like others Grnroos identifies trust as another key element. The resources of the seller personnel, technology and systems have to be used in such a manner that the customers trust in the resources involved and, thus, in the firm itself is maintained and strengthened( Grnroos, 1990, p. 5).

internal marketing is to provide a recommended method of organising, the better to provide services to firms customers. In identifying that a general definition of the learning organisation its still missing he follows Watkins and Marsick (1993) giving five statements about what a learning organisation is: 1. 2. 3. The learning organisation is more than just a collection of individuals who are learning. The The learning learning organisation organisation capacity demonstrates accelerates but also organisational capacity for change. individual learning

redefines organisational structure, culture, job design, and assumptions about the way things are. 4. The learning organisation involves widespread participation of employees and often customers in decision making and information sharing. 5. The learning organisation promotes systemic thinking and building of organisational memory.

Concluding from the literature reviewed it can be said that in the current discussion of internal marketing relationship marketing holds a dominant role in operationalising the internal marketing concept. In order to achieve customer orientation the traditional concept of transactional marketing is no longer seen as appropriate to fulfil this task. The multi-dimensional interactions between internal and external customers and suppliers can only be maintained and enhanced through two-way communication on a personal level rather than by a single marketing department. In this sense internal marketing becomes a strategy for relationship development in order to serve another purpose: creating and circulating new knowledge within networks of relationships.

Cahill (1995) develops the concept of the learning organisation as starting from the point of organisational learning and going forward in terms of systems theory to create a new kind of organisation. The difference between organisational learning and the learning organisation is that only a learning organisation consciously learns and that it understands its culture as well as the impact that being a learning organisation has on the firms culture and the reciprocal impact that the culture has on the firms ability to learn. Thompson and Lutherans (1990) further state several properties that emerge when relating behavioural and learning principles to organisational culture: Culture is a generic term. Culture is learned.

5.2.

Learning Organisation

Cahill (1995) focusses in his discussion on internal marketing on another recently introduced concept. This concept is called the learning organisation. The introduction of the learning organisation concept to

15

Culture is transmitted through a pattern of behavioural interactions. In an organisational setting, there are multiple agents. reinforcements and reinforcing

workers are assigned to tasks within a different context. This provides workers with a chance to affect the formal organisation, and evidence shows that this leads to increased work satisfaction and task effectiveness (Zand, 1981). Varey (1999) contributes that a broader concept of internal marketing requires that a process, or metastructure, perspective is taken for organisational development through learning in a consciously created interactive communication system, i.e. a social system which is not solely concerned with economic transactions. Ballantyne (2000) defines the common denominator in all internal marketing perspectives as knowledge renewal differentiating it in two forms. The first is knowledge generation, meaning the creation or discovery of new knowledge for use within the organisation, with external market intelligence as inputs. The second is knowledge circulation, representing the diffusion of knowledge to all that can benefit, through the chain of internal customers to external customers. He develops his model of knowledge renewal in three steps. First he depicts the main modes of learning activity. Second, he reconstructs these as a continuing process for knowledge renewal. Third, he matches both of these with the intentions that permit an insight into the participants behaviour. Thus he sets a general framework for internal marketing that might be tested in any organisational setting.

Each individual carries predispositions that shape his or her interpretation of the organisational culture.

A symbiotic relationship exists between the reinforcing agent and target. Changing an established culture is difficult.

Cahill believes that the metamorphosis into a learning organisation is a necessary step in the correct performance of internal marketing as a tool helping to implement internal marketing to get the organisation to provide its services to its customers better, with more competence and understanding of who the customers are and what they want. In his opinion it is the culmination of all the empowerment and human factors design or organisations, the jump from theory X to theory Y to learning organisations (Cahill, 1995 p.32). Dixon (1992) states that organisational learning may have become the critical competence of the 1990s. Halal (1996) suggests that organisational learning may merely be the rebirth of organisation development, in using team learning to encourage change from the bottom of the hierarchy of authority. This is needed to build effective teams, but does not recognise the growing need to transform organisations into entrepreneurial, democratic systems (Halal et al., 1993; Halal, 1996) which are able to learn about the current world by unlearning outmoded assumptions based on past experience. The parallel learning structure allows people to work in a completely different way from that of the formal organisation. It is specifically designed to solve problems, and allows change and innovation to be managed without disrupting the formal structures and mechanisms required for routine and repetitive tasks. Managers and

Four distinct modes for learning activity are revealed (following Ballantyne): Energising: learning how to work together on useful marketplace goals that are broader than the bounds of any individual job description. Following Katz and Kahn (1966) Ballantyne understands energy renewal as coming directly from the organisational activity itself. Code breaking: learning how to apply personal resources of know-how in working together to solve customer problems, create new opportunities and change internal procedures . Organisations learn through individual staff

16

members. The first steps are often intuitive; what will work cannot really be known until tested in action. However, testing personal know-how in a group setting is a necessary part of checking out the wider application of personal experience and, in doing so, gaining confidence to challenge entrenched internal policies and procedures. Clearly, working to discover and uncover operational solutions to customer problems is customer consciousness in action. Authorising: learning to make choices between options on a cost-benefit basis and gaining approvals from the appropriate line authority. Re-designing processes that cross over departmental borders also means learning an organisation-specific set of skills in representing a case for change. A well-documented argument for changing the particular process or policy is necessary, as is an understanding of the broader context in which it operates. This also requires advocacy and listening skills and, to some degree, the support of powerful others. Diffusing: learning how to circulate and share new knowledge across managerial domains in new ways. The diffusion of new knowledge is more than one-way message making. Many new ways of working can be tested and negotiated through dialogue. A trustworthy management would seem to be the secret of gaining staff commitment. However, any large organisation have hierarchical and specialist divisions that constrain interaction across internal borders. The effect is that these become barriers to trust and commitment if left unattended.

Diffusing: integrating knowledge: This phase is characterised by the integration of new knowledge into the working ways of the organisation, an explicit to tacit process, in which the store of organisational knowledge is renewed, at the explicit level, enhanced by personal knowledge and commitment.

Ballantyne introduces the third connection as key to the sustainability of the other two. This is the spontaneous community of participants, shaped within and by a supportive network of relationships. He sees the strength of internal marketing as its intent coupled with trusting employees and being trustworthy. Organisational knowledge is renewed through interaction and dialogue. Energising and diffusing involve new learning behaviours and thus require the co-operation of HRM, and code breaking and authorising departments. Senge et al (1994) define learning in organisations as the continuous testing of experience, and the transformation of that experience into knowledge accessible to the whole organisation, and relevant to its core purpose. Senge (1993) identifies four groups of concepts which need attending to in order to build an organisational foundation for the learning organisation: philosophy; attitudes and beliefs; skills and capabilities; and tools. He beliefs that developing this foundation and the new organisational skills and capabilities which need to flow from them may be the highest-leverage area for creating lasting change ( Senge, 1993, p. 21). Senge further focusses tightly on the necessity of having a shared vision throughout the organisation. providing the focus and energy for learning. The literature reviewed provided so far for the development of the academic discourse on IM, its main pillars and the current influences on the discussion. The last chapter is concerned with the implications for further research on IM identified in the literature reviewed. need support from operational

To connect the four learning activity modes to the concept of knowledge renewal Ballantyne draws particularly on the insights of Nonaka and Takeuchi (1995). He discusses each phase once more linking them to Nonaka and Takeuchis four-phase theory of knowledge creation: Energising: developing common knowledge: This phase is energised by the sharing of tacit knowledge, a tacit to tacit process, thus amplifying common knowledge under conditions where trust is present. Code breaking: discovering new knowledge: This phase is characterised by interaction in the discovery of new knowledge, a tacit to explicit process, necessarily supported by trust between the participants at the start, and a developing mutual obligation to see the task through. Authorising: obtaining cost-benefit knowledge: This phase is characterised by bringing together explicit knowledge on costs and benefits, an explicit to explicit process, where rationality nonetheless is informed by a sense of obligation and trust.

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6. Implications for further research

Suitable research should assist the development of terminology for a single clear understanding of the underlying principles of internal marketing among managers and academics alike. The extent of acceptance of internal marketing as a management philosophy by managers should be evaluated and if they recognise their own role in providing excellent service to their employees? Varey (1995) suggest to conduct research in organisations which do not have a strong marketing orientation to test the applicability of IM in nonmarketing companies. Further he points at a number of implementation options being defined for strategic plans (Nutt, 1989) and raises the question to what extent internal marketing can enable the various tactics to succeed and if there are other tactics available to the strategic manager as part of a strategic approach? Rafiq et al (2000) prefer the development of a scale to measure employee empowerment in order to have a complete set of scales for developing a reliable measure of IM scale. In their opinion this would be a considerable step forward in IM research. This measure can then be used to assess the claims made for IM, for instance regarding service quality, customer satisfaction, customer loyalty, and profitability. Lings (2000) focuses on developing a full

However the ten dimensions of service quality which are important to the external customer (Parasuraman et al., 1985) cannot be assumed to be the same as those which are important to the supply chain or internal customer. Once the important service quality dimensions for each internal and supply chain customer have been identified it will be possible to examine these and explore the propositions that they differ according to the nature of the supplier-customer interaction.

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