Research Proposal

On
The Effect of Internal Marketing on Employee
Organizational Commitment in Nepalese Commercial Banks

Submitted To: Submitted By:

Mr. Arjun Kumar Shrestha Aayushma Bista (19307)
Asst. Prof., KUSOM Rajina Khadka (19316)
Utsav Raj Pant (19324)
Ritesh Shakya (19332)
Ronjent Thapa (19337)
Group 7
1.1 Background of Study
Organizational commitment is the key to improved productivity and increased efficiency of

the company attained through reduced employee turnover and increased workplace

dedication. However, work commitment is the result of various factors inside the organization.

This paper on “Effect of Internal Marketing on Employees Organizational Commitment in

Nepalese Commercial Banks” has tried to highlight the relationship between the five major

components of internal marketing such as motivation, training, job satisfaction, understanding

and differentiation and inter-functional coordination with the organizational commitment of

the employees in Nepalese commercial banks. The rate of employee turnover is huge in

Nepalese Commercial banks and one of the potential reasons for this is the lack of dedication

of the employees at work. The amount of effort that these banks put on external marketing

like advertisements and promotion is high. However, this paper tries to analyze the importance

of developing this sense of commitment in the employees. As the competition between these

banks increase the burden on the employees go up as well. These pressurizing environment

might develop a sense of dissatisfaction among employees. In this research we have tried to

find the potential impact of internal marketing actions on employees organizational

Commitment.
1.2 Broad Problem Area
The financial services industry has become progressively more competitive. The customers as

well as the employees have a wide range of choices available to them. Employees (Internal

Customers) can easily switch between the organizations if they are not satisfied with the

services, or the pay scale, or the environment in which they operate and thus the employee’s

turnover is increasing at a very high rate. Therefore, retaining the existent (internal and

external) customer and employees has become a great challenge. If the financial institution is

to operate smoothly and retain its employees they must differentiate themselves from others.

One way the banks could achieve differentiation is through the use of internal marketing with

particular reference to the quality of service.

The banking sector in Nepal has been providing additional and new banking services and

facilities to the customers. But still, Commercial banks seems to be lagging behind and unable

to design any new strategies for the improvement of employees’ commitment towards the

organization. As a result, the employee turnover is ever increasing and they are also losing

their external customers. Internal marketing is crucial in Nepalese Commercial Banks due to

its role in ensuring employees organization commitment. In this research paper, we study the

effect of various aspects of internal marketing including understanding of employees,

employee motivation, job satisfaction, employee training and inter-functional coordination on

organizational commitment in Nepalese Commercial Banks.

Problem Statement
1.3 Objectives of Study
The general purpose of the study is to examine the effect of various aspects of internal

Marketing on employee’s organizational commitment in Nepalese Commercial Banks.

The specific objectives of study are:

• To analyze the effect of training on employees organizational commitment

• To determine the effect of motivation on employees organizational commitment

• To examine the effect of job satisfaction on employee organizational commitment

• To access the effect of understanding and differentiation on employees organizational

Commitment

• To determine the effect of inter-functional coordination on organizational commitment

of employees in Nepalese commercial Banks

1.4 Research Question

The study is intended to answer the main research questions which are:

• To what extent the employee’s motivation affect the employee’s organizational

commitment in Nepalese Commercial Banks?

• Does Training has any effect on employee’s organizational commitment in Nepalese

Commercial Banks?

• To what extent job satisfaction has an effect on organizational commitment of

employees in Nepalese Commercial Banks?

• To what extent the understanding has an effect on organizational commitment?

• To what extent the inter-functional coordination has an effect on organizational

commitment of employees in Nepalese commercial Banks.

1.5 Review of Literature

Internal marketing

Organizations that select, develop, manage and motivate their workforce in order to produce

outstanding business results have an extraordinary competitive advantages compare to others. The

term internal marketing originates from the service marketing literature with focus on developing

customer-conscious employees with the aim of turning service quality into an organization

imperative. The genesis of internal marketing (IM) can be traced to the early works of Berry,

Hensel & Burke (1976) as well as Sudhir & Sangitta (2010) who viewed internal marketing as a

strategy whereby an organization designs its jobs and markets itself to its employees as though the

employees are the firm’s (internal) customers. The use of marketing in the context of internal

marketing (IM) suggests that Internal marketing as a concept evolved from the simple idea that

employees constitute an internal market within the organization, which need to be recognized,

informed, trained and re-trained, motivated and rewarded in meeting the needs of the external

customers and expectations (Varey & Lewis 2000). Internal marketing leads to an increase in

organizational commitment and employee retention by developing a sense of connection and

belongingness with the employees and the organization. (Alshura, Nusair, & Aldaihani, 2016)

Organizational Commitment

Commitment is the engagement or dedication towards a certain activity. Organizational

commitment of employees is that how well a staff performs their duties and responsibilities. An

organization must assess its employees’ commitment levels periodically because it has a direct

impact on the level of organizational performance (Andrew, 2017). Different scholars have defined

employee commitment in diverse ways (Mowday, Steers & Porter, 1979; Maxwell & Steel, 2003;

He, Murrman & Perdue, 2010; Nartey, 2012). For instance, Mowday et al. (1979) noted that
commitment referred to the relative strength of an individual’s identification with and involvement

in a particular organization. Maxwell and Steele (2003) described employee commitment as the

intensity of an employee’s affinity to and participation in an organization. He et al. (2010) on the

other hand saw employee commitment as the psychological and emotional attachment of an

employee to his or her organization, accepting the goals and values of the organization, and

delivering high quality service in order to satisfy and retain customers. Narteh (2012) described

employee commitment as a felt state of employees‟ attachment to their organizations, including

their willingness to internalize the values of the organization and abiding by the rules and

regulations therein. For the purposes of this study, employee commitment is described as the

strength of an employee’s attachment to an organization, usually manifested in employee

internalization of organizational values, going the “extra mile” to achieve corporate objectives and

staying long in the organization.

Internal Marketing and Organizational Commitment

Various researches have been conducted to determine the relationship between Internal marketing

activities of organizations and organizational commitment of their employees. Many literatures

have shown a positive relationship between these two variables.

Ismail and Sheriff (2017) studied the banking sector of Yemen found Internal marketing variables

such as vision, development, rewards, empowerment and employee-management communication

to positively affect the level of organizational commitment on retail banking employees. Internal

marketing domains such as motivation, training, employee development and support systems are

also strong predictors in determining the level of Service quality provided by employees

(ELSamen Abu & Alshurideh, 2012). The higher service quality is a result of higher organizational

commitment which in turn depended upon the internal marketing domains. Alshura et al (2016)
concluded that an effective internal communication will lead to functional coordination between

various departments which will allow for converging of various skills, experiences and

competencies that allows for efficient completion of all organizational activities.

The study of Tansey, McHugh and McGrath (2004) as cited in Amjad and Muhammad (2012)

found that management can use internal marketing to motivate employees to provide the best

possible service to customers. In a similar development, Papasolomou (2006) argues that a lot of

companies set a systematic reward system to motivate its employees to ensure loyalty and improve

their service quality and delivery. Zain and Ghani (2009) established a direct relationship between

motivation as a reward system and employee commitment.

The research entitled “The Impact of Internal Marketing on Customer Service in a Retail bank” by

Brian A. Richardson C. Grant Robinson., (1986) was conducted to determine the relationship

between the internal marketing and the customer service provided by the bank. In which the

researchers found that the frontline personnel are a critical means of competition in the marketplace

and hence motivating them is the key task and internal marketing was responsible for the creation

of the framework for such activities. And, lastly the research concluded that the internal marketing

recognized the value of communication in informing and motivating staff and created positive

attitudes and sense of belonging which in fact affected the quality of service provided and was the

differentiating factor from its competitors. Cherrington (1994) postulated that employees

experiencing high satisfaction levels contribute to organizational commitment, job involvement,

improved physical and mental health, and improved quality of life both on and off the job.

Jaworski & Kohli (1993) using bank managers, investigated the indirect relationship between

inter-functional coordination and organizational commitment, putting market orientation in

between. The results showed that inter-functional coordination has a positive impact on market

orientation, and market orientation is positively related to organizational commitment.

Similarly, Caruana & Calleya., (1998) attempted to examine the internal processes associated with

delivering customer satisfaction focusing particularly on the relationship between the nature and

extent of internal marketing and its outcome in terms of the level of organizational commitment

on the part of employees in their research “The effect of internal marketing on organizational

commitment among retail bank managers”. The study set out to consider what internal marketing

involves and whether internal marketing practice in a service firm has an effect on the level of

employee commitment to the organization. The study found out that the effect of internal

marketing is on the affective commitment dimension. Affective commitment focuses on the

emotional attachment of the employee to the organization and underlines the commitment of the

employee to pursue the goals of the organization. The study also found out that organizational

commitment has other antecedents. These include employees’ perception of the extent to which

jobs are challenging, roles and goals are clear, goals are challenging, management is receptive to

employee suggestions, peer cohesion, organizational dependability and whether employees are

treated equitably, made to feel important and feedbacks about their work performance are

provided.
1.6 Theoretical Framework

The following conceptual framework is proposed in order to show the relationships among
independent and dependent variables. This theoretical framework model shows the relationship
between motivation, training, job satisfaction, understanding & Differentiation, Inter-functional
coordination and organizational commitment.

Internal Marketing

Motivation

Training

Employees
Job satisfaction Organizational

Commitment

Understanding and
Differentiation

Inter-functional
Coordination

Figure 1: Theoretical Framework

1.7 Hypothesis
Related to research questions a set of hypothesis have been formulated that link the dimensions of

internal marketing to organizational commitment as follows:

H1: Training has a positive effect on employee’s organizational commitment

H2: Motivation has a positive effect on employee’s organizational commitment

H3: Job satisfaction has a positive effect on employee’s organizational commitment

H4: Understanding & Differentiation has a positive effect on employee’s organizational

commitment

H5: Inter-Functional coordination has a positive effect on employee’s organizational commitment

References
Richardson, B. A., & Grant Robinson, C. (1986). The impact of internal marketing on customer

service in a retail bank. International Journal of Bank Marketing, 4(5), 3-30. Caruana, A., &

Calleya, P. (1998). The effect of internal marketing on organizational commitment among retail

bank managers. International Journal of bank marketing, 16(3), 108-

116.

Braimah, M. (2016). Internal marketing and employee commitment in the hospitality industry.

African Journal of Hospitality, Tourism and Leisure, 5(2), 1-22.

Carvalho, J. (2013). The crucial role of internal communication audit to improve internal and

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Alshura, M. S., Nusair, W. K., & Aldaihani, F. M. (2016). Impact of Internal Marketing

Practices on the Organizational Commitment of the employees of the Insurance companies in

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