The concept of internal marketing has been discussed in the literature of marketing and related disciplines for over twenty-five years (Rafiq and Ahmed, 2000). Yet, despite many attempts at the formalisation and operationalisation of internal marketing activities (Tansuhaj, Randall and McCullough, 1988; Bak et al., 1994; Ballantyne, 1997; Lings and Brooks, 1998; Sargeant and Asif, 1998; Quester and Kelly, 1999; Frost and Kumar, 2000; Straughan and Cooper, 2002), no conceptualisation or indeed definition has as yet found undivided acceptance by scholars and practitioners alike (Rafiq and Ahmed, 1993, 2000). Consequently, there is a high degree of ignorance and reluctance towards the concept of internal marketing, resulting in a lack of application. To a considerable extent, the confusion regarding the subject is a direct result of its three-pronged historical development, leading to three separate sets of analytical and implementation frameworks (Rafiq and Ahmed, 1993). These are:

  • Internal marketing to internal customers (Sasser and Arbeit, 1976)
  • Internal marketing in internal markets (Flipo, 1986)
  • Internal marketing as a strategy and change facilitator (Grönroos, 1981).

The internal marketing framework




Key Writers


IM to internal customers


Jobs are generic products that must be marketed to employees to ensure employee satisfaction; satisfied employees will lead to satisfied customers.

Sasser & Arbeit, 1976; Bery, Burke & Hensel, 1976; Beryy, 1981

Internal market reseach

Employer branding


Rewards and benefits



IM as a strategy implementer

Strategic marketing

Strategy is change and change must be implemented through employee understanding of organisational objectives and the creation of customer consciousness; employees must commit to the organisation and its brand/s.

Gronroos, 1981; Piercy & Morgan, 1991

Internal market research

Internal communication

Team management

Change management

Internal branding


IM in internal markets

Services/ TQM

Organisations consist of internal markets with an internal value chain; internal suppliers and internal customers need to be identified and their needs satisfied to achieve overall improved organisational service quality and consequential service quality to the customer.

Flipo, 1986; Foreman & Money, 1995

Internal market research

Internal communication

Internal quality control



Source: Established from the work and findings of: Sasser & Arbeit, 1976; Berry et al., 1976; Berry, 1981, Gronroos, 1981; Flipo, 1986; Tansuhaj, Randall & McCullough, 1988; Piercy & Morgan, 1991; Rafiq & Ahmed, 1993, 2000; Varey, 1995; Foreman & Money, 1995; Lings, 1999, 2000.

This classification is consistent with the frameworks proposed by other writers (Lings, 1999; Rafiq and Ahmed, 2000). It is recognised that these major thrusts are not necessarily mutually exclusive. Indeed, the tendency to overlap is expected, given the shared origin of these orientations. However, for the purpose of isolating a specific tool of internal marketing a categorisation into phases is useful (see Table 1).

A cyclical relationship is suggested between these functions, as committed employees and efficient and effective internal customer relationships are capable of attracting and retaining employees. Similarly, such efficient and effective internal customer relationships will also influence an employee's understanding of the organisation and its brand and thus increase the propensity for alignment with and commitment to the brand. It should be noted that these functions are traditionally not identified in the literature as occurring together, although some interrelationships are suggested (Tansuhaj, Randall and McCullough, 1988; Rafiq and Ahmed, 1993; Varey, 1995). Thus, taking into consideration the above analyses, the following inclusive definition of internal marketing is offered:

Internal marketing is the accumulation and application of functions and tools aimed at the formation and maintenance of a consistent, efficient, effective and customer-oriented workforce. These objectives are achieved through the communication with and attraction, retention, motivation, education and management of suitable employees. Suitable employees in this context are defined as those employees who are conscious of and committed to the needs of the organisation and other employees at all levels in the internal value chain.

Phases in the development and evolution of the internal marketing concept

Despite the confusion mentioned above, a careful examination of the literature over the last 20 years indicates the existence of three separate yet closely intertwined strands of theoretical development of the IM conceptualization, namely an employee satisfaction phase, a customer orientation phase, and a strategy implementation/change management phase. We discuss the evolution of these phases below.

Phase 1: Employee motivation and satisfaction

In the early developmental phase, the majority of the literature on internal marketing focused upon the issue of employee motivation and satisfaction. The major reason behind this was the fact that the roots of the internal marketing concept lie in efforts to improve service quality. Not being automatons, individuals exhibit inconsistencies in the performance of service tasks and as a consequence cause variation in the level of delivered service quality. The problem of ``variability'' focused organizational efforts on getting employees to deliver consistently high quality service. The overall effect of this was to bring to the fore the issue of employee motivation and satisfaction. From this starting point, the importance of employee satisfaction as an important parameter impacting upon customer satisfaction was hypothesized. The term internal marketing appears to have been first used by Berry et al. (1976) and later by George (1977) and Thompson et al. (1978, p. 243) and Murray (1979). Even though the term internal marketing was not directly used by them, the idea of internal marketing was also present in Sasser and Arbeit's (1976) article. However, it was not until the publication of Berry's (1981) article in which he defined internal marketing 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'' that the term entered popular discourse. A key assumption underlying this view of IM is based upon the notion that ``to have satisfied customers, the firm must also have satisfied employees'' (George, 1977, p. 91). Sasser and Arbeit (1976) took this line of argument a step further by contending that personnel is the most important market of a service company (Sasser and Arbeit, 1976, p. 61). The deployment of marketing techniques in the personnel area is also indicated by Sasser and Arbeit by their depiction of jobs as products and employees as customers:

Viewing their job offerings as products and their employees as customer forces managers to devote the same care to their jobs as they devote to the purchasers of their services (Sasser and Arbeit, 1976, p. 65).

The focus on employee satisfaction within these new approaches to employee management can largely be attributed to the fact that in the marketing of services much of what customers buy is labour, or human acts of performance. Consequently, attraction of the best personnel, their retention and motivation becomes of critical importance (Thompson et al. 1978, p. 263; Sasser and Arbeit, 1976, p. 64). Attraction, retention and motivation of high quality staff is especially critical in situations where the quality of the service is the only real differentiating factor between competitors. This situation occurs most frequently in service environments in which customers are highly demanding of employees, coupled with employees who in turn hold high expectations from their jobs as sources of self-actualization and self-development. Under these conditions it was thought that the effect of employing an IM approach would be to create more satisfied customer-contact employees who appreciate clearly the logic and benefit of courteous, empathetic behaviour when dealing with customers, and hence lead to greater customer satisfaction. Infused with this logic, the challenge of creating satisfied employees and hence customer satisfaction received a vigorous impetus. The fundamental tool for achieving employee satisfaction in this approach is the treatment of employees as customers. For instance, Berry and Parasuraman (1991) state:

Internal marketing is attracting, developing, motivating and retaining qualified employees through job-products 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 human needs (Berry and Parasuraman, 1991, p. 151).

Notwithstanding the appeal of the ``employees as customers'' philosophy that underpins much of the logic of the first phase, Rafiq and Ahmed (1993) put forward a number of potential problems with this conceptualisation of IM. First, unlike the external marketing situation, the ``product'' that employees are sold may in fact be unwanted by them or even possess negative utility. Second, unlike the external situation, employees are unlikely to have a choice in the ``products'' that they can select. Third, because of the contractual nature of employment, employees can, in the final analysis, be ``coerced'' into accepting ``products'' they do not want. Fourth, the financial cost of having satisfied employees could be considerable. And lastly, the notion of ``employee as customer'' also raises the question as to whether the needs of external customers have primacy over those of the employees. For instance, Sasser and Arbeit's (1976) proposition that a personnel is the most important market of a service company accords primacy to the employee

market and demotes the external customer to a secondary level. This would appear to invert one of the most fundamental axioms of marketing, namely that the external customer has primacy. This brings us onto the second phase.

Phase 2: Customer orientation

The second major step in the development of the IM concept was undertaken by GroÈnroos (1981) whose starting point was the concern that because contact employees in services become involved in what he termed ``interactive marketing'' it is essential that they are responsive to customers' needs. GroÈnroos recognized that not only do buyer-seller interactions have an impact on purchasing and repeat purchasing decisions but also, crucially, that buyer seller interactions provide a marketing opportunity for the organization. To take advantage of these opportunities requires customer oriented and sales-minded personnel. Hence, the object of the IM is to ``get motivated and customer conscious employees'' (GroÈnroos, 1981, p. 237). In this view, it is not sufficient that employees are motivated to perform better (as in the approach of Berry and his followers), but they must also be ``sales'' minded. Furthermore, effective service also requires effective co-ordination between contact staff and backroom support staff. GroÈnroos also views the IM concept as a means of integrating the different functions that are vital to the customer relations of service companies (GroÈnroos, 1981). GroÈnroos (1985) extended his original definition of IM as a method of motivating personnel towards customer consciousness and sales mindedness, to include the use of marketing-like activities in this pursuit:

. . . holding that an organization's internal market of employees can be influenced 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 (GroÈnroos, 1985, p. 42).

George (1990) similarly accepts this position by asserting that IM holds that employees are ``best motivated for service-mindedness and customer oriented behaviour by an active marketing-like approach, where marketing like activities are used internally''. The addition of marketing-like techniques internally, moves GroÈnroos' definition closer to that of Berry's (1981) definition, in that both sets of approaches stress the need to motivate employees, and advocate the use of ``marketing-like'' techniques to do it. However, the critical difference between GroÈnroos' approach and that of Berry and collaborators is that employees are not treated as customers, as is the case in the latter conceptualization. Additionally, GroÈnroos' conceptualization focuses attention on creating customer orientation in employees through a process of influencing, rather than satisfying and motivating employees per se.

Phase 3: Broadening the internal marketing concept - strategy implementation and change management

The beginning of the third phase is marked by insights drawn from a number of authors who explicitly began to recognize the role of IM as a vehicle for strategy implementation. Winter (1985) was one of the earliest to bring to prominence the potential role of IM as a technique for managing employees towards the achievement of organizational goals. Winter emphasizes that the role of IM is that of:

Aligning, educating and motivating staff towards institutional objectives . . . the process by which personnel understand and recognize not only the value of the program but their place in it (p. 69).

This emphasis appears to have implanted the initial notions of IM as an implementation mechanism. The development of IM as an implementation vehicle was also aided by the growing belief that IM had potential as a cross functional integration mechanism within the organization. For instance, George (1990) argues that IM is a philosophy for managing the organization's human resources ``as a holistic . . . management process to integrate the multiple functions'' (p. 64). This view is expressed more forcefully by Glassman and McAfee (1992) who emphasize the role of IM in integrating marketing and personnel functions to the extent that personnel becomes a resource for the marketing function.

In this phase the role of IM as an implementation tool/methodology is made more explicit. Initially, this viewpoint appeared in the context of services marketing in the works of Flipo (1986), and Tansuhaj et al. (1987). Later it was generalized to any type of marketing strategy by Piercy and Morgan (1989). Broadly speaking, all of these approaches appear to be based upon the recognition 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. These extensions led to IM being advocated as a general tool for the implementation of any organizational strategy whether internal or external. In due course, IM has come to be seen as a mechanism for reducing departmental isolation (Martin, 1992), reducing inter-functional friction, and overcoming resistance to change (Darling and Taylor, 1989; Rafiq and Ahmed, 1993). This has led to a widening of IM applications to any type of organization, not merely to services. For example, Harrell and Fors (1992) apply the concept to manufacturing firms, and Ahmed and Rafiq (1995) propose it as a change management implementation methodology suitable for a wide range of contexts. The discussion of the third phase suggests that the scope of IM activity is much wider than motivation of employees towards customer consciousness.

For instance, it can also be used to motivate non-contact employees towards behaving in a manner that enhances the service for end-customers. Taking these issues into account Rafiq and Ahmed (1993) defined internal marketing as ``planned effort to overcome organizational resistance to change and to align, motivate and integrate employees towards the effective implementation of corporate and functional strategies''. This definition incorporates the notion that any change in strategy is likely to require an IM effort to overcome organizational inertia and to motivate employees towards requisite behaviour. Furthermore, as some (including marketing) strategies are likely to span several functional areas, this is likely to require crossfunctional integration. The above definition of IM appears capable of handling these issues within the remit of its boundary. Moreover, this definition also places less emphasis on the concept of employee as customer and more on the tasks and activities that need to be undertaken for the effective implementation of marketing and other programs to achieve customer satisfaction, while recognizing the central role of employees.

While the criteria listed above are useful in assessing what constitutes IM and what does not, it is also necessary to show how they can be used in order to implement effective IM strategies. This is important, as at present there are no models that show how IM works. Going beyond definitions, and based on the IM literature reviewed above, Figure 1 shows the interrelationships between the criteria for IM and the implementation of one particular organizational strategy that is at the heart of service organizations, namely, service quality. The relationships indicated in Figure 1 are derived directly from the IM literature. For instance, the motivation of employees via marketing-like activities was implicit in the phase one literature and explicitly stated in the phase two literature in the evolutionary development of IM (Berry et al., 1976; George, 1977; Berry, 1981). GroÈnroos (1981) and others also recommend the marketing-like approach to improve the inter-functional co-ordination and hence customer orientation. Inter-functional co-ordination and integration are central to phases two and three (see for instance, Flipo, 1986; Tansuhaj et al., 1987; Piercy and Morgan, 1989). Improving customer orientation of the organization is central to phases one and two of the development of the IM concept. In phase three the central reason for interest in IM was the contribution of IM to effective implementation of strategy via increased inter-functional co-ordination and employee motivation. At the centre of this framework is customer orientation which is achieved through a marketing-like approach to the motivation of employees, and interfunctional co-ordination. The centrality of customer orientation reflects its

importance in the marketing literature and its central role in achieving customer satisfaction and hence organizational goals. In fact, according to Narver and Slater (1990), inter-functional co-ordination is an essential facet

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