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Internal marketing in manufacturing organizations: An exploratory study

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Int. Journal of Management and Development Studies 6(10): 70-82 (2017)
ISSN (Online): 2320-0685. ISSN (Print): 2321-1423
Impact Factor: 0.715

Internal marketing in manufacturing organizations: An exploratory study

Shyam Prasad. S1 and Shampa Nandi1
Abstract: Customer satisfaction is a key to an organization’s competitive advantage. Every
interaction of the customers’ with the company influences their satisfaction and their perception
towards that company. This is clear in case of a service. The service employees play a crucial
role in shaping customers perception, attitude and opinion about a company and are one of the
most crucial factors in delivering satisfactory customer experience. Internal Marketing - which
seeks to motivate employees in all functions to consistently deliver a satisfying customer
experience has been well studied in service organizations. The purpose of this paper is to explore
Internal Marketing in non-service organizations such as a manufacturing firm to find out the
status of Internal Marketing in that organization. The methodology adopted here were two fold.
Firstly, a survey was conducted among the employees of the organization using a questionnaire.
Secondly, personal interview was held with the top-level management. Measures used in this
study were drawn from earlier study “Internal-market orientation and its measurement” by
Gounaris in 2006. Reliability of research instrument was tested by a pilot study and data was
collected using convenience sampling. Statistical Package for the Social Sciences was used for
analyzing data.

Keywords: Internal Marketing, Customer Experience, Service Organisations, Manufacturing

Organisations, Empirical Research.

Introduction
Customer satisfaction is the key for an organization‟s competitive advantage and the employees
are one of the most crucial factors in delivering satisfactory customer experience. Particularly in
service organizations employees are the backbone of the business and therefore they need to be
motivated to give their best. In fact, the “employee-customer” interaction is a critical factor in a
customer‟s perception of the service quality. (Turkoz & Aklyol, 2008). Further, it was also found
that the level of employee satisfaction is strongly and directly related to customer satisfaction
and productivity (Asif & Sargeant, 2000 ; Rafiq & Ahmad, 2000). This situation led to the
development of a phenomenon called the internal marketing (IM) and definitions of IM started
appearing as early as in 1976. One of the initial definitions considered “employee as internal
customer and job as product” (Berry, Hensel, & Burke, 1976). Later many other authors,
practitioners, and researchers have put forward varying definitions for IM. The review of
literature on this subject has revealed definitions with varying perspectives leading to an
unsettled situation. In this paper, we have come up with a comprehensive definition (anonymous)
and hope will settle the issue. Secondly, while discussing IM, the academic literature places its
attention mainly on the service industry and those employees that come in contact with the

1
International School of Management Excellence.
Corresponding author: Shyam Prasad. S can be contacted at: [email protected].
Any remaining errors or omissions rest solely with the author(s) of this paper.

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 International Journal of Management and Development Studies
customers. This is because, in a service business, majority of the people employed are engaged in
marketing activities. Thus, it has been mostly studied and researched in service organisations
such as, Oil and Gas industry, Health industry, Hospitality industry, Banking industry, IT
industry, Education, Retail industry, Airlines industry, Car rental industry and so on (Martinez
& Wang, 2013). But there is hardly any study done in a manufacturing industry. Therefore, in
this paper, we have looked into a manufacturing unit to explore the status of IM in
manufacturing firm with the following two objectives:
1. To explore, if IM occurs in manufacturing organizations,
2. If it happens, what extent it is administered.

Literature Review
Originally in 1976, as mentioned earlier, internal marketing was defined by Berry et al. as
“Internal marketing is concerned with making available internal products (jobs) that satisfy the
needs of a vital internal market (employees) while satisfying the objectives of the organization”
Grönroos (1981), defined internal marketing as an act of selling a corporation to its employees as
internal customers based on the tenet that highly satisfied employees will help create a market-
oriented and customer-centered corporation. While this may be true, it does not clearly tell a
manager what should he regularly do to ensure internal marketing is sustained. This is because,
IM is not a onetime activity. Another definition of IM is "attracting, developing, motivating, and
retaining qualified employees through job products that satisfy their needs" (Berry &
Parasuraman, 1992). Yet another definition says that “IM is defined as treating both employees
and customers with equal importance through proactive programs in order to achieve the
objectives of the organization (Woodruffe, 1995). These definitions are more encompassing and
places a manager in a better position to act. Stauss and Hoffman (2000), defines Internal
marketing as “The planned use of communication actions to systematically influence the
knowledge, attitudes and behaviors of current employees” and Rafiq and Ahmed (2000), say that
IM is: "A planned effort using a marketing-like approach to overcome organizational resistance
to change and to align, motivate, and inter-functionally co-ordinate and integrate employees
towards the effective implementation of corporate and functional strategies in order to deliver
customer satisfaction through a process of creating motivated and customer oriented employees".
The same view is also expressed by Forman and money (1995), when they include internal
communications, education, creating of motivation, empowerment, guidance and organizational
incentives as indexes while consider internal marketing synonymous with human resources
management. Rafiq and Ahmed in 2003 defined internal marketing as a cultural framework and
an instrument to achieve strategic alignment between front-line employees and marketing
(Ahmed & Rafiq, 2003). Kotler and Keller (2016), defines IM as „the task of hiring, training and
motivating able employees who want to serve customers well‟.
A close examination of the definitions reveals that the central theme of each definition
varies from employees to organisations and its culture to customers‟ satisfaction and alignment
of different departments to achieve corporate goal. For example, Ahmed, Rafiq and Saad (2003)
focused on employees‟ job satisfaction Bell, Menguc and Stefani (2004) on motivation.
Mukherjee and Malhotra (2006) dealt with organisational commitment. Though internal
marketing is employees centric, it is more of a management philosophy that requires multilevel
management to continuously encourage and enhance employees‟ understanding of their roles and
organizations (Berry, Hensel, & Burke, 1976)

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 Internal marketing in manufacturing organizations: An exploratory study
Keeping these different perspectives in view, a comprehensive definition can be: “Internal
Marketing is a cultural framework in an organisation that seeks to align, motivate and empower
employees in all functions and at all managerial levels to consistently deliver a satisfying
customer experience”. Culture in the above statement may be defined as „the ideas, customs, and
social behaviour of a particular people or society‟. It includes the behavior of „hiring and training
able employees who want to serve customers well‟.
It could be argued that IM is no different from good HR management practices. While it
may be agreed that Internal marketing and HRM represent an interface between marketing and
HR from the service management perspective (Grönroos, 1990), it is definitely more than good
HR. This is simply because the overall responsibility of internal marketing lies with the top
management and not with HR department alone. Going a step further, neither does the
responsibility of internal marketing lies completely with marketing department alone. Broadly
we might say that 50% of the responsibility of IM lies with top management, 25% with HR and
rest 25% with the concerned department.
Review of existing body of literature on internal marketing yields a three dimensional
model made up of internal communication, training, and internal market research. In our opinion,
another important dimension – culture of the organization- is needed to be added and can be
depicted in Figure 1.

Figure 1 - Model of Internal Marketing

Culture of the Organisation
Internal Communication
Internal Customer
Training
Marketing Satisfaction

Internal Market Research

Culture of the Organisation

Culture of the Organisation
There have been studies that have considered culture from the broader perspective (Kale,
2007; Kelemen & Papasolomou, 2007;Budhwar, Varma, Malhotra, & Mukherjee, 2009). For
example, Kale talks of Western cultures and Eastern cultures, Kelemen & Papasolomou
examines national cultures. However, in the proposed model above, culture here is used to
denote „the ideas, customs, and social behaviour‟ within the organisation that impacts the morale
of the employees.
In fact, the onus of instilling into employees company culture, values, and vision is on the
leaders of the organisation (Berry, Hensel, & Burke, 1976).
The need for internal marketing lies in motivating and spurring the employees to provide
customer satisfaction by giving their best performance (Lings & Greenley, 2005). The
heightened role of employees in service organisation led to the concept of internal marketing
(Mishra, 2010). Pitt and Foreman argue that many firms, especially service firms, transact with
the employees in a way similar to that of external customers and the nature of interactions rests
on the degreeof participation of these employees in the delivery of the firm‟s offerings(Pitt &
Foreman, 1999). Further, they also argue that IM is not always carried out by the entire firm
forall the employees – there have been instances of IM being carried out by departments, groups

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 International Journal of Management and Development Studies
or functions within an organisations.Based on goal congruency and performance ambiguity they
have depicted four possible levels of IM. In the first case, dealing with impersonal market where
there is low performance ambiguity and goal incongruence, there is no need of IM. In the second
case of relational market where is low performance ambiguity and high goal congruence , IM
would be nice. In the third case, called impersonal hierarchy, there is goal incongruency as well
as high performance ambiguity. Here IM is illegitimate. The fourth caseis relational hierarchy
where the performance ambiguity high coupled with high level of goal congruence. Here IM
become necessary.
In a manufacturing organisation the employees are partially responisbile for its success
and goal congruence can be emphasized by promoting the role of the employees in achieving the
same. This builds a relational heirarchy. Here the situation is the one where the performance
ambiguity is moderate (between low ambiguity and high ambiguity) with moderate to high goal
congruency. Therefore, it falls under the fourth case but bordering the second case. This implies
that IM is necessary albeit to a lesser degree.
Thus a research proposition would be:
P1: IM in manufacturing organizations is practiced to a lesser degree than service
organisations.

Research Methodology

Sampling Design
To explore the dimensions of “Internal Marketing” and to ascertain the existence of Internal
Marketing in manufacturing unit, data from a sample of 175 operators and supervisors of
“Laguna Clothing Pvt Ltd, Bangalore” was collected for our study. Laguna Clothing is a
renowned manufacturer of premium international brands of shirts. Convenience sampling
method was used for data collection. Measures used in the study were drawn from an earlier
study by Spiros P. Gounaris titled, “Internal-market orientation and its measurement” (Gounaris,
2006). Some modifications were made to make it suitable for manufacturing sector. A pilot test
was done on the questionnaire to check the reliability of research instrument. The value of
Chronbach Alpha obtained was 0.79, Table 1 which is above the threshold value. The result
portrays satisfactory level of reliability of the questionnaire. Respondents were encouraged to
give their honest answers with simple self-explanatory questions written both in English and
Kannada - regional language.

Method of Analyzing Data

For analyzing data t-test, simple mean, variance and percentages were calculated with the help of
SPSS 20.

Data Analysis and Results

Table 1: Cronbach Alpha

Scale: Reliability Analysis with a pilot study of 20 respondents Reliability Statistics
Cronbach Alpha No of Items
0.79 21

73
 Internal marketing in manufacturing organizations: An exploratory study
The overall statistical results for reliability analysis (overall alpha) of this dimension give
a value of 0.763 which portrays satisfactory level of internal consistency among the responses in
this dimension. The demographic profile of the respondents is shown in Table 2.

Demographic Characteristics of Respondents

Table 2: Demographic Characteristics of Respondents

Group Respondents’ Number of Percentage (%)
Characteristics Respondents
Gender Male 83 47.4
Female 92 52.6
Education(last degree completed) 10th 47 26.9
12th 126 72.0
Diploma 2 1.1
Designation Operator 170 97.1
Supervisor 2 1.1
Asst. Manager 1 0.6
Senior Manager 2 1.1

Dimensions of internal marketing & their prevalence in manufacturing sector

Internal Communication & Management Concern

Table 3: Mean Score of Internal Communication & Management Concern

Descriptive Statistics N Minimum Maximum Mean Std.
Deviation
S2_My organization gathers employee 175 4 4 4.00 0.000
feedback
S3_We have regular meetings with managers 175 3 4 3.86 0.345
and ongoing communication channels are
opened
S5_My organization regularly seeks 175 2 4 3.29 0.653
employee suggestions.
S10_My organization talks with me to 175 2 4 3.70 0.647
identify issues that I may have.
S16_Before any change in the system or 175 2 4 3.16 0.586
policy is made my supervisor informs
advance
S18_ My organization collects data on 175 2 4 3.38 0.815
employee complaints
S20_ There is an internal communication 175 2 4 3.33 0.762
program for all employees in my organization
Internal Communication & Management 175 3.531
Concern

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 International Journal of Management and Development Studies
Figure 2: Mean Score of Internal Communication & Management Concern
Internal Communication & Management Concern
5 4 3.86 3.7
4 3.29 3.16 3.38 3.33 3.531
3
2
1
S2 S3 S5 S10 S16 S18 S20 IC&MC

Interpretation
At a macro level, it has been observed that the value on “Internal Communication and
Management concern” is 3.531 Table 3 and Figure 2, which implies employees in manufacturing
unit are accepting the presence of that component at a minimal level. Though the organization
takes employee feedback, and conduct regular meetings with managers but in terms of
implementing their suggestions, the company has received a low score. Since most of the data is
collected from the operators, it can be concluded that they are neither involved in decision-
making nor they get prior information before any policy changes.

Remuneration & Training

Table 4: Mean Score of Remuneration & Training

Descriptive Statistics N Minimum Maximum Mean Std.
Deviation
S4_In this company training is closely 175 2 4 3.78 0.253
related to the individual needs of each
employee
S7_When I do something extraordinary I 175 1 5 3.19 0.831
know that I will receive some financial
reward or bonus
S9_If one is moved from one department to 175 2 4 3.34 0.762
another, the new supervisor will personally
train him/her for a pre-specified period of
time
S11_Every one gets an annual bonus 175 2 4 3.88 0.419
regardless of their performance
S15_My organization focuses efforts on 175 2 4 3.64 0.537
training employees
S21_Training in my organisation has 175 2 4 3.75 0.580
enabled me to do my job well
Remuneration & Training 175 3.59

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 Internal marketing in manufacturing organizations: An exploratory study
Figure 3: Mean Score of Remuneration & Training

Remuneration & Training

5
3.78 3.88 3.75
4 3.64 3.59
3.19 3.34
3

1
S4 S7 S9 S11 S15 S21 Remunration
& Trn

Interpretation
In our case, the score obtained in the parameter titled “Remuneration & training” is 3.59 Table 4
and Figure 3, which refers that the manufacturing unit pays to its employees at per industry
standard and conducts training from time to time. Employees get annual bonus regardless of their
performance. Trainings being conducted as per the need and requirement of the individual
employee. Also training helps them substantially to perform better in their job. The company
lacks in terms of individual reward and recognition area as well as supervised training are not
being conducted when an employee moves to a new section. Overall it is being observed that the
presence of internal marketing in terms of training is not satisfactory.

Internal Market Research (Organisational Identification& Job description)

Organizational Identification

Table 5: Mean Score of Organizational Identification

Descriptive Statistics N Minimum Maximum Mean Std.
Deviation
S1_I am proud to tell others that I am part 175 4 4 4.00 0.000
of this organization
S6_I would accept almost any type of job 175 2 4 3.36 0.752
assignment to keep working for the
organization
S8_My organization communicates a clear 175 2 4 3.39 0.775
brand image to me.
S13_Employees at all levels understand the 175 3 4 3.94 0.243
direction and key priorities of my
organization.
S19_ The employees in the organization 175 3 5 3.60 0.705
feel secured in the job
Organizational Identification 175 3.678

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 International Journal of Management and Development Studies
Figure 2: Mean Score of Brand
Organizational Identification
5
4 3.94
4 3.6 3.678
3.36 3.39
3
2
1
S1 S6 S8 S13 S19 OI

Interpretation
A study (Rolf Van Dick et al, 2009) suggested internal marketing is basically a process in which
leaders instil into the followers a sense of openness and belongingness within the organisation
and as well as organisational commitment, formerly known as “Organisational identification
(OI)”. Employees‟ motivational level depends on how much they identify themselves as a part of
organisation. Actually OI is inculcated to the subordinates by the cascading effect of the leader‟s
OI. In the above case the value of OI is 3.678 Table 5 and Figure 4, which implies respondents in
the manufacturing sector agree with presence of Internal market orientation in the form of OI.
Though none of them have agreed strongly. OI lead to internal customer attitude development,
motivation and loyalty.

Job Description

Table 6: Mean Score of Job Description

Descriptive Statistics N Minimum Maximum Mean Std.
Deviation
S12_I am satisfied with the responsibility 175 4 4 4.00 0.000
and role that I have in my work
S14_I feel that I work in good working 175 2 4 3.97 0.199
condition
S17_My supervisor allows me to use my 175 1 4 3.10 0.977
own judgment in solving problems
Job Description 175 3.69

Figure 3: Mean Score of Job Description

Job Description
5
4 3.97
4 3.69
3.1
3
2
1
S12 S14 S17 JD

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 Internal marketing in manufacturing organizations: An exploratory study
Interpretation
In our case, it is observed (Table 6 and Figure 5) that employees are satisfied with the roles and
responsibilities that they have in work. They also agreed that Laguna has a good working
condition. Score obtained in using own judgment of the employee in solving problem is low. The
reason might be in the manufacturing set up, whether its assembly line or other production
process, technically it is impossible to solve any issue faced by any employee. It needs special
expertise in that area.

Dimensions of Internal Marketing

Figure 4: Internal Marketing Dimensions

Internal Marketing Dimensions

Remuneration & Training 3.588571429
Job Description 3.691382857
Internal communication & Management… 3.517508571
Organisational Identification 3.627428571

Interpretation
From all the above dimensions of internal marketing (Figure 6), it is found that the values on
each dimension of “Internal Marketing” are between 3 to 4. This means that the practices of
internal marketing in manufacturing sector is not practiced at a high level. Employees responses
on all these dimensions are between 3(neutral) to 4 (agree), which implies

Table 7: Group Statistics

GENDER N Mean Std. Std. Error
Deviation Mean
Organisational Male 83 3.65542 .382945 .042034
Identification Female 92 3.60217 .301636 .031448
Internal Communication Male 83 3.51979 .220387 .024191
& Management Concern Female 92 3.51553 .236742 .024682
Job Description Male 83 3.75904 .300466 .032980
Female 92 3.63043 .340425 .035492
Remuneration & Training Male 83 3.58233 .292607 .032118
Female 92 3.59420 .305929 .031895

Hypothesis – Testing the Dimension Scores of Internal Marketing on the Gender Difference
H01: There is no significant difference of the mean score of “Organisational Identification”
between male & female.
H02: There is no significant difference of the mean score of “Internal Communication &
Management Concern” between male & female.
H03: There is no significant difference of the mean score of “Job Description” between male &
female.
H04: There is no significant difference of the mean score of “Remuneration & Training”
between male & female.

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 International Journal of Management and Development Studies

Table 1: Independent Samples Test

Independent Samples Test
Levene's t-test for Equality of Means
Test for
Equality of
Variances
F Sig. t df Sig. Mean Std. Error 95% Confidence
Difference Difference Interval of the
(2-tailed) Difference
Lower Upper
Organisational Equal variances 6.864 .010 1.027 173 .306 .053248 .051863 -.049119 .155614
Identification assumed
Equal variances 1.014 155.568 .312 .053248 .052496 -.050448 .156944
not assumed
Internal Equal variances .025 .874 .123 173 .902 .004266 .034688 -.064201 .072732
Communication assumed
& Management Equal variances .123 172.823 .902 .004266 .034560 -.063949 .072480
Concern not assumed
Job Description Equal variances 1.994 .160 2.637 173 .009 .128601 .048762 .032356 .224846
assumed
Equal variances 2.654 172.922 .009 .128601 .048450 .032972 .224230
not assumed
Remuneration Equal variances .720 .397 -.262 173 .794 -.011874 .045369 -.101421 .077674
& Training assumed
Equal variances -.262 172.399 .793 -.011874 .045264 -.101217 .077470
not assumed

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 Internal marketing in manufacturing organizations: An exploratory study
Interpretation: Except in “Job Description”, there is no significant difference observed in the
mean scores between male and femaleas shown in table 7 and 8. So male and female respondents
perceived the job description facilities provided by the company in a different way. Other than
gender, since the number of respondents from different categories of educational qualifications
and designations are negligible, so testing the differences of weight ages on “Internal Marketing”
dimensions across other demographic variables are meaningless.

Conclusions
The importance of people in marketing of services cannot be over emphasized. It is clearly
brought out in the people element of the service marketing mix consisting of product, price,
promotion, place, people, process and physical evidence. Further, the employees who come in
contact with the customers are considered as i) they are the service, ii) they are the organization
in the customer’s eyes, iii) they are the brand and iv) they are marketers (Zeithaml, Bitner,
Gremler, & Pandit, 2011).
In our study, amongst all the factors, organisational identification received the highest
(3.678) score indicating that the employees identify themselves with the organisation implying
the presence of internal marketing. Also in another important factor i.e. job description, the data
indicates that employees agree that the working conditions are good. These findings demonstrate
that IM is practiced in M/s Laguna Clothing Pvt. Ltd, Bangalore.

Table 1: Comparison of mean scores between Manufacturing and Service Organisations

Manufacturing Service
Sl. No. Dimensions
(Mean score) (Mean score)
1 Internal Communication & Management Concern 3.52
1a Internal Communication - 5.05
1b Management Concern - 3.67
2 Remuneration & Training 3.59
2a Remuneration - 2.74
2b Training - 4.15
3 Organisational Identification 3.62 -
4 Job Description 3.69 4.41
3.61 4.00
(Source: Manufacturing data from this study & Service data from the study by Spiros P. Gounaris, 2005)

Thus the study achieved its objective of exploring the occurrence and extent of IM in
manufacturing organisations. It can be concluded (see table 9) that IM do happen in
manufacturing though to lesser extent. These findings also concur with Pitt and Foreman
argument that in case of relational market where performance ambiguity is low and congruence
is high goal, IM would be preferable.
The limitation of this study is very conspicuous. This study is limited to data pertaining to
only one firm. In order to generalize the findings, data from more than one firm need to
analyzed.

Managerial Implications
It is well understood by the modern managers that employees play a significant role in customer
satisfaction that leads to organization’s ability to perform better and gain an advantage over the
competitors. Much of the research is on internal marketing in service marketing is evident by the

80
 International Journal of Management and Development Studies
presence of great number of paper on the subject. Pitt and Foreman (1999), argue that internal
marketing is cannot be clearly identified as necessary or unnecessary. According to them, the
necessity of internal marketing might be dependent of the nature of firm’s relationship with its
employees. Their transactional cost perspective establishes four different levels of internal
marketing viz. illegitimate to irrelevant and nice to necessary. Our study establishes that internal
marketing in a manufacturing organizations would be nice.

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