The concept of international marketing (IM) employed in service
sector is crucial to excellent service provision and successful external
marketing which calls for an exploration in details. The IM concepts has
evolved from the original conceptualization of employee
satisfaction/motivation by treating employees as customer and jobs as
products to improve service quality (Berry, 1981), to customers
orientation/market orientation and to use marketing-link approach and
marketing-link tolls internally to motivate employees (Gronross, 1985).
Moreover, IM was use for the implementation of external marketing
programs (Piercy and Morgan, 1991), and extension to implementation of
any functional strategy (Rafiq and Ahmed, 1993).
The importance of service both to national economies and to
individual customers has given rise to considerable effort on the part
of both industry and academy to improve service quality (Lings, 1999).
The academics and practitioners in field of marketing have been strong
advocates of having a market orientation as a strategic advantage in
achieving the objective of customer satisfaction and loyalty for more
than four decades (e.g Naver & Slater, 1990; Slater & Never,
1994; Kohli & Jaworski, 1990). During the last 20 years, there are
many works to study in filed internal marketing, as a result of
increasing internal competition and globalization, which requires
improved service quality and greater responsiveness to customer need and
want (Parker, Wall, & Jackson, 1997.) In previous research, Green et
al., (1994) point out that internal marketing is the key to excellence
service and to successful external marketing. Further, Tansuhaj,
Randall, & Jim McCullough, (1988) explain that the marketing concept
sets as the goal of a firm the satisfaction of consumer needs. These two
views justify the exploration of marketing concept, i.e, internal
marketing, within a business organization in the service sector. More
recently, there has been also little clear empirical evidence of
positive relationship between internal marketing and organizational
effectiveness and business performance. There is even less research
examining the mechanics of this linkage, Hence, it is difficult to
generalize about the extent to which the implementation of marketing
along with relate business strategies actually effects business
performance. To bridge these gap, this study, unlike previous research
on internal marketing, not only proposes, but also improves and
evaluates empirically the proposed internal implementation framework in
the hotel business in Thailand context. In this study, the key research
questions are how can firm enhance external service quality, external
customer satisfaction, external customer loyalty and business
performance?; and how does internal capability influence external
The study is presented in the following manner. First, this it
draws from the research literature to identify internal marketing that
impact organizational competencies and external marketing. Second, it
constructs a research model that explains the relationships of those
factors to business performance. Third, it generates research
empirically test them. Finally, it provides suggestions for further
research in this area and conclusion.
[FIGURE 1 OMITTED]
2. LITERATURE REVIEW
2.1 Internal Marketing
Internal Marketing has been defined variedly in the marketing and
the organizational behavior literature. Gronroos (1981) defined internal
marketing as "selling the firm to its employee" George and
Gronross (1991) suggest that the "internal marketing of employee is
best motivated for service-mindedness and customer-oriented behavior by
an active, marketing like approach, where marketing like activities are
used internally." In service marketing, the employee plays a
central role in attracting, building and maintaining relationship with
customers. The recognition of the central role of employee in service
marketing has given rise to internal marketing. Thus, it is important
that the firm must be strongly oriented to employee development.
In this study, internal marketing incorporates a multifaceted focus
on employee development. A comprehensive internal marketing activities
is concerned with employee recruitment, training, motivation,
communication and retention efforts (Tansuhaj, Randall, &
2.1.1 Recruitment and training
Employees are a key organizational resource. Qualified applicants
are attracted to the firm through the use of specific job description
and effective recruitment procedure. Careful selection of contact
personnel in service organizations is an essential accompaniment to the
recruitment process (Davidson, 1978). Once employed, employees must
participate in training program witch supplies them with a view of total
organization, so that they can locate themselves within, and see their
importance to the organization. Training is professional and involves
marketing managers, using as many senior level managers as possible.
The value of a solid recruitment and training activity in the
service industry has not gone unrecognized. In previous study, over
seventy percent of 323 firm surveyed reported that they carefully select
personnel and emphasize training in customer interaction skill
(Zeithaml, Parasuraman, & Leonard (1985). Avis requires that all
personnel participate in training activity before they have any
communication with customers. In addition to a more competent staff, a
specific benefit realized from the mandatory training is significantly
decreased turnover in service personnel (Davidson, 1978)
Motivation strategies can help to increase an employee's drive
to activity a higher level. Most employees in high-contact service job
are self-motivated to provide what they believe is good customer
service, but they feel that management often frustrates their desires to
do so (Zeithaml, Parasuraman, & Leonard (1985). Managers of service
firms must believe in their organizations, be able to communicate their
enthusiasm and conviction to their subordinates, and facilitate employee
performance (Heskett, 1981).. The motivation of employee can be
increased by appropriate incentive activity, team-building techniques,
staff meetings, staff retreats, task force, seminars and workshop.
(Zeithaml, Parasuraman, & Leonard (1985).
Marketing managers applying internal marketing concepts seek to
improve interpersonal, interactive communication channels by
establishing a open information climate. In service firm, internal
communication with employee may be more important than external
communication with customers (Heskett, 1981).
Retain employee, marketing managers ensure that salaries are
competitive and bonus systems are attractive. Some of the most
successful service firms have the most liberal and comprehensive fringe
benefit activity in their industries (Heskett, 1981). Such as these
factors can help to retain employees.
2.2 Internal Marketing and Organizational Competencies
In the proposed model internal marketing is a strategy that aims
for the creation of superior performance work systems by managing the
interdependent elements of the internal marketing to create and achieve
greater individual and organizational competencies and ultimately
impacts service performance.
There are two major paradigms that are used to explain superior
competitive advantage in the strategy filed : the competitive force view
(Porter, 1980, 1985), and resource-based view (Prahalad and Hamel,
1990). The proponent of this view argued that the success of a
company's competitive strategy depends on the choice of a strategy
that position the organization within its industry environment, so that
it can define itself against competitive forces of influence them in its
In this study, following Prahalad and Hamel (1990) that they view
RBV based on the idea that a firm perform well over time because it
develops a "distinctive competence" or "core
competences" which allows it to outperform its competitor. A core
competence is defined as an organization-based capability that combines
and integrates the skills of a set of practitioners working across
different business units, and creates superior value for customers. In
other words, a core competence is the organizational version of unique
individual know-how (overmeer, 1997).
Following the resource-based approach, the internal market
framework is deployed here as a means of creating competencies in
organizations. That is, internal marketing is used as marketing
perspective to build internal competencies for external success (Grorge,
& Gronroos, 1989). Therefore, it is argued that the internal
marketing is capable of linking organizational competencies and business
performance. In this study, there are three indicators of organizational
competencies that can improve business performance and relate to
internal marketing construct identified in this conceptual model are:
customer/market orientation, employee satisfaction, and
specific/individual competencies. There is considerable discussion of
customer/market orientation (Gronroos, 1981), and employee satisfaction
(Berry and Parasaraman, 1991) in the internal marketing literature, but
little discussion of individual competencies. In previous study,
Woodruffe (1993) defines competencies as dimensions of behaviour, which
are related to superior job performance. Green (2000) describes
individual competency as a written description of measurable work habits
and personal skills used to achieve a work objective. He emphasizes that
individual competencies contribute to achieving work objective. Gilmore
and Carson (1996) develop the idea of services marketing management
competencies to reflect the fact that service marketing managers require
specific competencies because of the special nature of services. In
summary, the development of individual competencies leads to
organizational competencies. Therefore, the proposition is posited as
Proposition 1: Internal marketing will be positively associated
with organizational competencies.
2.3 Internal Marketing and External Marketing
External marketing activities are generally divided into external
service quality, external customer satisfaction and specific/individual
competencies. In service firm, it is generally believed that a marketing
plan composed of external marketing activities largely determines
consumer satisfaction. However, in service organization the
implementation of this plan depends, to a great extent, on the
activities of the employees. Bansal, H. S., Menderson, M. B. &
Sharma, B. (2001) attempt to develop and sustaining an organizational
culture that emphasizes internal customer well-being as a means to
attract and retain external customer patronage. They propose a model
that relates six key internal marketing practices to external customer
satisfaction and loyalty, mediated by internal customer attitudes (i.e.
loyalty to the firm, job satisfaction, trust in management) leading to
extra role behaviors directed at external customers. Kotler (2000)
explains that internal marketing is more important than conventional
external marketing. Further, Green et al., (1994) point out that
internal marketing is the key to excellence service and successful
external marketing. Tansuhag, Randall, & McCullough (1998) explores
the linkage between internal marketing activities (directed at employee
recruitment, training, motivation, communication, and retention) and the
more traditional external marketing activities (e.g., pricing,
advertising, and personal selling). An examination of the relationship
between the key elements of the service marketing management model
(internal and external marketing, employee attitudes and behavior, and
customer attitudes and behavior) demonstrates how service managers can
enhance customer loyalty, satisfaction and perception of quality. They
argue that the internal and external elements of the marketing program
of service firms are closely interrelated. Service firms need to give
greater recognition to the "employee-customer interaction"
nature of services. It is clear that attitudes and behavior of employees
affect the marketing performance of the firm. Ultimately, positive
customer attitudes and behavior may be translated into improved firm
performance through such measure as the firm's market share, sales,
profitability, and other financial rations.
One work that appears most promising in exploring the link between
internal marketing activities and external marketing is attributable to
Morrison (1996). She argues that the five dimensions of extra role
behaviors, namely: (1) conscientiousness, (2) altruism, (3) civic
virtue, (4) sportsmanship, and (5) courtesy, when direct at external
customer of an organization are "crucial for ensuring service
excellence" Hence, the study proposes the proposition as below:
Proposition 2: Internal marketing will be positively associated
with external marketing .
2.4 The Relationships Between Internal marketing, Organizational
Competencies, External Marketing and Business Performance.
This study examines the relationship between the internal
marketing, organizational competencies, the use of marketing-like
philosophy, and marketing-like tools, and their effects on external
marketing and performance. First, the studies indicate that the internal
marketing variable is positively related to the organizational
performance. Second, organizational competencies mediate the
relationship between the internal marketing and external marketing and
lead to business performance. In particular market orientation, employee
satisfaction and specific/individual competencies are regarded as
instrumental in mediating the relationship between internal marketing
and external marketing. Market orientation mediated this relationship by
ensuring that the organization is highly aware and responsive to
customer need and competitors' capabilities. According to Naver and
Slater (1990), strong market orientation within a business leads to
grater effort being exerted to offer superior value continuously to
customer, and so there will be a greater likelihood that superior value
will be offered. Therefore, it creates competitive advantage in the
customers' perception, which leads to superior organizational
performance. Employee satisfaction facilitates superior performance as
it leads to greater attraction and retention of the best employee, which
enhances the ability of the organizational to deliver high quality
service (Berry, 1981, Berry and Parasuraman). Similarly, Gronroos (1981)
postulates that employee satisfaction leads to more highly motivated and
customer-conscious employee, which leads to improved service quality and
organizational performance. Development of specific/ individual
competencies can lead to improved and consistent quality of work as well
as enabling the customization of product and thereby meeting customer
needs more accurately. It also helps to improve the self-effect of
individual, and thus improves their and organizational performance
(Conger and Kanugo, 1988; Rafiq and Ahmed, 2000).
In the light of the relationships between organizational
competencies and external marketing, previous literature indicates
market -orientation firm as external focus, responding to present, and
anticipating future customer needs (Kohli & Jaworski, 1990). In
concrete terms, this means that organizations must emphasize the
centrality of customer by putting them first (Mohr-Jackson, 1992) as a
means of attracting and more importantly retaining customer patronage.
In addition, Heskett Jones. Loveman, Sasser, and Schlesinger (1994)
suggest that profit and growth are simulated primarily by customer
loyalty. Loyalty is a direct result of customer satisfaction.
Satisfaction is largely influenced by the value of services provided to
the customers. Satisfied, loyalty and productive employees crate value.
Employee satisfaction , in turn, results primarily from high-quality HR
practice that enables employees to deliver results to customers" It
is clear then that the success of external marketing of service
organization is contingent on the success of how well it markets itself
internally. This paper develops a model to elaborate on this thesis by
relating key internal marketing practices to external marketing mediated
by organizational competencies leading to business performance. In
addition Ahmed, Rafiq, & Saad (2003) propose the concept of IM mix
or set of controllable instrument inside the organizational that can be
used effectively to influence employees so that they are motivated and
acted in customer-oriented fashion. The results show that organizational
competencies mediate the relationship between IM mix and business
performance, consistent with literature, this study proposes the
Proposition 3: Internal marketing will be positively associated
with business performance.
Proposition 4: Organizational competencies mediate the
relationships of internal marketing with external marketing.
Proposition 5: External marketing will be positively associated
with business performance.
2.5 Moderating Effect
The model also postulates that the application of external
marketing philosophy and tools moderate the relationship between the
internal marketing and organizational competencies. This is consistent
with the internal marketing literature. George and Gronross (1989)
clearly state that internal market is basically a philosophy for
managing the organization's human resource based on a marketing
perspective. Berry and Parasuraman (1991), consistent with this
proposition, advocate that internal marketing is about the viewing
employee as internal customer, viewing job as internal product, and
endeavouring to offer internal products that satisfy the needs and wants
of these internal customer while addressing the objective of
organization. Thus, internal marketing-like philosophy in treating
employee as the internal customer, the understanding of which results in
the application of marketing-like tools and activities to achieve
required outcomes. Gronroos (1985) mentions specifically that internal
marketing is about motivating the employee by active market-like
activities that he suggests that 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. Collins and Payne (1991) suggest that in order to
implement internal marketing, external marketing tools, including market
research, segmentation, developing a marketing mix, and controlling
marketing activity, may be used within the organization. Ahmed, Rafiq,
& Saad (2003) postulates that application of marketing-like
philosophy and marketing-like tools internally moderated the
relationships between IM mix and organizational competencies. The
consideration leads to posit the following propositions:
Proposition 6: Application of marketing-like philosophy will
moderate the relationships between internal marketing and organizational
Proposition 7: Application of marketing-like tools will moderate
the relationships between internal marketing and organizational
This paper has proposed a new internal marketing implementation
framework. The paper proposes the concept of internal marketing that can
be used to influence employee effectively so that they are motivated and
acted in customer-oriented fashion. An innovative feature of the model
presented is that the internal marketing is employees as a means of
creating and enhancing competencies in organizations to improve external
marketing and business performance, namely, customer/market orientation,
employee satisfaction, and specific individual competencies. Therefore,
the internal marketing affects external marketing and leads to business
performance through organizational competencies. Or in more formal term,
organizational competencies mediate the relationship between internal
marketing and external marketing and lead to business performance. In
the departure from previous research, the marketing-like approach was
advocated by various internal marketing authors (e.g. Berry, 1981; Berry
and Parasuraman, 1991; Gronroos, 1981; George, 1990) is separated into
two components, namely, the application of marketing-like philosophy and
marketing-like tools. The conceptual framework that examines the
relationships among these factors suggests that hotels can be successful
in creating business performance if they can manage their factor that
can influence well. Researchers need to help firms understand more
clearly how firm can enhance external service quality, external customer
satisfaction, external customer loyalty and business performance and how
internal capability influences external marketing. This study proposes
the conceptual model for the relationships of these variables. Much
academic work remains for theory development and verification.
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Nantana Ooncharoen, Mahasarakham University, Thailand
Phapruke Ussahawanitchakit, Mahasarakham University, Thailand
Dr. Nantana Ooncharoen earned her Ph.D. at Mahasarakham University,
Thailand in 2009. Currently she is a Lecturer at the Faculty of Tourism
and Hotel Management, Mahasarakham University, Thailand.
Dr. Phapruke Ussahawanitchakit earned his Ph.D. at Washington State
University in 2002. Currently he is an Associate Professor of Accounting
and a Dean of the Faculty of Accountancy and Management, Mahasarakham