More than 25 years ago, internal marketing (IM) was first proposed as a solution to the problem of delivering consistently high service quality by Berry et al.¹. However, despite the rapidly growing literature on IM, relatively few organizations actually apply the concept in practice. One of the main problems contributing to this is that there does not exist a single unified concept of what is meant by IM. There are a variety of meanings attributed in the literature as to exactly what IM is, what it is supposed to do, how it is supposed to do it, and who is supposed to do it. This variety of interpretations as to what IM constitutes has led to a diverse range of activities being grouped under the umbrella of IM. This diversity of interpretations and definitions in turn has led to difficulties in the implementation and widespread adoption of the concept. Most importantly, these problems create contradictions at the conceptual level with respect to defining the precise domain of IM, and make meaningful investigations of the concept more difficult.

In order for IM to be effectively operationalized as a paradigm of organizational change, management and implementation of strategies, a clarification at the definitional level is necessary. What is required is a precise specification of those activities that can be taken to constitute IM and those that do not, since definition and classification are fundamental prerequisites to marketing analysis. The purpose of this chapter is to critically examine the IM concept and outline its scope by tracing the major developments in the concept to date. It proposes a definition and a set of core criteria that are essential features of an internal marketing programme. Managerial implications arising from the proposed definition of internal marketing are also discussed.

Despite the array of interpretations mentioned above, a careful examination of the literature over the last 25 years indicates the existence of three separate yet closely intertwined strands of development of the IM concept, 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 work 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 machines, 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. as previously mentioned, and later by George², Thompson et al.³ and Murray⁴. 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 article⁵. However, it was not until the publication of Leonard Berry's 1981 seminal 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’⁶ that the term entered popular management 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’⁷. Sasser and Arbeit took this line of argument a step further by contending that personnel is the most important market of a service company⁸. 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 customers forces managers to devote the same care to their jobs as they devote to the purchasers of their services.’⁹

The focus upon 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. 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 Parasuraman¹⁰, who with a number of colleagues have carried out some of the most innovative research on service quality, 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.’¹¹

Notwithstanding the appeal of the ‘employees as customers’ philosophy that underpins much of the logic of the first phase, there are a number of potential problems with this conceptualization of IM. Firstly, unlike the external marketing situation, the ‘product’ that employees are sold may in fact be unwanted by them or even possess negative utility. Secondly, unlike the external marketing situation, employees are unlikely to have a choice in the ‘products’ that they can select. Thirdly, because of the contractual nature of employment, employees can, in the final analysis, be ‘coerced’ into accepting ‘products’ they do not want. Fourthly, the financial cost of having satisfied employees could be considerable. And finally, 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, the proposition that 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 on to the second phase.

Phase 2: customer orientation

The second major step in the development of the IM concept was undertaken by Christian Grönroos¹², 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. Grönroos 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 IM is, in his view, to ‘get motivated and customer-conscious employees’¹³. 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. Grönroos also views the IM concept as a means of integrating the different functions that are vital to the customer relations of service companies.

Grönroos 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 and redefining internal marketing as:

‘... 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.’¹⁴

George similarly accepts this position by asserting that IM holds that employees are ‘best motivated for service-mindedness and customeroriented behavior by an active marketing-like approach, where marketing-like activities are used internally’¹⁵. The addition of marketing-like techniques internally moves Grönroos’ definition closer to that of Berry's 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 Grönroos’ approach and that of Berry and collaborators is that employees are not treated as customers, as is the case in the latter conceptualization. Additionally, Grönroos’ 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 implementing strategy. Winter¹⁶ 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.’¹⁷

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 argued that IM is a philosophy for managing the organization's human resources ‘as a holistic. . . management process to integrate the multiple functions’¹⁸. This view is expressed more forcefully by Glassman and McAffee, who emphasize the role of IM in integrating marketing and personnel functions to the extent that personnel becomes a resource for the marketing function¹⁹.

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. Later, it was generalized to any type of marketing strategy by Piercy and Morgan, who showed that the tools and techniques of external marketing could be applied internally (see Figure 1.1)²⁰. In addition, their model explicitly links internal marketing with external marketing programmes. A more generalized version of their model is presented in Figure 1.2. This model acknowledges the broader nature of external marketing efforts by incorporating relationship marketing and also integrates interactive marketing efforts into the model.

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 and the need to achieve better internal communication. These extensions led IM to be 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, reducing inter-functional friction and overcoming resistance to change. This has led to a widening of IM applications to any type of organization, not merely to services. For example, Harrell and Fors apply the concept to manufacturing firms, and Ahmed and Rafiq propose it as a change management implementation methodology suitable for a wide range of contexts²¹.

Figure 1.1 The link between internal and external marketing programmes. Source: Piercy, N. and Morgan, N. (1991). Internal marketing – the missing half of the marketing programme. Long Range Planning, 24 (2), 82-93.

Figure 1.2 The relationship between internal marketing, external marketing, interactive marketing and relationship marketing.

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, in an earlier article, we 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’²². 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 cross-functional 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 programmes to achieve customer satisfaction, whilst recognizing the central role of employees.

The review of work on IM indicates that there are a number of competing definitions and activities all claiming to address IM. From the analysis of the key conceptual and empirical literature, five main elements of internal marketing are identified. These are:

1   Employee motivation and satisfaction.

2   Customer orientation and customer satisfaction.

3   Inter-functional co-ordination and integration.

4   Marketing-like approach to the above.

5   Implementation of specific corporate or functional strategies.

From detailed examination of the literature, it is generally safe to say that in each of the different phases not all the elements of the criteria listed above are present. For instance, it was highlighted in the discussion earlier that employee motivation through employee satisfaction was the major concern during phase 1 of the development of the IM concept. During phase 2, customer orientation (or ‘customer consciousness’ as Grönroos puts it) and the use of marketing-like techniques received emphasis. In phase 3, the major emphasis was on inter-functional coordination and implementation.

Thus far, the definitions that come closest to fully satisfying the above criteria are those of Grönroos and Rafiq and Ahmed²³. However, Grönroos’ definition lacks an emphasis on inter-functional co-ordination, whilst Rafiq and Ahmed's definition fails to emphasize the use of a marketing-like approach. Hence, it is proposed that IM is defined either in the Grönroos sense, but suitably modified by incorporating inter-functional co-ordination and strategic dimension, or the definition of Rafiq and Ahmed is modified to incorporate the use of marketing techniques. Bearing in mind the weaknesses and strengths of existing definitions, as well as the need to generalize the conceptualization beyond the services context to a more widely relevant area of application, the following definition is proposed:

‘Internal marketing is a planned effort using a marketing-like approach directed at motivating employees, for implementing and integrating organizational strategies towards customer orientation.’

This definition incorporates the five requisite components of IM set out above. It emphasizes achieving customer satisfaction through the implementation of customer-orientated strategies by motivating employees and co-ordinating cross-functional efforts.

This chapter has traced the development of the IM concept over the last 20 years, and shown that there is still much discussion in the literature over its definition and scope. The chapter has also highlighted the fact that the IM conceptualization appears to have evolved through three distinct phases. From the synthesis of the ideas in each of the three phases, the chapter develops a list of essential components of an IM programme. These components are:

   employee motivation and satisfaction;

   customer orientation and customer satisfaction;

    inter-functional co-ordination and integration;

    marketing-like approach to the above;

    implementation of specific corporate or functional strategies.

These components are then integrated into a more rigorous definition of IM:

‘Internal marketing is a planned effort using a marketing-like approach directed at motivating employees, for implementing and integrating organizational strategies towards customer orientation.’

The chapters that follow expand on this basic definition of internal marketing and the core elements that constitute it. They also elaborate on models of internal marketing showing how internal marketing works and can be implemented by managers.

1.  Berry, L. L., Hensel, J. S. and Burke, M. C. (1976). Improving retailer capability for effective consumerism response. Journal of Retailing, 52(3), Fall, 3–14, 94.

2.  George, W. R. (1977). The retailing of services – a challenging future. Journal of Retailing, Fall, 85–98.

3.  Thompson, T. W., Berry, L. L. and Davidson, P. H. (1978). Banking Tomorrow: Managing Markets Through Planning, p. 243. New York: Van Nostrand Reinhold.

4.  Murray, J. G. (1979). The importance of internal marketing. Bankers Magazine, July/August, 38–40.

5.  Sasser, W. E. and Arbeit, S. F. (1976). Selling jobs in the service sector. Business Horizons, June, 61–2.

6.  Berry, L. L. (1981). The employee as customer. Journal of Retail Banking, 3 (March), 25–8.

7.  George, W. R. (1977). Op. cit., p. 91.

8.  Sasser, W. E. and Arbeit, S. F. (1976). Op. cit., p. 61.

9.  Sasser, W. E. and Arbeit, S. F. (1976). Op. cit., p. 65.

10.  Berry, L. L. and Parasuraman, A. (1991). Marketing Services: Competing Through Quality. New York: The Free Press.

11.  Berry, L. L. and Parasuraman, A. (1991). Op. cit., p. 151.

12.  Grönroos, C. (1981). Internal marketing – an integral part of marketing theory. In Marketing of Services (J. H. Donnelly and W. R. George, eds), pp. 236–8. American Marketing Association Proceedings Series.

13.  Grönroos, C. (1981). Op. cit., p. 237.

14.  Grönroos, C. (1985). Internal marketing – theory and practice. American Marketing Association's Services Conference Proceedings, pp. 41–7. Quotation from p. 42.

15.  George, W. R. (1990). Internal marketing and organizational behavior: a partnership in developing customer-conscious employees at every level. Journal of Business Research, 20, 63–70.

16.  Winter, J. P. (1985). Getting your house in order with internal marketing: a marketing prerequisite. Health Marketing Quarterly, 3 (1), 69–77.

17.  Winter, J. P. (1985). Op. cit., p. 69.

18.  George, W. R. (1990). Op. cit., p. 64.

19.  Glassman, M. and McAfee, B. (1992). Integrating the personnel and marketing functions. Business Horizons, 35(3), May/June, 52–9.

20.  Piercy, N. and Morgan, N. (1991). Internal marketing – the missing half of the marketing programme. Long Range Planning, 24 (2), 82–93.

21.  Harrell, G. D. and Fors, M. F. (1992). Internal marketing of a service Industrial Marketing Management, 21 (November), 299–306. Ahmed, P. K. and Rafiq, M. (1995). The role of internal marketing in the implementation of marketing strategies. Journal of Marketing Practice: Applied Marketing Science, 1 (4), 32–51.

22.  Rafiq, M. and Ahmed, P. K. (1993). The scope of internal marketing: defining the boundary between marketing and human resource management. Journal of Marketing Management, 9, 219–32.

23.  Grönroos, C. (1985). Op. cit. Rafiq, M. and Ahmed, P. K. (1993). Op. cit.