Question

Discussion questions

1. What is the link between internal marketing and service quality in the airline industry?

2. What internal marketing programmes could British Airways put into place to avoid further internal unrest? What potential is there to extend auch programmes to external partners?

3. What challenges may BA face in implementing an internal marketing programme to deliver value to its customers?

(1981)ǐn the context ofbank marketing ths theme has bon pururd by other, nashri oriented towards the identification of employee training and development needs to improve quality in the delivery of services. Similarly, the interdependence of internal and external markets has been stressed by Flipo (1986), who emphasised the need to overcome conftlict of the earlier conceptualisations of the employee as 'internal customer was provided by Be conceptualistion of internal markets in a political economy model of marketing Perhaps the best-known wn conceptualisations of internal marketing come from the 'Nordic of School of Services; where amongst other contributions Gronroos (1984, 1985) has written use of internal marketing to achieve culture change in organisations. The practical applica studied the the need for strategic and tactical internal marketing, and Gummesson (1987) has 1986 tion of these concepts is reflected in the literature of 'customer care (e.g.Moores. I and the 1987; Lewis, 1989), which emphasises customer importance of fostering this perception through the training and development of personnel at the point of sale. Thus, there is some well-established precedent for use of the terms 'internal marketing reasons for executives and the 'internal customer: We see these developments as important for two main First, the internal marketing paradigm provides an easily accessible mechanism marketing executives and they are comfortable' with them. The second point is executives as somehow 'improper to analyse the organisational issues which may need to be addressed in implementing mar ng strategies. Quite simply, concepts of marketing programmes and target are familiar to that the inter nal marketing model provides a language which actually legitimises focusing attention on issues like power, culture and political behaviour which appear quite often to be avoided by 17.3 The scope of internal marketing It follows from the emergence of the internal marketing paradigm from diverse conceptual sources that the practice of internal marketing and its potential contribution to marketing strategy are similarly varied. It is possible to consider the following types' of internal market ing, although they are probably not equal in importance . internal marketing that focuses on the development and delivery of high standards of internal marketing that is concerned primarily with development of internal communica . internal marketing which is used as a systematic approach to managing the adoption of . internal marketing concerned with providing products and services to users inside the service quality and customer satisfaction; tions programmes to provide employees with information and to win their support nnovations within an organisation; organisatiom; and internal marketing as the implementation strategy for our markcting plans 17.3.1 Internal marketing and service quality The original and most extensive use of internal marketing has been in efforts to improve the quality of service at the point of sale in services business like banking, leisure, retailing, and so on - the so-called'moment of truth' for the services marketer. Some call this 'selling the staff, because the product' promoted is the person's job as a creator of cusfomer servige and value. This tends to be seen in customer care training programmes and similar initiatives. These types of internal marketing programme are, in practice, essentially tactical and often restricted to the operational level of the organisation. High Low High Synercy Interna Figure 17.1 Customer satisfaction-the internal market and the external market Low Allenation people compete for Brownie points' in the system at the expense of both the company and the customer. This said, we have also to recognise not just the complementarity between internal and external markets, but the potential for conflict of interest. Achieving target levels of customer service and satisfaction may require managers and employees to change the way they do things and to make sacrifices they do not want to make. This may take more than simple advocacy or management threat. Related to the above argument, recognizing the internal market suggests that there may be a need for a structured and planned internal marketing programme to achieve the effec tive implementation of customer satisfaction measurement and anagement. This has been described elsewhere as 'marketing our customers to our employees (Percy, 2009a) and can be built into the implementation process to address the needs of the internal customer and to confront the types of internal processual barrier we have encountered. Also related to the recognition of the internal market is the need to question the relation ship between internal and external customer satisfaction. This can be discussed with 3 4 executives using the structure shown in Figure 17.1. This suggest four possible scenarios that result when internal and external customer satisfaction are compared: Synergy, which is what we hope for, when internal and are high, and we see them as sustainable and self-regenerating. As one hotel manager explained it:'1 know that we are winning on customer service when my operational staff come to me and complain about how I am getting in their way in providing customer service, and tell me to get my act together!' This is the 'happy customers and happy employees' situation, assumed by many to be obvious and easily achieved (a) (b) Coercion is where we achieve high levels of external customer satisfaction by changing the behaviour of employees through management direction and control systems. In the short term this may be the only option, but it may be very difficult and expen- sive to sustain this position in the longer term, and we give up flexibility for control. Alienation is where we have low levels of satisfaction internally and externally, and we are likely to be highly vulnerable to competitive attack on service quality, and to the (c) instability in our competitive capabilities procduced by low staflf morale and high statf turnover (d) Internal euphoria is where we have high levels of satisfaction in the internal market, but this does not translate into external customer satisfaction -for example, if inter- nal socialisation and group cohesiveness actually shut out the paying customer in the external market. These scenarios are exaggerated, but have provided a useful way of confronting these issues with executives. CHAPTER 17 STAATECİYINELEMENTATONANDINTERNAL MARKETING The logic is that marketplace success is frequently largely dependent on employees who are far removed from the excitement of creating marketing strategies- service engineers, cus- tomer services departments, production and finance personnel dealing with customers, ficld sales personnel and so on. As we noted carlser, these are all people Evert Gummesson (1990) called part-time marketers- they impact directly and significantly on customer relation ships, but are normally not part of any formal marketing organisation, nor are they typically within the marketing department's direct co Indeed, US research suggests we should think more carefully about the impact of the organisation's external communications on employees -as'advertising's second audience (Gilly and Wolfinbarger, 1996). Actually, the chances are that employees are more aware and more influenced by our advertising than are our customers, so the suggest should use that awareness productively to deliver messages to employees s that we There are a growing number of cases of companies whose service quality excellence has been driven by explicit attention to internal marketing. Southwest Airlines is the much- udmired originator of the 'no frills'airline model, and has achieved not only outstanding proft performance in a difficult sector, but has also regularly won industry awards for service quality and low levels of customer complaints. From the outset, Southwest's mission statement said Above all, employees will be provided the same concern, respect and caring attitude within the organisation that they are expected to share externally with every Southwest customer. The company uses high employee morale and service quality to achieve excellent profitability. Tactics include offering employees a vision that provides purpose and meaning to the workplace, competing aggressively for the most talented people, providing skills and knowledge, but also emphasizing teamwork and motivation, and ensuring that organisa tional management understands the internal customer. The effect is an integrated internal marketing approach that drives service quality. Southwest shows the positive impact of inter nal marketing on employees, external customers and performance. Southwest's success is based in large part on its employees' positive attitudes, high productivity, and customer orientation (Czaplewski et al.,,2001) It can be argued that there is no one right' strategy in any given product market situation but there are good and bad ways of delivering market strategies, which determine if they succeed or fail. The critical issue is becoming the consistency between strategies, tactics and implementation actions.This suggests that real culture change is a central part of the process of going to market effectively. At its simplest, the disgruntled employee produces the dis- gruntled customer. Bonoma (1990) summarises this point succinctly: treat your employees like customers, or your customers will get treated like employees. However, it is apparent that successfully exploiting the linkage between employee and customer satisfaction may not always be straightforward. Research into the way in which customer satisfaction is measured and managed in British companies is revealing (Piercy 1995). Studies suggest that 1 There is a need to create clarity for all employees regarding customer service and to expect success in attaining them. The starting point must be to identify what has to be achieved in customer satisfaction to implement specific market strategies, and to position the company against the competition in a specific market. It is unlikely that achieving what is needed will be free from cost. We need to take a realistic view of the time needed and the real costs of implementation in aligning the internal market with the external r satistaction It is not enough to pay lip-service to these market. 2 Internal processes and barriers suggest the need to consider both the internal and external markets faced in implementing customer satisfaction measurement and management damaging the company's capacity to achieve and improve customer satisfaction in the external market. If, for example, systems. To ignore the internal market is to risk actually d management uses customer feedback in a negative and coercive way, then it may reduce r service, or create 'game-playing behaviour where employee enthusiasm for CHAPTER 17 STRATEGY IMPLEMENTATION AND I INTERNAL MARKETING I mistake is to ignore the real costs and challenges in sustaining high service improving quality levels and the limitation which may exist in a company's capabilities for customer satisfaction levels. While advocacy is widespread and the appeal is achieving the potential benefits requires more planning and attention to implementation realities than is suggested by the existing conventional literature 17.3.2 Internal marketing as internal communications As well as customer care training and a focus on service quality, internal marketing may also be seen as internal communications. In fact, the largest growth in this area has been invest- ment by companies in broader internal communications programmes of various kinds where communications' is understood as providing our employees with delivering messages which support the business strategy. Athough up-to-date figures are scarce, in 2001 one study found that the Fortune Top 200'most admired' companies spent an average of $1.6 million (E1.1 million) each on internal communications (Marketing Week 2001). The goal of internal communications is normally to build both understanding and commitment. Often, these activities tend to be a responsibility of the Human Resource Department One industry study (Pounsford, 1994) suggested that managers saw the role of internal communications in the following terms and with the following advantages (see Table 17.1) Table 17.1 The role of internal communications Perceived role Illustrative comments Team building Educate employees about breadth and diversity of the organisation. Assist cooperation between divisions. Darmage control Prevent managers getting communications wirong Prevent managers getting communications wrong. Suppress bad news. Counter pessimism. buildersIncrease Build confidence Increase motivation Represent employee opinions upwards Create channel to share problems/values. Increase people recognition. Change management Increase understanding of the need for change Test new ideas. Help people relate to rapidly changing environment. Goal-setting Help organisation steer in a coordinated direction. Provide focus on corporate goals Generate support for policies. The manifestations of this form of internal marketing include: company newsletters, employee conferences and training, video-conferencing, satellite TV transmissions, inter- active video, e-mail, and so on. Increasingly, creating dialogue within an organisation and encouraging employee involvement can involve approaches like web-based internal blogs (Hathi, 2007). These delivery mechanisms are important, but are in danger of obscuring an important point. Instructing and informing people about strategic developments is not the strategy Figure 17.2 Internal and external marketing programmes External marketing programme 17.3.5 Strategic internal marketing Lastly, we note the use of strategic internal marketing (SIM) as an approach to the structured planning of marketing strategy implementation, and analysis of underlying implementation problems in an organisation. This form of internal marketing is a direct parallel to our con ventional external marketing strategy and marketing programme, which aims at winning the support, cooperation and commitment we need inside the company, if our external market strategies are to work. This is a somewhat different view of internal marketing compared to those discussed above, although it is informed by the other types of internal marketing which have a longer history. The key underlying issue here is the organisational and cultural change needed to make marketing strategies happen. A structure for an internal marketing programme is shown in Figure 17.2. The underlying proposal is that the easiest way to make practical progress with this type of internal market ing, and to establish what it may achieve, is to use exactly the same structures that we use for planning external marketing. This suggests that we should think in terms of integrating the elements needed for an internal marketing mix or programme, based on our analysis of the opportunities and threats in the internal marketplace represented by the company with which we are working. This is shown in Figure 17.2 as a formal and legitimate part of the planning process. In fact, in this model, we take the internal marketing programme not only as an output of the planning process and the external marketing programme, but also as an input, i.c. constraints and barriers in the internal marketplace should be considered and analysed as a part of the planning at both strategic and tactical levels. For the proposals to make sense in practice, we rely on this iterative relationship. The starting point for this approach is that the marketing strategy and the planning process may define an external marketing programme in the conventional way, and less conventionally the internal barriers suggest that some external strategies are not capable of being implemented in the timescale concerned, and we have to feed back into the planning process the message that some adjustments are needed while there is still time to make those adjustments to plans More positively, however, it is equally true that our analysis of the internal market may suggest new opportunities and neglected company resources which should be exploited, which in turn impact on our external marketing plan and thus on the planning process. What we are trying to make explicit for executives is the need to balance the impact of both internal and external market attributes on the strategic assumptions that they make in planning. The structure of such an internal marketing programme is suggested in Figure 17.3 and can be presented to executives in the following terms: The product.At the simplest level the product' consists of the marketing strategies and the marketing plan. Implied, however, is that the product to be sold' is those values, attitudes Contents Product | Tho strategy andthe plan. !--Forexample, the written plan, attitudes l the new company initistive nre asking interialFor example, stepping out of comfort zones for new types Price projects personal and Media and messnges toFor example, reports, plans inform and persubde Figure 17.3 The content and structure of internal marketing Physical and social venuesFor example, meetings, for workgroups, training sessions and workshops, informal meetings, social occasions the Source: Adapted from Piercy (2009a) and behaviours which are needed to make the marketing plan work eflectively. These hidden dimensions of the product may range from increased budgets and different resource allo- cations, to changed control systems and criteria used to evaluate performance, to changed ways of handling customers at the point of sale. At the extreme the product is the person's job - as it is redefined and reshaped by the market strategy so it will make people's working lives more enjoyable. There may also be negatives -changes people will not like, which brings us to price. The price. The price element of the internal marketing mix is not our costs, it is concerned with what we are asking our internal customers to 'pay' when they buy in to the product and the marketing plan. This may include the sacrifice of other projects which compete for resources with our plan, but more fundamentally the personal psychological cost of adopting different key values, changing the way jobs are done and asking managers to step outside their 'comfort zones' with new methods of operation. The price to be paid by different parts of the internal marketplace, if the marketing plan is to be implemented successfully, should not be ignored as a major source of barriers and obstacles of varying degrees of difficulty Communications. The most tangible aspect of the internal marketing programme is the communications media and the messages used to inform and to persuade, and to work on the attitudes of the key personnel in the internal marketplace. This includes not only written communications, such as plan summaries and reports, but also sentations to individuals and groups who are important to the success of the plan. Broadly, we should remember that to assume that simply 'telling' people will get them on our side is likely to be as naive inside the company as it is outside. We suggest it is import- ant to consider the full range of communications possibilities and associated goals, as we would with external customers, and we should not forget to budget the time and financial costs which may be associated with these activities. At the simplest level, the purpose of our internal marketing communication may be served by a video presentation explaining things or a roadshow taking the message out to the regions and the distributors. But real communication is two-way - we listen, we adapt, we focus on our audience's problems and needs. CHAPTER 17 STRATEGY IMPLEMENTATION AND INTERINAL MARMETING . Distribution. The distribution channels element of thex and sociotechnical venues at which we have to deliver our product a seminars, w meetings, committees, training sessions for managers and stafi. written reports, informal communications, social occasions and so on ever, the real distribution channel is human resoarce management. recruitment training, evaluation and reward systems behind marketing the culture of the strategies. In fact, as long this, which are worth confronting, He said that if we real mitment from our external strategies, then we should give our customers a major role in our e staff recruitment and selection decisions e staff promotion and development decisions e staff appraisal, from setting the standards to measuring the performance e staff reward systems, both financial and non-financial e organisational design strategies; and e internal communications programmes mix is concerned with the physical its communications:. 、UItimately, how- and in the lining up of strategies, so that company becomes the real distribution channel for internal marketing ago as the 1990s, Ulrich (1992) made some radical points about want complete customer com- customers, through independent, shared values and shared In effect this means using our human resource management systems as the internal marketing channel, thus taking the internal and external customer issue to its logical conclusion (see section 17.5.2 below). Companies developing such approaches in the US included General Electric, Marriott, Borg-Warner, DEC, Ford Motor Company. Hewlett-Packard and Honeywell. In many important ways, the revitalisation or transformation of a company, as well as the implementation of a new strategy, may be in large part dependent op incorporating employees fully in the challenge to change the ways they deal with conflict and learning; leading differ ently to maintain employee involvement; and instilling the disciplines that will help people learn new ways of behaving and sustain that new behaviour (Pascale et al, 1997). Managers who fail to get their employees to understand what they are doing and why, and to build their enthusiasm, should not be surprised when strategy execution fails For example, a simple internal marketing analysis for two companies is illustrated in financial Tables 17.2 and 17.3. These examples concern a key customer account strategy in a services organisation and a vertical marketing strategy in a computer company. In both cases we can see a formal' level of internal marketing which concerns the marketing plan or strategy, but also levels of internal marketing concerned with the informal organisation and the processes of decision making and change inside the company. In the computer company vertical marketing is not a simple strategy because it is linked to changing resource allocation and departmental responsibilities, and also to a change of management culture. In the finan cial services company, a key account strategy involves not simply a new marketing direction, but a change in line management freedom and ways of doing business. These cases are indica tive of the types of implementation and change problem which can be addressed by internal marketing. It also follows that we can use conventional market research techniques inside the com pany to get to grips with who has to change, in what way,how much and what the patterns are in our internal marketplace. Finally, as with the external marketing programme, we should not neglect the importance of measuring results wherever possible. This may be in terms of such criteria as people's attitudes towards the market strategy and their commitment to putting it into practice, or customer perceptions of our success in delivering our promises to them- or, perhaps more appositely, our lack of success as presented by complaints, and so on. Again, in exact parallel with the conventional external marketing plan, our internal marketing programmes should be directed at chosen targets or segments within the market. The choice of key targets for the internal marketing programme should be derived directly from the goals of the external marketing programme, and the types of organisational and ( LTRATEOY MPLEMENTATION AND INTERRUAL MARKETN Table 17.3 Internai marketing in a financial services organisation Internal market targets (1) Branch managers of retail 2) Divisional chiet executives for the banks and the finance banks and finance compary Internal marketing levels Formal Informal Product Integration of selling efforts Head office group-based around key customers, as a planning and resource manager's role from Change in the indvi key marketing strategy with greater branch entrepreneur to group- based collaborator Time, efort and competitors with diferent central control Price Branch profit/commission Loss of treedom/ from independent selling to independence of action srmaller customers, to be in the marketplace t-al paint of collaborating with former sacrificed to build long-term Potential loss of commission-earning backgrounds-the banker versus power relationships with key the hire purchase salesman Fear that the other side would damage existing customer Written strategic marketing Written communications Joint p plans Sales conferences Informal discussion of chief executive's attitude teams for each region-built around central definition of target market segments Redesign of commission C and incentives systems management intformation in both companies systems, and changing its structure to reflect new segments ommunications Formal presentation by chief Sponsorship by chief Social events executive at conferences executive- the train is Joint training course Written support from chief executive Redesign market information systems to be branches) more up-to-date now leaving the station, Redefinition of markets and you are either on it or.. target segments written memo sent to all 17.4 Planning for internal marketing There are a variety of situations when strategic thinking about competitive strategy should address the possible role of internal marketing where performance in critical areas of customer service are unsatisfactory and not sufficient to establish a strong competitive position; where customer satisfaction is consistently low and complaints suggest that the underlying causes are employee attitudes and behaviour, rather than poor product standards or inadequate support systems when market conditions and customer requirements have shifted, so that continuing the standards and practices of the past will no longer bring success ase study British Airways British Airways has calculated that the economic damage from the at least £30m. Gate Gourmet dispute anounts to No one has yet put a figure on the losses to the airline's brand image caused by cancellations and the travel chaos that ensued from this month's strike action. The final bill for that could be much higher But experts suggest that a great deal depends on how BA handles its response. If there is any lasting damage to BA's image, the consequences could be significant This month, Mori, the polling group, reported a rcGety trages link between the reputation and share prices of listed companies. It tracked the favourability rating of five according to Mr Ambler."tis actualily motivating your companies and found changes in customer satistac- staff to want what is best for BA tion led to corresponding moves in share perfor- mance, typically 3 to 12 months later Jes Frampton, the chief executive of Interbrand, the branding consultancy, argued that BA had been Some fund managers have begun to commission puilled into a problem not of its making. When it is this brand Waheed Aslam, Mori development director, said: But BA had been able to limit the damage by acting Investors believe in the link and increasingly want quickly and being seen to be honest about the situ- research into customer perceptions of companies. important, it has a massive impact lon the have had limited control over this (strike action, they have benefited by being private data that add value to their investment ation. Gilven the fact that they The disruption faced by travellers in the holiday very open and honest and straightorward season, the scenes of low-paid workers protesting to Companies that have been seen to respond efferc get their jobs back, and a well-orchestrated union tively have limited the damage from diffiult situations, campaign have kept the dispute high up the news one example being Sheil's reversal of its decision to agenda. Tim Ambler, a senior fellow in the London sink the Brent Spar oil platform, Mr Frampton said. Business School marketing faculty, believes that The common thread that runs through the people BA's brand risks hitting the low points last seen in its that have done it well is speed of reaction and honesty days as a nationalised industry. Source: from Damage limitation s vitai to a brand under fre, Firancial It is now the third summer in a row that BA has Times, 24/08/2005(Moules, J.) made what looks from the outside like a serious managerial error, he noted Discussion questions The unrest among BA's ground services staff at Heathrow showed that some of the biggest image 1 What is the link between internal marketing problems lay in internal perceptions of the BA brand and service quality in the airline industry? among the company's own staff. 2 What internal marketing programmes could Colin Marshall (BA's former chairman and chief Brtish Airways put into place to avoid further executive] took control of the internal branding of BA to the staff. That was lost when he left, and they never really got it back,' Mr Ambler said internal unrest? What potential is there to ex- tend such programmes to external partners? What challenges may BA face in implementing an internal marketing programme to deliver value to its customers? 3 Internal marketing was not jyst a case of raising staff morale, which could be gchieved by 'simply paying people more and giving them longer holidays

Answer 1

1) Internal marketing motivates employees of the organisation. Helps them understand the company mission and vision statements and target. The employees are aligned with the goal of the organisation in a manner that they see their progress in the progress of the company. They realize that their financial growth is a result of growth of the organisation's sales, market share and profits. Airline industry is service based, hence customer satisfaction is the crucial factor determining business growth. Customer is satisfied with excellent services he/she is provided. Motivated employees are inclined towards better performance and serve the customer with higher efficiency. Thus internal marketing results in improved quality of services.

2) Internal marketing programs that could be conducted are:

• Acknowledging the employees for their efforts and contribution
• Informing employees about the mission and vision of the organisation and benefits to individual and teams.
• Trainings on Customer interaction and communication
• Teamwork building activities.
• Deserved salaries and benefits to employees.
• Facilitating 2-way communication and chance to employees to voice their ideas and opinions for improvements
• While making policy decisions, discuss with employees.
• Help maintain work-life balance to give them physical and psychological stability.

Extended partners should be kept informed regarding the improvement processes. The management at BA can meet the extended partners, know their ideas and views for progressing the business. Also, this will help ensure their trust in BA.

3) Challenges that BA may face while implementing internal marketing for improved customer service are as follows:

• Assumption of employees regarding the organisation
• Less responsible
• Low self-esteem and/or not self-driven
• Personal biases
• Employees are not able to share the organisational goal or even relate to it
• Employees not satisfied with the salary and benefits
• Ineffective communication in the organisation
• Employee does not value the provisions provided by the organisation