Internal Marketing as a Competitive Advantage in Banking Industry

Transcription

1 Internal Marketing as a Competitive Advantage in Banking Industry b Wail Alhakimi*a, Khaled Alhariry a,b Marketing Department, Taiz University, Taiz, Yemen Abstract Nowadays, banking industry has to recognize the change and challenges that face them. Global deregulation, increasing the demand level, and intensely competitive environment are the issues that bank must consider in maintaining their competitive advantage. This paper discusses findings from a descriptive study concerning internal marketing in Yemeni s banking industry. The main purpose of this study was to examine the level of internal marketing, job satisfaction, organizational commitment, and customer orientation in Yemeni s banking industry. A quantitative data were collected from customer service employees. The findings enhanced the understanding of how customer service employees perceived internal marketing in banking industry. The findings will help banks executives identifying the critical dimensions of internal marketing, which finally affect the competitiveness level of their banks. Keywords: internal marketing; banks; Yemen I. Introduction Internal marketing stresses the importance of the marketing concept internally, within the firm, by focusing on the employee and providing a source of competitive advantage (Panigyrakis and Theodoridis, 2009). Differentiation is one of the most critical sources of sustained competitive advantages for business. Therefore, banks have used several approaches to gain a competitive advantage, such as creative financial products, customize IT system, alliances and joint ventures. The objective of internal marketing is to create an internal environment in which customer consciousness proliferates among personnel (Caruana and Calleya, 1998). This study sets out to consider the level of internal marketing perception, job satisfaction, organizational commitment, and customer orientation in banking industry. II. Problem Statement It becomes clear that successful marketing can only be implemented if the firm is involved not only in external but also in internal marketing. The internal marketing concept holds that the organization s personnel are the first market of a company. The key motive behind the launch of internal marketing within banks is the need to achieve attitudinal change among staff towards service-mindedness and customer focus that will enable the organization to compete more successfully in the external market place (Papasolomous and Kitchen, 2004). Over the last three decades internal marketing was proposed as a solution to the problem of delivering consistently high service quality. However, despite the rapidly growing literature, very few organizations actually implement the concept in practice. The lack of implementation guidelines has also contributed to the low adoption rate by organizations (Gounaris, 2008). The current study tries to figure out the level of internal marketing perception and its implications in banking industry. III. Research Objectives Several objectives have examined in the current study: 1. Identify the level of internal marketing perception in Yemeni s banking industry. 2. Identify the level of job satisfaction and organization commitment in Yemeni s banking industry. 3. Determine the level of customer-oriented culture among bank employees. IV. Literature Review A. Internal Marketing Varey and Lewis (2000) indicated that internal marketing concept was suggested in the 1970s, as a managerial approach to build and inculcate service delivery competence. In the literature internal marketing has two prime motives. First, it complements external strategic marketing efforts, through interactions between the personnel and customers. Second, it effectively develops and maintains a workforce, which is both motivated and satisfied (Panigyrakis and Theodoridis, 2009). Internal marketing is a coordinated philosophy using a traditional marketing approach to motivate, train, and guide employees to implement change (Turkoz and Akyol, 2008). It is the philosophy of treating employees as customers and it is the strategy of shaping job-products to fit human needs (Berry and Parasuraman, 1991). 15

2 Gronroos (1980) pointed out that each employee should be trained as a marketer to do add-on, cross-selling and the like along with customer retention skills that would enable the building of ongoing customer relationships. Berry (1981) first created the term of internal marketing as viewing employees as internal customer, and viewing jobs as internal products that satisfy the needs and wants of these internal customers, while addressing the objectives of the organizations. Later on, Johnson and Seymour (1985) define internal marketing as the tool to create employees customer oriented behavior. Then, Gronroos (1994) defines internal marketing as the organization through enthusiastic action, negotiation, and ways almost like marketing strategies to stimulate the internal market, which is made up of own employees in an effort to strengthen their customer orientation and service awareness. Historically, the idea of internal marketing was originally proposed as a solution for how to motive employees to consistently deliver high quality service. Effective implementation of internal marketing highlights the importance of helping personnel to become more customer-focused and service oriented (Papasolomou and Kitchen, 2004). Three theoretical development phases of internal marketing have been identifies by Rafiq and Ahmed (2000): Phase I: focus on employee motivation and satisfaction (George, 1977, Berry, 1981; Berry and Parasuraman, 1991, Bak et al., 1994), Phase II: viewing internal marketing as a vehicle for enhancing customer-oriented behavior (Kotler, 1977, Gronroos, 1985; George and Gronroos, 1989, Cahill, 1995; Liao et al., 2004), Phase III: viewing internal marketing as a critical tool to implement organizational strategy and change management (George, 1990; Glassman and McAfee, 1992; Martin, 1992; Rafiq and Ahmed, 1993; Piercy, 2002). Internal marketing exists through employees, organizations, external customer satisfaction, and crossfunctional units, which all require communication for success (Ballantyne, 2003). Communication plays a key role in the relationship between the supervisor and the employees and is necessary for achieving job satisfaction (Carriere and Bourque, 2009). Internal marketing must be a holistic process integrating all employees each practicing the market aspects according to the function. Simberova (2007) stressed the need of an integrated employee program to embed in the organization the corporate goals and the orientation to serve customers well. A previous study of internal marketing in UK banks revealed that the employees and customers of banks experience positive outcomes when the organization operates with a customer service orientation. Banks have launched internal marketing in order to develop and maintain a workforce that is customer focused and service oriented (Papasolomou and Kitchen, 2004). B. Job Satisfaction In this study, job satisfaction is conceptualized as the extent to which an employee reacts with happiness to his/her job in general. Bak et al. (1994) pointed out a positive relationship between internal marketing and job satisfaction. In service organizations such as banks, an internal customer s satisfaction can be significantly influenced by service encounters experienced with internal service providers (Papasolomou and Kitchen, 2004). Marketing scholars focusing on the internal role of the marketing function concur that employees job satisfaction is an internal, intermediate, objective of the marketing philosophy with service excellence and customer satisfaction in mind (Gounaris, 2008). Heskett et al. (1997) suggests that the satisfaction of employees reflects on customers and vice-versa resulting in a cycle of good service and ultimately increased profitability. Ahmed et al. (2003) repost that internal marketing programs influence positively employees level of job satisfaction. Heightened competition has also placed pressure on banks to achieve optimum staff contribution to competitiveness by giving certain forms of empowerment to workers (Papasolomou and Kitchen, 2004). C. Organizational Commitment In this study, organizational commitment is conceptualized as the strength of the employee s emotional identification with an organization and loyalty to that organization. Several studies demonstrated a significant and positive relationship between internal marketing and organizational commitments (George and Gronroos, 1989; Tansuhaj et al., 1991; Piercy and Morgan, 1994; Hogg, 1996; Carruna and Calleya, 1998). Effective commitment focuses on the emotional attachment of the employee to the organisation and underlines the commitment of the employee to pursue the goals of the organization (Carruna and Calleya, 1998). Souchon and Lings (2001) have also suggested that internal marketing practices have been proposed as a key means of increasing staff motivation, organizational commitment, and employee satisfaction. 16

3 Kyriazopoulos et al. (2007) examined the adoption of the internal marketing concept from bank s branches, and they found that internal marketing has a positive effect on organizational commitment. D. Customer Orientation Customer orientation is the sufficient understanding of target buyers to be able to continuously create superior value for them (Awwad and Agti, 2011). It is the extent to which salespeople help their customers make purchasing decisions without pressure while satisfying their needs and increasing customer satisfaction (Saxe and Weitz, 1982). The literature pointed out a significant and positive relationship between internal marketing and customer orientation (Kotler and Armstrong, 1991; Gronroos, 1994; Cahill, 1995). According to Barney (1991), resources that are rare, valuable, difficult to imitate and non-substitutable will be the source of a sustained competitive advantage. The role of customer orientation is critical to competitive advantage. That is, customer orientation focuses on the interest of customer and understanding their needs and want. It aims of building long-term relationships with customers, which, enables the company to increase customer satisfaction. V. Research Design A close-ended questionnaire was design to collect the data from employees of customer service departments in Yemeni s banking industry (i.e. they have direct contact with external customers). The respondents were asked to rate their level of perception of the four variables on five-point Likert scale. In addition, demographic data from each respondent were collected. Well-known measurements with demonstrated reliability and validity were used in this study (Liao et al., 2004; Hackman and Oldham, 1980; Hunt et al., 1985, O Reilly and Chatman, 1986; Saxe and Weitz, 1982; Thomas et al., 2001). Internal marketing were examined using 21 items, which contains five underlying dimensions (i.e. communication, supervisor, intangible benefits, compensation, and intermediary). Organizational commitment was examined using 8 items, which contains two underlying dimensions (i.e. loyalty and identification). Job satisfaction was examined using 3 items scale and customer orientation was examined using 10 items. The Yemeni s banking system consists of the Central Bank of Yemen and 16 commercial banks (see Table 1). Only 11 banks operating in Taiz city (i.e. the largest industrial base in Yemen), nine of them agreed to participate in the study. Table 1 Yemeni s Banking Industry Bank Name Date of Establishment The Yemen Bank for Reconstruction And Development 1962 National Bank Of Yemen 1969 Arab Bank 1972 United Bank LTD 1972 Housing Bank 1977 International Bank Of Yemen 1979 Yemen Kuwait Bank For Trade & Investment 1979 Cooperative & Agricultural Credit Bank 1982 Rafidan Bank 1982 Yemen Commercial Bank 1993 Islamic Bank Of Yemen for Finance and Investment 1995 Tadhamon International Islamic Bank 1996 Saba Islamic Bank 1996 Yemen Gulf Bank 2001 Shamil Bank Of Yemen & Bahrain 2002 Qatar National Bank ( QNB ) 2007 Source: CBY (2014) A self-administered questionnaire was distributed to all customer service employees, who have a direct contact with external customers in nine commercial banks. At the end of the process, only 31 questionnaires were returned (i.e. 73% response rate). Several drafts were evaluated in order to increase the content validity of the research instrument. Afterwards, internal consistency was examined; overall Cronbach's Alpha is 0.91, which indicates high internal consistency among the items representing the construct (i.e. communication, 0.68; supervision, 0.85; intangible benefits, 0.85; compensation, 0.94; intermediary, 0.79; job satisfaction 0.96; loyalty, 0.86; identification, 0.85; and customer orientation, 0.82 ). Majority of the respondents are males (67%), educated (93% have an undergraduate degree), and experienced in the banking industry (45% more than seven years). 17

4 VI. Results All of the variables were measured using five-point Likert scale ("1" Strongly disagree; to "5" Strongly agree). The interpretations of the Likert scale results are: scores of 1 to 2.32 indicate low level, scores of 2.33 to 3.65 indicate medium level, and scores of 3.66 to 5 indicate high level. The average score of the twenty-one items of internal marketing is 3.80, which indicated a high level of internal marketing in Yemeni s banking industry (see Table 2). Generally, the results showed a high and medium level of communication, high level of supervision, high and medium level of intangible benefits, medium level of compensation, and finally, high and medium level of intermediary. Communication Supervision Intangible benefits Table 2 Internal Marketing Dimensions Statements Mean Standard deviation The bank often announces new policies to us by holding meetings. The bank often shares work related information at employee events The bank regularly communicates its philosophy and values through training courses. The bank regularly reinforces our identification with the bank through participation with external sponsor events. Our direct supervisor should motivate us to give him/ her best efforts. Our direct supervisor fully understands our work performance Our direct supervisor always tries to proactively understand if we encounter job related problems. Our direct supervisor regularly discusses with us about our career development. Our direct supervisor tries to have us provide feedback about her leadership. In my work, I can enhance my interpersonal relationship The bank treats employees well The bank treats employees with respect My current job allows me to develop my talents and potential The bank tries to provide us with a very comfortable working environment. The bank tries to make our work interesting The bank regularly investigates and understands the employee benefits of competitors. The bank regularly investigates and understands the employee salary scale of competitors. The bank sets up different incentive programs for different department. The bank often announces and shares work-related information with us on the intranet. The bank provides us with good channels for filing complaints The bank often sponsors various employee group activities to gain support and understanding from the employees. Overall mean 3.80 Compensati on Intermedi ary The results illustrated in Table 2, showed a high level of communicating polices and work related information to customer service employees. This will enhance the employees knowledge, and defiantly will improve their customer-oriented behavior. However, some employees complaint of the lack of training courses and external sponsor events. Work supervisors play an important role in motivating and directing employees. In Yemeni s banking industry, the results of this study demonstrated a high level of motivation and understanding of customer service supervisors. Customer service employees were highly satisfied with the respect and good interpersonal relationship at their work environment. However, they did not think that their job is interesting; this justify why some of them are looking for alternative job opportunities. At the compensation dimension, it seems that banks executives did not give more attention to employees benefits and salary scale of competitors. Organizations need to maintain its workforce through proper training and development, motivation, attractive salary and 18

5 compensation, and developmental plan (Zubair et al., 2012). In addition, Yemeni s banks need to provide good channels for filing employees complaints. The average score of the three items of job satisfaction is 3.62, which indicated a medium level of job satisfaction in Yemeni s banking industry (see Table 3). Many studies have demonstrated the important role of job satisfaction in initializing organizational commitment and customer-oriented behavior. Even a majority of the respondents claimed a general high level of job satisfaction; however, a significant number of them are thinking of quitting their jobs if they found better job opportunities. Bank mangers should take these results seriously, that is, employees with moderate level of satisfaction will not demonstrate a customer-oriented behavior. In fact, employees are always plays the main part for the successful journey on any organization therefore it is mandatory to increase their educational level, motivate them and make them happy in any means that is must to make a differential and competitive advantage in the world (Mishra, 2010). 19 Table 3 Job Satisfaction Statements Mean Standard deviation I am generally satisfied with the kind of work I do in this job Generally speaking, I am very satisfied with this job I frequently think of quitting this job Overall mean 3.62 The average score of the eight items of organizational commitment is 3.81, which indicated a high level of organizational commitment in Yemeni s banking industry (see Table 4). Generally, the results showed a high and medium level of loyalty within customer service employees and high level of organizational identification. Loyal internal customers always do their best and effective internal marketing practices, also will avoid the new hiring and training cost, time (Ahmad et al., 2012). Table 4 Organizational Commitment Dimensions Statements Mean Standard deviation Loyalty I would be wiling to change banks if the new job offered more status I would be willing to change banks if the new job offered more creative freedom I would be willing to change banks if the new job was with people who were friendlier. I would be willing to change bank if the new job offered a 25% pay increase Identification I talk up the bank to my friends as a great organization to work for I am proud to tell others that I am a part of this organization What this organization stands for is important to me I feel a sense of 'ownership' for this organization rather than just being an employee. Overall mean 3.81 The average score of the ten items of customer orientation is 4.11, which indicated a high level of customer orientation in Yemeni s banking industry (see Table 5). Therefore, Yemeni s banks can sustain their competitive advantage through focusing on customer orientation behavior. Table 5 Customer Orientation Statements Mean Standard deviation I try to find out what kind of product would be most helpful to a customer I try to figure out what a customer's needs are A good salesperson has to have the customer's best interest in mind I offer the product of mine that is best suited to the customer's problem I try to sell a customer all I can convince him or her to buy, even if I think it is more than a wise customer would buy. I try to bring a customer with a problem together with a product that helps him or here solve that problem. It is necessary to stretch the truth in describing a product to a customer I paint too rosy a picture of my products to make them sound as good as possible I decide what products to offer on the basis of what I can convince customers to buy, not

6 on the basis of what will satisfy them in the long run. I try to sell as much as I can rather than satisfy customers Overall mean 4.11 VII. Conclusion and Implications Historically, internal marketing practice in banks appeared to be a way of manipulating employees to engage in behaviors that would enable management to achieve goals that lead to organizational benefits (Papasolomous and Kitchen, 2004). This study examined the level of internal marketing, job satisfaction, organizational commitment, and customer orientation in Yemeni s banking industry. The findings enhanced the understanding of how customer service employees perceived internal marketing in banking industry. The findings will help banks executives identifying the critical dimensions of internal marketing and customer orientation, which finally affect the competitiveness level of their banks. Organization are changing their thinking regarding the employees and assuming them an important and integral part of the organization in the emerging markets and industrial era (Zubair et al., 2012). To achieve good service quality in banking industry, internal service providers must have the freedom and flexibility to adapt the service delivery to meet the needs of their customers. The mechanistic structure and rigid nature of the internal operations of a bank create discontent and low staff morale. Increasing internal customer satisfaction, needs to empower employees to go out of their way to satisfy their fellow employees and subsequently, their external customers. Commercial banks must develop and manage an effective internal communication system aimed at creating awareness, and enhancing understanding among staff regarding internal marketing. Yemeni s commercial banks should convert internal marketing as a strategy into their core operations and systems to meet employees demands and the bank goals. Their employees shall show their sincere organizational commitment and customer orientation. Effective internal marketing programs require that the bank is willing to invest in adjusting its culture and in adopting the concept. References Ahmad, N., Iqbal, N. and Sheeraz, M. (2012). The Effect of Internal Marketing on Employee retention in Pakistani Banks. International Journal of Academic Research in Business and Social Sciences, Vol 2 No. 8, pp Ahmed, P.K., Rafiq, M. and Saad, N.M. (2003), Internal marketing and the mediating role of organizational competencies, European Journal of Marketing, Vol. 37 No. 9, pp Awwad, M. and Agti, D. (2011). The impact of internal marketing on commercial banks market orientation. International Journal of Bank Marketing. Vol. 29 No.4, pp Bak, C., Vogt, L., George, W., and Greentree, I. (1994). Management by Team: An Innovative Tool for Running a Service Organizationthrough Internal Marketing, Journal of Services Marketing, Vol. 8 No. 1, pp Ballantyne, D. (2003). A relationship mediated theory of internal marketing. European Journal of Marketing, Vol. 37, pp Barney, J (1991), Firm Resources and Sustained Competitive. Advantage, Journal of Management, Vol. 17 No.1, pp Berry, L.L. (1981), The employee as customer, Journal of Retail Banking, Vol.3 No.1, March, pp Berry, L.L. and Parasuraman, A. (1991), Marketing of Services Competing through Quality, Macmillan, New York, NY. Cahill, D.J. (1995), The managerial implications of the learning organization: a new tool for internal marketing, The Journal of Services Marketing, Vol. 9 No. 4, pp Carriere, J., and Bourque, C. (2009). The effects of organizational communication on job satisfaction and organizational commitment in a land ambulance service and the mediating role of communication satisfaction. Career Development International, Vol. 14 No. 1, pp Caruana, A. and Calleya, P. (1998), The effect of internal marketing on organisational commitment among retail bank managers, International Journal of Bank Marketing, Vol. 16 No. 3, pp Central Bank of Yemen CBY- (2014). Retrieved on 23 January 2014 from George, W.R. (1977), The Retailing of Services - a Challenging Future. Journal of Retailing, Vol. 53 (Fall), pp George, W.R. (1990), Internal marketing and organizational behavior: a partnership in developing customerconscious employees at every level. Journal of Business Research, Vol. 20 No. 1, pp George, W.R. and Gr nross, C. (1989), Developing customer conscious employees at every level internal marketing, in Congram, C.A. and Friedman, M.L. (Eds), Handbook of Services Marketing, AMACOM, New York, NY. 20

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