Impact Of Internal Marketing Strategy On Customer (a Case Study Of Polaris Bank Plc)

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

In the period of competition, numerous organizations need to make key planning to exploit competition or to win the challenge. One key to success in winning a competition is by creating a strategic marketing plan, which will have significant contribution to achieve the organizational visions and goals. Marketing is a management procedure that has the responsibility to optimise the profit (return) to stakeholders and its firm or industry then providing room for competitive advantage in product (Doyle, 2000). The term marketing came to recognition in the mid 1950s while its application within organizations was being activated. This concept should be performed with a holistic marketing approach covering an integrated marketing, performance marketing, relationship marketing and internal marketing (Kotler and Keller, 2009). The holistic marketing concept focuses on the planning, development, implementation, execution and design of marketing programs, process, and activities that represent the foundation and interdependences. Holistic marketing gives room for “everything that matters in marketing”, therefore integrated perspectives is often necessary. Marketing principles that were examined in the literature and practiced in various companies and organizations has been more associated with product marketing that addresses the customer as the last purpose. Customer is a group of people who buy the end of the organization's products or services, or who consume products or services which are provided by organizations (Jim Blythe, 2008). In customer service world, customers are categorized more often into two classes which are external customers and internal customers. An external customer is a customer who is not directly connected to that organization, whereas an internal customer is a customer who is directly connected to an organization. Internal customers are usually stakeholders, employees, or shareholders of the company and organization, but the definition also encompasses creditors and external regulators (Juran, 1988).

The marketing concept that gives adequate explanation about internal customer is explained on the last part of holistic marketing which is internal marketing. Internal marketing strategy is considered to be fundamental because internal marketing strategy has a responsibility in ensuring that everyone in the organization embraces appropriate marketing principles. During this time, in a service business there is a concept of customer first, but more precisely is the employee first. Internal marketing sees employees as internal customers that the company has to build their loyalty to, said Johari Zein the Executive Director of JNE (Marketing Magazine, May 2011). Employee motivation is a significant element of the concept, for many authors understands this to be the essence of what internal marketing to be. An employee's attitude towards their own work place is believed to directly influence the value of the customer service that is given to consumers. This was summarized by Kusluvan (2003) “Internal marketing efforts are assumed to result in employee satisfaction, job involvement, work motivation, employee commitment, maximum employee effort on behalf of the firms and clients, increased job performance, service-oriented behaviors and attitudes and lower turnover which, as a result should have a positive impact on service quality, customer satisfaction and loyalty” (Kusluvan S, 2003). Internal marketing strategy a new discipline that emerged in holistic marketing reveals that satisfied customers come from satisfied employees. In other words, employees who are satisfied are those who have a high commitment to their roles and functions within the organization in terms to meet organizational goals and objectives. By those facts, it is known that implementation of internal marketing will be difficult if the internal customers are not satisfied. Internal customers who are not satisfied to have the same symptoms with external customers who are not satisfied, it is difficult to provide good service to external customers and will impact the organization or company's decline in productivity (Kotler, 2009).

Internal marketing strategy outlines the impact of the marketing concept internally, within the organisaton, by concentrating 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, organizations most especially the banking sector have used several approaches to gain a competitive advantage, such as creative financial products, customize IT system, different prize linked campaigns to mobilize local and foreign currency in the form of deposit. The objective of internal marketing is to create an internal environment in which customer consciousness proliferates among personnel (Caruana and Calleya, 1998). Due to scarcity of local studies that deal with internal marketing, and its relation with customers’ satisfaction, this study covers this gap from all sides whether from the point of view of banking establishments represented by workers, or the point of view of customers concerning their satisfaction about service quality provided to them by Polaris Bank Plc.

1.2       Statement of the Problem

Banking sector is one of the largest and fastest growing sectors in Nigeria contributing more to the national output and currently employing more people than any other sector. The nature of services being rendered, heterogeneous, and financial and assets management at the same time makes it peculiar to deliver, and challenging to organizations to achieve differentiation from their competitors. In that way, employees become critical instruments with an important role in long-term success through their involvement and contributions in meeting customers’ needs and achieving customers’ satisfaction (Dunne & Barnes, 2000). The researcher will pay more attention and highlight the elements of internal marketing as a pre-requisite for external marketing. With an internal marketing strategy, workers are considered to be “internal customers” who must be convinced of an organization’s mission and vision just as aggressively as “external customers.” The aim of internal marketing strategy is to link up every area of an organization’s internal operations to ensure they are as competent as possible of providing value to customers. An organization that can operate in a coordinated and standardized way will obviously provide a more repeated experience to their customers. On this note, it is pertinent to investigate internal marketing applications. The recognition of the role employees' play in every organization has led the banking sector to adopt internal marketing strategy and hence, treat their employees as internal customers (Mishra, 2010). Even though, internal marketing play a vital role for the long success of companies, this area has not been well researched in our country and needs much more investigation.

Researches on internal marketing in Nigeria are very few. Due to the challenging business environment in which Polaris Bank Plc is operating, it needs to be determined to retain its employees, which can only be achieved through the successful implementation of internal marketing strategies. The employees want the management of their organization to understand their feelings, emotions and intellect, be treated as respectable individuals, require open communication channels with them and desire the establishment and management of a long-term relationship with them. Failure of all these requirements to be met, employees will become less satisfied and loyal towards their employer, which could eventually influence their satisfaction and productivity levels within the organization. Therefore, it becomes important for Polaris Bank Plc to implement internal marketing strategies which could be to the benefit of both the employees and the business in the long term. All these factors have forced the bank to find a new basis for competition in order to build and protect their competitive position by satisfying their customers. Thus this study aims at investigating the impact of internal marketing strategy on customers’ satisfaction by using Polaris Bank Plc as a case study.

1.3       Objectives of the Study

            The present study is aimed to assess the impact of internal marketing strategy on customer satisfaction by using Polaris Bank plc as a case study. The specific research objectives of the study are:

1. To establish the relationship between internal marketing and customers’ satisfaction
2. To examine the prevalence of internal marketing strategy in the banking sector
3. To determine the relationship between internal marketing strategy and service quality of Polaris bank Plc

1.4       Research Questions

            The study will try to analyze and answer the following main research questions.

1. What is the relationship between internal marketing and customers’ satisfaction?
2. What is the prevalence of internal marketing strategy in the banking sector?
3. What is the relationship between internal marketing strategy and service quality of Polaris bank Plc?

1.5       Research Hypotheses

            In the course of this study, the following hypotheses were generated:

1. There is a significant relationship between internal marketing and customers’ satisfaction
2. There is no significant relationship between internal marketing strategy and service quality of Polaris bank Plc

1.6       Significance of the Study

            This study is useful in providing good deal of lesson because it will be conducted in a bank (Polaris Bank) in the country and retaining customers is crucial in this competitive environment. The result of this study will provide insight for service marketers in the banking sector to introduce internal marketing programs in to their organizations and allowing managers to focus on identified internal marketing elements. A substantial amount of research has been conducted on internal marketing and most of them focused on its relation with employee satisfaction that hinders to some extent its acceptance by organization to fully implement the practice. Therefore, the first benefit of this study will be to provide a better understanding of internal marketing strategies as determinant of external customers’ satisfaction at Polaris Bank in particular. Secondly, the researcher will aim to provide an understanding in terms of the elements of internal marketing strategies and the extent to which each of them explains customer satisfaction.

1.7       Scope of the Study

            This research is a case study on Polaris Bank where employees and customers are contacted to gather their insight about the firm’s level of internal marketing strategies implementation and level of satisfaction respectively. The rationale of choosing this bank is due to its largest market share and contribution in the economic development of the country by playing the financial intermediation role. The study will be confined to branches located in Yaba, Ikeja and Surulere Local Government Areas of Lagos State, Nigeria. The reason for selecting these branches is because major customers of the bank are served in these branches and the transaction volume is very high. The study also targets employees working at branch level due to the fact that they have frequent interactions with customers to investigate the internal marketing strategies of the bank. In addition, perception of external customers regarding the satisfaction was used in studying the relationship among the constructs. The study will also limited to the internal marketing scale variables (empathy and consideration, benchmarking, job quality and reward, upward communication, value and information sharing and promotional activities), even if there are numerous internal marketing strategies developed by different scholars like inter-functional coordination, training and development, strategic reward and incentive system, knowledge management, etc.

1.8       Limitation of the Study

The study will focus on the identified internal marketing elements to assess their relations with service quality and customer satisfaction. The study will depend on the information it gets from employees working at branch level and external customers’ of the bank to assess the internal marketing strategies of the bank and its effect on customer satisfaction on selected sample branches. The use of non-probability sampling such as convenience (accidental), quota, purposive and network sampling procedures implies that not every element of the population has an opportunity for being included in the sample, (Burns & Grove, 2001). The non-probability sampling procedure may limit the generalizability of the findings.

Another limitation form a conceptual standpoint is that regardless of the study outcomes, organizational management theorists still may believe that internal marketing is a human resource phenomenon with a marketing twist (Mudie, 2003).

1.9       Definition of Terms

For the purposes of this study proposal, the following terms are defined.

Internal marketing: Internal Marketing is defined 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 firm,” (Berry & Parasuraman, 1991, p.272).

Service Quality: Service quality is a critical element of customer perception which influence both customers‟ evaluation of a service as well as their satisfaction with the overall service delivery process (Zeithaml & Bitner, 2009).

Customer Satisfaction:  The most comprehensive definition of satisfaction has been offered by Kotler and Keller who define satisfaction as: “person’s feeling of pleasure or disappointment which resulted from comparing a product’s perceived performance or outcome against his/ her expectations” (Kotler and Keller, 2006, p.144).

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