Inernal Marketing 15

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2 2 LOGI STI CS I NFORM ATI ON M AN AGEM ENT 8 ,4

In t roduc t ionNearly every manager who heads a staff function hasbeen challenged at one time or another to cut costssharply and improve service or face the prospect of surrendering responsibilities to a more competitiveoutside source. Current trends towards verticaldisintegration and outsourcing have left many staff managers wondering how best to respond to therequirements and expectations of their organizations.

The trend towards cutting back staff functions is

particularly acute in US businesses, where large internalstaffs have become synonymous with non-competitive-ness in global markets. Even in companies which havealready trimmed layers of staff, managers of internalservices, such as education and training, marketingresearch, MIS, health and safety and others, face an era of tighter resource constraints in the 1990s. Many tradi-tionally budgeted programmes are now under intensemanagement scrutiny to assess their contribution tocompany objectives and operating performance. Today,effective staff heads must recognize that their internalusers are in fact their customers and that marketing

inside the organization is an essential part of deliveringvalue to the company and ultimately to the end consumer.

Despite growing attention in marketing literature to theconcept of the internal customer, little has been written toshow how marketing can be applied practically by staff units to defend against outsourcing or to garner supportfor their function. This article is based on our originalwork in 1992[1] and examines internal marketing on thebasis of a case study of one staff function that suffersfrom a lack of internal customer focus – occupationalhealth and safety. The study findings and implicationsare generalizable to many staff units which themselvescan benefit from an internal marketing approach basedon meeting or exceeding management’s expectations.

The in tern al m ark et ing conceptIndustrial firms invest considerable time, talent andmoney to understand organizational buying from theperspective of marketing, an approach that seeks tounderstand the needs, wants and expectations of buyersto develop the firm’s ability to provide customersatisfaction effectively, efficiently and profitably.

An understanding of organizational buying behaviourhas long been a first step in the development of inter-

organizational marketing strategies – that is, thestrategies of firms marketing to other firms. In contrast,most companies devote far too little attention to theconcept of intra-organizational marketing of goods andservices – where one organizational unit or staff groupmarkets its capabilities to other units within the samecompany. Yet these internal exchanges constitute animmense share of the business transactions that movegoods and services through the industrial supply chain tothe end consumer.

Business authors have recently indicated that internal

customers are in many ways similar to externalcustomers, noting that a broader definition of “thecustomer” may be necessary to maximize the benefits of acompany’s marketing initiatives[2-4]. From a morefocused perspective, internal marketing has been appliedby executives to such areas as management informationsystems and training to show how staff professionals canpromote products and services to their management[5,6].Internal marketing, in essence, recognizes that allemployees are customers of managers who wish to carryout the firm’s objectives. If the firm’s objectives are soundfrom an external marketing standpoint, individualfunctional areas contribute by responding to theirrespective internal publics, each of which is directly or

M a r k et i ng serv i ces t o sa t i sf yin t erna l cust om ersGilber t D. Harrell and Matthew F. Fors

A case stud y on occupa t io nal hea l th a nd safety is used to show t hat i n tern al m ark et ing is an essent ia lcon t r ib u t ion t o the p rocess o f de l i ve r ing va lue to t he o rgan iza t ion i t se l f and , u l t im ate ly , to the endconsumer

Logistics Information Management, Vol. 8 No. 4, 1995, pp. 22-27 MCBUniversity Press Limited, 0957-6053

This article first appeared in Industr ial Marketing Management , Vol. 21, 1992, pp. 299-306.


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indirectly linked to the ultimate customer and competitivemarketplace.

The case stu dyObjectives

This case study has two objectives:

(1) it identifies the management expectations thatinternal marketing must address; and

(2) it outlines practical implications for managers whomarket their services within the organization.

The case of industrial health and safety is especiallyuseful for examining internal marketing issues and

applications. When compared with decisions aboutquality and cost reduction, health and safety provideinteresting contrasts that highlight the impact of internalmarketing on management decisions. Health and safetydecisions are among the most important, expensive andcomplex decisions that corporations make. However,these decisions command much less managementattention than do areas such as cost and quality, and arethereby representative of many staff areas such asplanning, employee education, research and others. Theresearch suggests that these functions can benefit frominternal marketing to advance their contribution to the

company’s objectives and encourage the implementationof programmes.

Research m etho dAn in-depth case study involving exploratory researchtechniques is appropriate for attempting to discoverrelevant variables and understand their relationships.Plant managers in the automotive industry providedextensive information and insights in focused groupinterviews and a survey about the internal marketing of occupational health and safety.

In all, plant managers from 140 separate manufacturingfacilities in the auto industry were included. Each focusedgroup was professionally moderated for the two to two-and-a-half hour period, tape-recorded and transcribed.Analysis involved developing a typology of responsecategories, counting mentions and performing contentanalysis of the most important areas. The interviewsexplored how plant managers made determinations tosupport staff initiatives.

As an adjunct to the focused groups, a mail survey was

taken of 200 top automotive plant managers (of whom 107returned the survey). The instrument was designed toverify the focused group findings. The sample was notdrawn from a frame representing all manufacturingplants; rather, it was a convenience sample of automanufacturers. Thus, it was intended to provide

supporting exploratory data rather than conclusivepercentages.

As expected, not all managers view these topics in thesame light, although many similarities are evident. Yet,one fact is clear: a vast majority believe their jobs wouldbe much easier if health and safety personnel understoodissues from a managerial perspective, and if they wouldwork towards meeting their expectations with a morecustomer-oriented approach.

ResultsManagement expectat ions for internal marketing

Five key management expectations were isolated thatstrongly influence the success of internal marketingefforts. These expectations have been incorporated in aflow diagram to illustrate the sequence and therelationship to management investment decisions (Figure1). The research indicates that meeting or exceedingmanagement’s expectations on these five dimensions willtend to favour investment decisions. Alternatively, if thestaff unit is unable to meet expectations on thesedimensions, then management inaction or a deferral of

23MARKETING SERVICES TO SATISFY INTERNAL CUSTOMERS

Decision priority

Does the decision area have tangibleapplications for business performance?

1

Corporate commitment

Is top management strongly behindinvestments in this area?

2

Centre of expertise

Does the staff possess (or have access to)experts in the area?

3

Decision leadership and team building

Can a solution be developed that has thesupport of all key people and

groups involved?

4

Operational impact

Will investment in the solution positivelyaffect overall operating performance and

can this be financially justified?

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IN

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Expectations met or exceeded




Expectationsnot met

Expectationsnot met

Expectationsnot met

Expectationsnot met

Expectations met orexceeded

Expectations not met

Figu re 1. Management expectat ions for internal marketing


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the investment decision is likely. We need to look at eachdimension in turn.

Tangible appli cati ons Managers of staff functions need, first, to understandwhere their staff services stand relative to other decisionsthat command the organization’s attention. They can thentake steps to position the internal staff serviceappropriately with regard to management’s currentpriorities. The initial focused group interviews exploredthe major types of decisions that require plant managers’time and attention. The intent was to determine indirectlythe relative importance of various decision areas based onthe frequency of mentions, without using a preconceivedlist of decision areas.

When asked about crucial management concerns, plantmanagers overwhelmingly talked about issues of costcontrol and product quality. In fact, it was somewhatdifficult to direct top management’s attention to issuessuch as health and safety, training and other topics,except as they related to cost and quality. On directquestioning, other topics did command attention. Thesurvey helped establish the relative importance of healthand safety and other decisions. The 107 managersresponding to the survey were asked to rank 13 decisionareas, identified as salient by the focused groups,according to the amount of time and attention they devote

to each over the normal course of their jobs. As Table Ishows, cost control and product quality are the cleardecision priorities. Consistent with what was learnedfrom the focused groups, managers, on average, rankedhealth and safety lower – safety is rated sixth andemployee health is ninth. While health and safety may bearticulated as “number one” priorities, they commandsignificantly less managerial attention compared withother pressing issues on a day-to-day basis.

When asked directly, most managers indicated thatissues such as health and safety are of primaryimportance to them and to their plants. Hence, while

managers say that health and safety are highlyimportant, they spend little time reflecting on these typesof decisions. It seems paradoxical that health and safetyrank high in importance when managers are asked aboutit directly, yet have low salience when all major decisionsare considered through non-directive, free responsequestioning. The following statement from an executivein one of the focused groups captures this perspective:

I think that our two biggest decision areas are cost andquality on a daily basis. To be very up-front and honest, Idon’t know that my people think of safety as being right upthere with cost and quality, although it should be. In the day-

to-day battles, I don’t think that it really does fall at the top.It follows that marketers of internal services shouldactively seek to establish tangible objectives and promotesystematic tools and techniques to demonstrate theapplications of their service in the industrial environment.

To accomplish this, plant managers indicated thatacceptable expectations or performance standardsshould be understood. Plant managers indicated thathealth and safety personnel need to help them identifyand define relevant goals – one of the overriding topics inthe marketing management perspective. This shouldinclude the development of internal audits to assess

organizational performance critically with regard to theinternal service and determine where performance gapsoccur.

Systematic audits are appropriate for a wide range of functions and can be patterned after the typical “qualityaudits” most companies use today. Plant managersagreed that the focus of these tools should be to point outhow well the organization is using internal services tomeet company goals and objectives. Marketers of internalservices can use this self-assessment to consult with in-house customers and so target support services more

effectively.

Corporate commitment

Plant managers, by and large, march to the beat of twodrummers – corporate executives and direct customers.Managers consistently attempt to get all personnel insidethe plant in step with these forces. Consequently, a seconddimension involves plant managements’ expectationsconcerning the emphasis placed on the area by corporateexecutives. Regardless of the particular staff function,plant managers tend intuitively to understand theimportance of their various responsibilities in corporate

executives’ eyes and direct their attention and effortaccordingly. Staff units should incorporate top executivesin their marketing effort. Plant managers indicated thatevidence of corporate commitment includes a high levelof executive presence at major staff events and meetings,a focus on the contribution of the staff service to company


Tab le I . Priori ty ranking of manager ial decision areas

Decision areas Mean rankinga

Cost control 1.5Product quality 1.9Planning 3.4Scheduling and delivery 4.7Union relations 5.0Employee safety 5.7Employee training 6.1Customer contacts 6.9Employee evaluation 7.5Employee health 8.2Community relations 9.1

Your own training 10.5Hiring 10.7

Total sample n = 107

Note: a1 = highest priority; 13 = lowest priority


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operations in corporate publications and performancereports, and the presence of measurement systems thatreward and provide incentives to line management for

superior performance in the functional area.

For many companies, corporate executives do notcommunicate health and safety concerns with the sameenthusiasm and clarity as, for example, quality and costcontrol. Quality improvement and cost control tend to beclearly articulated as corporate objectives with well-defined programmes in place to accomplish these goals.Most managers are asked not only to participate in suchprogrammes in their plants, but to interface withorganizations that promote programmes to movesystematically in the direction of higher quality and cost

containment. The following focused group commentreflects this issue:

Quality, cost and safety are not of the same importance. Youdon’t have the same passion. There is no question inanybody’s mind where our direction is on quality. Topmanagement preaches quality. Safety programmes in thecorporation are so institutionalized that we just acceptthem.… But you don’t see the emphasis on safety at the topthat cascades to the operational level and down to themanufacturing end.

To the degree that plant managers have formed clearexpectations of a staff function, they seek support to

arrive at these goals. Because quality improvement andcost objectives tend to be clearly articulated, most plantmanagers seek support from quality personnel andprocess engineering to gain compliance. As in-housecustomers begin to recognize that the corporation placeshigh importance on the support services, the internalmarketing task becomes easier – customers are morereceptive to new approaches, and highlighting internalsuccess stories has greater impact on otherorganizational buying units.

Centre of expert ise

A third important management expectation involves thelevel of expertise provided by the staff function.Establishing the internal service group as a recognizedcentre of expertise in the organization is essential to themarketing effort. Staff personnel must be viewed asexperts to be consulted by plant management onimportant issues. This may result in providing servicesor acting as a referral to the outside. In either case, thestaff serves as the broker or manager for that function inthe customer’s eyes. Plant managers indicate that thebackground and experience of the staff are highlyinfluential in this regard. Equally important is the degree

of networking that the staff can provide to bring inoutside solutions and share information across units inthe company.

In the case study, a majority of managers believe healthand safety personnel are predominantly generalists with

little specific competence in the discipline of health andsafety. By contrast, they will quickly point to specialistsin areas such as quality control at the plant level. The

common expectation is that health and safety personneldo not typically have the rigorous training that isfundamental to other line disciplines such as finance,engineering, or quality control. A related belief is thatsome union people are appointed to health and safetypositions, not because of their technical competences, butbecause of their status in the organization or for politicalreasons. This contributes to perceptions of non-professionalism in the field:

When you talk about a quality programme and a costprogramme, I see a group of analysts – trained people whoknow that it is part of their everyday job to provide us with

that kind of information. In quality, we’ve got adiagnostician and a quality staff all the way up to the top of the corporation. We don’t have that in health and safety.

While health and safety problems have grownincreasingly complex, the competences of individuals atthe plant level are not believed to have increased at acommensurate rate. For example, committees are oftenappointed on an ad hoc basis to study specific health orsafety incidents. The incident is likely to represent aneasily identifiable health or safety breach to whichcommon-sense solutions are sought. This “incident-response” orientation fosters reactive rather than

proactive activities. Proactive approaches require specificprogrammes and expertise that go beyond simplystimulating general awareness of health and safety’simportance. Yet, managers indicate that this “halo of awareness” often characterizes the thrust of health andsafety promotion.

The extent of internal networking is also crucial toestablishing an expectation of expertise; that is, thedegree to which the staff function acts as a conduit orinformation hub for solutions to management problemsexperienced in other areas of the company or by other

companies in the industry. Most plant managers indicatethat limited corporate and divisional assistance has beenprovided to plants in health and safety. In general,managers contend that manufacturing plants initiate,develop and implement their own health and safetyprogrammes. Plant managers believe they actindependently of other operational units in identifyingareas that require attention and in finding the resourcesto develop health and safety programmes. The result isthat many plant managers believe plants are “on theirown” in health and safety areas. Focused groupparticipants expressed a pervasive sense of isolation,

particularly in the areas of health and safety planning,training and programme development. Two typicalcomments follow:

We developed our own programme. I don’t see the back-upsupport out of the corporation that I see flowing in the otherareas. I don’t see safety institutes that we can send our



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executives to. We even have a “cleaning school” now, whichis good, but we have nothing like that for health and safety.

We have internal safety programmes in our plants. We’vetaken on a lot of them, like lead safety and confined entry.But that has all been done by internal people who have anumber of other things to do. We haven’t had one accountantcome up and offer to help with safety. We haven’t had onequality engineer come up and help with safety. It is unfair tosay that safety programmes don’t exist, but they are verylocal programmes, spearheaded at the manufacturing level.I don’t see the corporate or organizational support in safetyat any comparable scale with those of other programmes.

Decision leadership and team bui lding

Plant managers seldom make decisions in a vacuum. Typically, when the stakes are high, they seek input frommany individuals and groups on policy issues. Internalmarketing must recognize the complex decision processinvolved. Managers will be more favourably disposedtowards investment if they expect to gain support for asolution by assuming leadership or building an internalteam. Modelling the organizational buying processreveals who participates in decision making and suggestshow team building can build a consensus and reduce theinternal customer’s perceived risk.

Without exception, plant managers agreed thatresponsibilities for health and safety should reside at theplant level. Although divisional and corporate levels mayprovide input to health and safety decisions, managerspoint out that health and safety problems ultimately fallon their shoulders. The common rationale for this strongbelief in localized responsibility is that specificmanufacturing situations are best understood at the locallevel. Consequently, plant managers see themselves asultimately responsible for plant health and safety.

While managers accept ultimate responsibility for health

and safety in the plant, they do not always assume a leadproblem-solving role. In the majority of cases wheredecisions are complex and multifaceted, the managerenlists the help of several representatives to consider thesituation jointly and form recommendations, such as:

supervisors;

engineers; and

the union.

Such teams help to access and integrate expertise whilestrengthening support for the eventual solution amongthe groups involved. These teams may be formal, as in

the case of task forces or committees, or an informalgroup of advisers, consulted by the manager on anad hoc basis.

The degree to which managers expect that a team can beformed to arrive at an acceptable solution is instrumental

in decision making. Effective staff units will foster teamformation and orchestrate cross-functional input tofacilitate management investment decisions. This aspect

of internal marketing can reduce risk perceived bymanagement and pave the way for decisions that have thesupport of all important parties.

Operat ional impact

A fifth management expectation for internal marketinginvolves the link to operating performance. The ability to

justify decisions financially for the internal service iscrucial to getting favourable buying decisions. Thisrequires an understanding of how such justifications aredeveloped by the organization’s financial people andenlisting their support to prepare the necessary analysis.

In the case of many internal services, it is only afterpreference is determined for a particular solution thatmanagers actively seek financial justification. That is, thefinancial impact is not in itself a decision criterion, but itis essential to acquire funds to carry out the decision.Many managers are uncertain of how to build effective

justifications to satisfy the requirements of financialpersonnel, yet they recognize that these justifications arenecessary to get funding. In some instances, managersmay take funds from other areas or “miscellaneous”accounts to enact a solution before receiving the actualapprovals and allocations.

Health and safety professionals and those in otherinternal service functions can fulfil important marketingroles with regard to financial justifications. There is aclear need to assist management in developing

justifications that are consistent with accepted corporateapproaches to obtaining funding. At the same time, staff should recognize that stressing cost or benefits early inthe problem-solving process may not always be aninfluential catalyst for management investment in staff functions. Often, such decisions tend to be based on non-financial criteria. In essence, managers determine what is

the right thing to do and then build a financial case tosupport doing it. Thus, internal marketers must be:

(1) aware of the stage in the decision process at whichmanagers seek to justify investments financially;

(2) able to work closely with managers and financialpeople to build a convincing case linking theinvestment to operational performance.

Summary The case study identified five prominent management

expectations that influence decisions to invest in staff services. The indications are that staff who market theirservices internally should direct their efforts towardsmeeting or exceeding management expectations in theseimportant areas. The following recommendationssummarize the implications of the research for internal



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marketing. Managers of in-house services and staff functions should:

Help decision makers determine which problemswarrant their involvement and focus attention onthe tangible applications of their staff units tobusiness performance. This will ensure thatimportant initiatives for the service are notoverlooked and demonstrate staff contributions tothe organization.

Engage corporate executives to help communicatea prominent and consistent message throughoutthe organization regarding the importance of thestaff function. This helps plant managementrecognize that investments in this area will besupported at higher levels.

Establish a centre-of-expertise perception for thefunction and build the professional image of staff personnel as specialists in their disciplines. If managers’ expectations of expertise are met orexceeded, they will be more likely to consult withthe staff and have confidence in theirrecommendations.

Encourage team building through formal andinformal group processes. In-plant task teams thatare charged with providing recommendations tomanagement will help narrow the range of

alternatives, reduce perceived risks and providevital support for the eventual investmentdecisions.

Establish systematic procedures to justify internalprogrammes and services where financialapprovals are required. These justifications shouldbe developed in conjunction with the financial staff to build acceptance and support managers in theirefforts to gain funding or key programmes.

The case example of health and safety decisions illustrateshow marketing can be applied when the customer is

internal to the firm. Like other internal staff functions,industrial health and safety decisions range from relativelyinexpensive, routine purchases to major corporate

investments where the solutions are complex and theoutcomes uncertain. In this setting, the proper role of marketing is not simply one of promotion or demandgeneration. It requires an understanding of the expecta-tions of managers as internal customers. Marketing, insideor outside the firm, involves understanding the needs,wants and expectations of customers and tailoring theorganizational approach to provide customer satisfactioneffectively and efficiently. The implication is that staff professionals can effectively market their servicesinternally by addressing management expectations in thedecision process and adjusting their approaches to meet or

exceed those expectations.

References

1. Harrell, G.D. and Fors, M.F., “Internal marketing of aservice”, Industr ial Marketing Management , November1992, p. 299.

2. George. W.R., “Internal marketing and organizationalbehavior: a partnership in developing customer-conscious employees at every level”, Journal of Business Research, Vol. 20, 1990, pp. 63-70.

3. Grönroos, C., “Relationship approach to marketing in

service contexts: the marketing and organizationalbehavior interface”,Jour nal of Business Research , Vol. 20,1990, pp. 3-11.

4. Johnston, W.J. and Bonoma, T.V., “Purchase process forcapital equipment and services”, Industr ial M arketing Management, Vol. 10, 1981, pp. 253-64.

5. Bobbitt, H.R. Jr and Ford, J.D., “Decision-maker choice asa determinant of organizational structure”,Academy of Management Review , Vol. 5, 1980, pp. 13-24.

6. Trumbly, J.E. and Arnold, D.R., “Internal marketing of amanagement information system”, Jour nal of Systems Management, Vol. 40, 1989, pp. 26-30.


Gilbert D. Harrell is Professor of Marketing and Logistics at the Eli Broad Graduate School of Management, MichiganState University, East Lansing, Michigan and Matthew F. Fors is a private Business Consultant in Michigan, USA.

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