RELATIONSHIP BETWEEN INTERNAL MARKETING AND BUSINESS PERFORMANCE: A CASE STUDY...

I J A B E R, Vol. 13, No. 5, (2015): 3277-3295

* Assistant Professor (CES), Department of Commerce and Business Management, Faculty of Commerce,M. S. University of Baroda, Vadodara, India, E-mail: [email protected]

** Assistant Professor, Department of Business Economics, Faculty of Commerce, M. S. University ofBaroda, Vadodara, India, E-mail: [email protected]

RELATIONSHIP BETWEEN INTERNAL MARKETING ANDBUSINESS PERFORMANCE: A CASE STUDY OF

SELECTED BANKS IN INDIA

Parinda V. Doshi* & Shradha Hitesh Budhedeo**

Abstract: The study investigates the impact and significance of internal marketing practiceson business performance in service industry. It explores the nature of association and relationshipbetween internal marketing and organizational commitment, market orientation, employeeperformance and employee productivity for selected banks in India. These parameters in turnhave a positive effect on overall business performance. The analysis is based on primary datacollected from employees in customer service departments of five selected banks. Using chi-square tests, the study establishes that internal marketing is a crucial aspect of serviceorganization and has a significant positive impact on business performance variables. Thestudy concludes that internal marketing strategies would enhance an organization’scompetitiveness and promote competency by motivating and encouraging its employees.

Keywords: internal marketing, organizational commitment, market orientation, employeeperformance, employee productivity

1. INTRODUCTION

Globalization in the economy has compelled innovative approaches towardsmanaging the work force. The dramatic changes in the social system and fiercecompetition have forced the organisation to develop pioneering ideas to identify,nurture and groom employees for the future (Orooj Siddiqui, 2014). Internalmarketing plays an effective role in developing customer-conscious employeesthat endeavour to serve the organisation towards achieving its performance goals.The focal point of internal marketing is the customer. It focuses on promising anddelivering high quality services and customer satisfaction by emphasizing oncustomers’ needs. Organizations need to recognize the importance of internalaudiences or employees as part of their total marketing communication activities.Internal marketing practices strengthen the relationship between customers andorganizations. With the aid of such practices, organisations can achieve dualobjectives of employee and customer satisfaction.

3278 � Parinda V. Doshi & Shradha Hitesh Budhedeo

Internal marketing is an important aspect of service-oriented organisations. Inthese establishments, the employees are in direct contact with the customers andhence the effectiveness of the organisation can be measured in terms of the qualityof delivery of the services. As quality service delivery by the employees isimperative in service organisations, it becomes crucial to well acquaint theemployees about customer needs, products and services of the organisation, marketsituation, competitors’ strengths, policies, etc. Well informed and trained employeeswill better understand the requirements of the organisation and will effectivelyparticipate in the process of fulfilment of the latter’s goals. Studies by Caruanaand Calleya (1998) and Farzad et al. (2008) also support the view that ‘applicationof internal marketing program is one of the best ways to achieve commitment ofemployees in an organization’. Gronroos (1990) considers it a managementphilosophy and framework for employees’ management toward market orientation.Internal marketing enables organizations to face the challenge of maintaining strongrelationship with stakeholders (Tortosa et al., 2009). Organisations when supportedby employees exhibiting good performance and productivity, leads to improvementin quality of services and increase in profitability of firm. By influencingorganizational commitment of the employees; their level of market orientation;employees’ performance and productivity, internal marketing aims at realisingthe goal of higher business performance and profitability of an organisation.

Literature reveals that internal marketing has an important role to play in theservice industry. In this context, the present study is an attempt to understand theimpact of internal marketing in the service sector. The banking industry is aprominent segment of the service sector propelling the country’s economic growth.Moreover, the history of banking goes a long way in India dating back to pre-independence period. The banking sector has undergone a phenomenal changesince the initiation of planning in India. A role was defined for the banking systemin the document of First Five-Year Plan and special efforts were made in subsequentplan periods by Government and RBI to align economic policies with bankingpolicies. There has been a definite and massive transition from class to massbanking. The nationalisation of major commercial banks in 1969 further led to theexpansion of this sector. The number of commercial banks in the country hasescalated from 89 in 1969 to 151 by 2014. The number of offices of scheduledcommercial banks in India has gone up from 8,262 to 1,17,280 during the sameperiod. Population served per bank office has improved from 64,000 to 10,800 now.The number of bank employees has reached nearly 11 lakhs in 2014 from around 2lakhs in 1969.

Development in the banking sector has triggered the growth of the Indianeconomy by providing monetary infrastructure for business activities. Mostly,major banks have realized that improving service quality and creating customerrelationships that deliver value beyond that provided by the core product itself is

Relationship between Internal Marketing and Business Performance � 3279

the key for fighting competition and driving performance. Internal marketing withits unique philosophy plays a critical role in the relationship building orientation,as it works on assuring the employees satisfaction and commitment which is animportant prerequisite for providing high service quality (Sasser and Arbeit, 1976;Berry, 1981). The crucial role of internal marketing in influencing organizationalcommitment, market orientation, employee efficiency and productivity eventuallycumulatively has an effect on the overall business performance.

Hence, this study focuses on the investigation of the nature of impact of internalmarketing aspects on the efficiency and effectiveness of employees in the bankingindustry. The purpose is to understand their influence on overall businessperformance in the banking industry.

The study has been designed to include eight broad sections. The first section isthe introduction to the study followed by literature review in the second section.The third section discusses theoretical framework of the study and the meaning ofdifferent concepts. The objectives and hypothesis of the study has been defined inthe fourth section. The fifth section states the details of the data and methodologyused in the study. This is succeeded by presentation of the empirical results insection six. The seventh section traces the limitations of the study and scope for futureresearch. The last section concludes the findings and perceptions of the study.

2. LITERATURE REVIEW

There is a wide array of literature available on the impact of internal marketing oncompany’s performance via its influence on different aspects of employee efficiencyand effectiveness such as its influence on organizational commitment, marketorientation, employee performance and employee productivity. The present studyreviews some of these studies and highlights their findings.

Studies by Caruana and Calleya (1998) and Bennett and Barkensjo (2005) founda positive relationship between internal marketing and organizational commitment.The results of Shekary et al. (2012) also confirmed to a similar relationship. Abzariet al. (2011) empirically tested the effects of internal marketing on organizationalcommitment. They found that internal marketing affects organizationalcommitment directly and indirectly through market orientation. It means thatfactors of internal marketing influence market orientation directly and then marketorientation in turn affects organizational commitment.

Voola et al. (2003) highlights the role played by internal marketing in thedevelopment of market orientation and competitors’ orientation of employees.The study found internal marketing to have an encouraging influence on marketorientation of employees. Tsai et al. (2012) investigated the impact of internalmarketing on market orientation for Taiwanese district hospitals. By employingmultiple linear regression analysis, they found that internal marketing significantly


influences market orientation. Other studies that support the existence of a positiveeffect from internal marketing to market orientation of employees are Conduit &Mavondo (2001), Lings and Greenley (2009), Gounaris et al. (2010), Mcclure, (2010),Papasolomou-Doukakis (2012), Taheri and Ghasemi (2015).

Kyriazopoulos et al. (2007) examined the impact of internal marketing onefficiency and performance of employees of bank branches. The study found apositive effect of internal marketing on both organizational commitment andmarket orientation for bank employees. Moghaddam et al. (2014) studied the effectof internal marketing and organizational commitment on market orientation inMellat Bank in Iran. They used structural equation modeling to examine therelationship between variables. The results revealed a positive relationship betweeninternal marketing and market orientation. There is no relationship betweeninternal marketing and commitment. Also, the study arrived at a positiverelationship between commitment and market orientation. They support that useof proper internal marketing operations would promote employees commitmentand market orientation.

Zaman et al. (2012) examined the impact of internal marketing on organizationalcommitment, market orientation and business performance for commercial banksin Pakistan. The study suggests that internal marketing programs have aconsiderable impact on employees’ commitment, their market orientation andoverall profitability of the firm. Tortosa et al. (2009) examined the relationshipbetween internal marketing and firm performance. They analysed the impact ofinternal marketing on internal factor (influence on the satisfaction of the contactpersonnel) and external factors (perceived service quality and customersatisfaction).

Internal marketing is a tool that harnesses the employees and creates anenvironment of employees’ responsibility towards the organization. In the pursuitof organizational performance, every employee strives to enforce their performanceand productivity. A study by Amangala and Wali (2013) found internal marketingreward system to have a positive and significant impact on employees’ performancein Nigeria. The study validates that internal marketing strategy is a strong tool forwinning employees’ commitment to work and perform. Also, the studyrecommends greater use of internal marketing strategies for motivating employeesand enhancing productivity. The same has been substantiated by Rafiq and Ahmed(2000), Benea (2008), Panigyrakis and Theodoridis (2009), Stancu et al. (2011), Shah(2014), and. Effective internal marketing shaves positive relationship in overallperformance of individuals and departments in any organization.

Organizations increasingly realize that active role of workers is imperative inthe face of changes that occur internally and externally. Hence, an understandingof the ‘needs and factors’ promoting the efficiency and productivity of workers


for performance consequences is a vital issue that needs to be addressed. The majoraspects that need to be studied are the role of internal marketing practices and itsimpact on organizational commitment, market orientation, employees’ productivityand employees’ performance.

3. THEORETICAL FRAMEWORK AND CONCEPTS

The concept of Internal Marketing has emerged from the services marketing literaturein the 1980s which focuses on developing customer-conscious employees (Gilmoreand Carson, 1995). The aim of internal marketing is to provide quality products orservices to customers; with an emphasis on turning service quality into anorganization’s imperative (Berry et al., 1976). In service organization, serviceproduction and consumption are simultaneous, as there is a direct contact betweenthe service provider and the customer (Collier, 1983). The unique feature of serviceindustry is the delivery of quality services for building good relations with thecustomers. Thereby, internal marketing helps in developing customer focusemployees and plays a crucial role in the development of organisation. Internalmarketing has been defined by Rafiq and Ahmed (2000, p. 454) as “a plannedeffort using a marketing like approach to overcome organizational resistance tochange and to align, motivate and inter-functionally co-ordinate and integrateemployees towards the effective implementation of corporate and functionalstrategies in order to deliver customer satisfaction through a process of creatingmotivated and customer oriented employees.”

Internal marketing stresses upon training, developing and motivatingemployees to help satisfy the needs of customers. It is a critical and fundamentalactivity, which creates a customer-focused organizational culture. It is a processwhere functional processes of organization are aligned and employees at all levelsare motivated and empowered to deliver a customer-oriented outcome. Internalmarketing not only helps in establishing awareness about customers’ needs, butalso plays an important role for efficient and effective working of the employeesin the organization (Christopher et al., 1991).

Organizational Commitment is the commitment and loyalty of employees towardsthe firm as if they feel obliged to stay with the organisation and work for it in thefuture as well (Cichy, Cha, and Kim, 2009). Meyer and Allen (1991) have furthercategorized commitment into affective commitment, normative commitment andcontinuance commitment. Morgan and Hunt (1994) argue that organizationalcommitment becomes strong if it acts as s mediating variable in establishingorganizational outcomes with respect to internal marketing programs. Internalmarketing is a means of enhancing organizational commitment of employees(Souchon and Lings, 2001). Internal marketing processes not only provide jobsatisfaction to the employee but also induct and orient them about the objectivesand products of the organisation. Induction and orientation enhance the


understanding about the job and requirement of customer. Proper understandingabout the job helps them to perform well, resulting into customer satisfaction, jobsatisfaction and organizational commitment. Eventually, satisfied and committedemployees enhance organizational effectiveness.

Marketing Orientation is defined as “the organization wide generation of marketintelligence pertaining to current and future customer needs, dissemination of theintelligence across the departments, and organization-wide responsiveness tomarket intelligence” (Kohli & Jaworski, 1990, p.6). Market constitutes of customerorientation, competitor orientation and inter-functional coordination in theorganisation (Narver and Slater, 1990). Employees who are oriented for the currentand future customer needs deliver superior customer value and thus enhance firms’performance (Cadogan, 2003; Hunt and Morgan, 1995). According to Cole et al.(1993), market orientation of employees helps in increasing performance,productivity and profitability of the organization. Balakrishnan (1996) supportsthat internal marketing even leads to profit maximisation for firms. Internalmarketing is usually considered as a framework for employees’ managementtowards market orientation practices (Gronroos, 1990). The implications if internalmarketing programmes have increasingly become significant on account of theirsuccess in achieving market orientation. These programmes enable employees tobe updated with market situations, about customers, competitors and market basics.This ultimately has a positive impact on business performance of firms. Bourantaet al. (2005) also support the case that internal marketing components lead topositive influence to market orientation.

Human resource is an integral component of any organization. An organisationdepends upon its employees to meet its desired goals. High performing individualsenable better delivery of products and services of an organisation and create acompetitive edge for the company in the market. Employee Performance is what theorganization hires one to do, and do well” (Campbell et al., 1993, p. 40). Bormanand Motowidlo (1997) suggested that the effectiveness with which employeesperform their activities for an organisation decides the strength of the companies’technical core.

Employee Productivity is an assessment of the efficiency of a worker or group ofworkers. It is evaluated in terms of the output of an employee in a specified periodof time, comparing to an average for other employees doing similar work.Productivity of employees is directly influenced by the work environment andtraining given by the organization. It may be indirectly influenced by the effects ofhealth and well being (Koopman et al., 2002). Internal marketing creates a customer-centric environment, wherein the employees are trained to fulfill the needs ofcustomers. A well trained and focused employee helps in the achievement ofobjectives and goals of an organization. This significantly contributes to the businessperformance and productivity.


Internal marketing is an important driver for business performance, bothfinancial and non-financial and has a positive impact on business performance(Panigyrakis & Theodoridis, 2009). Mehra, Joyal, and Rhee (2011) highlighted theimportance of training of employees for improving profitability of the firm becausesatisfied and trained employees are more suited to satisfy customers. Satisfiedemployees tend to perceive their output more than their input. They take it as anobligation to increase quality and profitability for the firm.

4. OBJECTIVES AND HYPOTHESIS OF THE STUDY

The broad aim of the present research endeavour is to examine the role and impactof internal marketing on business performance in service industry. Banking sectorplays a strategic role as a financial intermediary in the development of the economy.It is also an important segment of the service industry. Success of the serviceindustry depends on well informed and trained employees. To fulfil this objective,service organisations hire, train, develop and motivate their employees to deliverservices for utmost customer satisfaction. Organisations follow internal marketingpractices to augment their business performance through effective and efficientutilization of human resource.

In specific, the present study attempts to explore the impact of internalmarketing practices on organizational commitment, market orientation, employees’performance and employees’ productivity for selected Banks of Vadodara city.

The prime objectives of the study are:

1. To examine the significance of internal marketing practices in bankingsector in India.

2. To assess the role of internal marketing in banks on organizationalcommitment of employees.

3. To analyse the impact of internal marketing in banks on market orientationof employees.

4. To measure the effect of internal marketing in banks on performance ofemployees.

5. To determine the nature of impact of internal marketing in banks onproductivity of employees.

In order to attain the above mentioned objectives, the following hypotheseshave been established in the study.

H1: There is a significant positive relationship between Internal Marketingand Organizational Commitment

+OC = f (IM)


H2: There is a significant positive relationship between Internal Marketingand Market Orientation

+MO = f (IM)

H3: There is a significant positive relationship between Internal Marketingand Employees’ Performance

+EPerf = f (IM)

H4: There is a significant positive relationship between Internal Marketingand Employees’ Productivity

+EProd = f (IM)

5. EMPIRICAL ANALYSIS: DATA AND METHODOLOGY

Cities across the country have witnessed significant changes over the past twodecades on the back of high economic growth, infrastructure development andthe booming services sector. Vadodara too enjoys a special place as the third largestcity in the State of Gujarat. The city is centrally located in the State and is forecastedas one of the major cities to spearhead the country’s growth process in the comingtimes. Vadodara with its growing urbanization supports a population of over 16.6lakhs, as per 2011 census. Nearly all major commercial banks are located inVadodara with a well-defined branch network spread across the city. Hence,Vadodara city becomes the right choice for conducting a survey of banks forstudying the nature and significance of impact of internal marketing strategies onaspects of business performance.

The empirical analysis in this section, involves discussion on the data employedfor the study; reference period of the data collected; and methodology adopted foranalysing data.

5.1. Target Population, Data and Sample Size to be Covered

The study focuses on the employees of the banking sector for data collection andanalysis. For this purpose, five banks were selected in Vadodara city. Of these,two banks were nationalised – Corporation Bank and State Bank of India, twowere private banks - Axis Bank and ICICI Bank, and one cooperative bank - KalupurCommercial Cooperative Bank. The target population for the study is the employeesworking in the branches of the selected banks in Vadodara city. Out of the totalemployees of the selected bank branches, a sample of 50 employees/respondentswas chosen for primary data collection for studying the impact of internal marketingon the organizational commitment, market orientation, employees’ performanceand employee’ productivity.


Tables 1, 2, 3 and 4 present the profile of the respondents selected for datacollection.

Table 1Employee Profile: Age

Respondents Age Group Frequency Percentage Mean

20-30 20 40 36.830-40 13 2640-50 5 1050-60 12 24

The study has grouped the respondents on the basis of their age. Therespondents fall into four broad age groups of 10 years class interval. Majority ofthe respondents belong in the age group of 20-30 years. The average age of therespondents is 36.8 years [Refer Table 1].

Table 2Employee Profile: Gender

Respondents Frequency Percentage

Male 34 68Female 16 32Total 50 100

Out of 50 respondents, 34 were male which form 68 percent of the sample and16 respondents constituting 32 percent of the sample were females [Refer Table 2].

Table 3Employee Profile: Experience

Respondents Experience Frequency Percentage Mean

0-10 28 56 13.410-20 6 1220-30 8 1630-40 8 16

Bank respondents were grouped on the basis of their experience.Four categories for experience were formed with 10 years class interval.It was found that out of total respondents, 56 percent had an experience lessthan 10 years, 12 percent were experienced between 10-20 years, rest of therespondents with an experience of 20-30 years and 30-40 years respectively were16 percent each. The average experience of the respondents is 13.4 years [ReferTable 3].


Table 4Employee Profile: Designation

Respondents Frequency Percentage

Managerial Level 22 44Clerical Level 28 56Total 50 100

The respondents were selected from two levels of designation - managerialand clerical level. 44 percent of respondents were designated as managers while56 percent were clerical staff [Refer Table 4].

5.2. Method of Data Collection

Convenience sampling technique has been employed to select bank respondents forthe study. A self-administered structured questionnaire with close-ended questionswas prepared and distributed to employees in customer service departments in thefive selected banks of Vadodara city, as they have a direct contact with the customers.Of the employees in the customer service departments of the banks, 70 employeeswere given the questionnaire for their responses. At the end of the process, 50complete questionnaires were received amounting to a response rate of 71 percent.The purpose of the questionnaire was to measure the impact of internal marketingon four variables - organizational commitment, market orientation, employees’performance and employees’ productivity in banking firms. Hence, the questionnairecomprised of four constructs/variables with a total of 35 items distributed betweenthese four constructs, measured on a seven-point scale ranging from StronglyDisagree (1), Disagree (2), Somewhat Disagree (3), Undecided (4), Somewhat Agree(5), Agree (6) to Strongly Agree (7). The respondents were asked to rate their level ofperception of the four variables on the basis of 35 questions asked to them.

The impact of internal marketing on organizational commitment was examinedusing 12 items, while that of internal marketing on market orientation was assessedon the basis of 8 items. For the effect of internal marketing on employeeperformance; 9 questions were framed and the influence of internal marketing onemployee productivity was gauged with the help of only 6 questions.

5.3. Reference Period of the Data

The collection of requisite data for studying the impact of internal marketing onvariables affecting business performance pertains to the year 2014-15.

5.4. Method of Processing and Analyzing Data

The objectives of the study have been examined and analysed using suitablestatistical tools. To analyse the impact of internal marketing on different aspects


of business performance - Chi-square Tests have been engaged in the study fortwo purposes:

1. as a Test of Goodness-of-Fit of the items/questions included in thequestionnaire. This involves an estimation of how closely an observeddistribution matches an expected distribution.

At any chosen level of significance,

If the calculated �2 < tabulated �2, the Null Hypothesis is accepted, thatthere is no significant difference between the expected values (theoreticalvalues) and observed values. Therefore, the theory holds good.

If the calculated �2 > tabulated �2, the Null Hypothesis is rejected in favourof Alternative Hypothesis, that there is significant difference between theexpected values (theoretical values) and observed values. Therefore, thetheory is incorrect.

2. as a Test of Independence for determining the impact of internalmarketing on organizational commitment, on market orientation, onemployee performance and on employee productivity (testing of thehypotheses established in the study in the previous section). This involvesan estimation of whether two random variables are independent orassociated.

At any chosen level of significance,

If the calculated �2 < tabulated �2, the Null Hypothesis is accepted, thatVariable A and Variable B are independent.

If the calculated �2 > tabulated �2, the Null Hypothesis is rejected in favourof Alternative Hypothesis, that Variable A and Variable B are notindependent but associated.

Support for the alternative hypothesis suggests that the variables arerelated, in the sense that knowing the level of Variable A can help predictthe level of Variable B.

Systematic recording and tabulation of data reveals that none of the respondentshave answered in favour of scale 1 and 2 (Strongly Disagree & Disagree); very fewrespondents have answered in favour of scale 3 and 4 (Somewhat Disagree &Undecided); while majority of the respondents are in favour of scale 5, 6 and 7(Somewhat Agree, Agree & Strongly Agree). Chi-square test requires the expectedvalue in any category to be not less than 5. As there is no response in scale 1 and2 and very low response in scale 3 and 4; each of these four points of the scale hasbeen aggregated forming a group of values representing a scale in favour ofdisagreement. This is done primarily for facilitating the purpose of data analysisand for satisfying the conditions of chi-square test. The rest of the scale - 5, 6 and 7represent values in favour of agreement.


6. EMPIRICAL RESULTS: CHI-SQUARE TESTS

This section presents the results for chi-square tests - both for Test of Goodness-of-Fit and Test of Independence for establishing whether internal marketing shares asignificant positive relationship with the four aspects of business performance;namely, organizational commitment, market orientation, employees’ performanceand employees’ productivity for banking firms in India.

The results of the chi-square test for goodness-of-fit of the observations or datacollected from the bank employees has been presented in Tables 5, 6, 7 and 8. Testfor goodness-of-fit for the items included in the questionnaire is important forassessing whether a particular set of observation is sufficiently reliable for thepurpose for which it has been collected.

The test results for Independence Test between dependent and independentvariables selected for the study as established in the hypotheses have also beenreported in Tables 5, 6, 7 and 8. The calculated chi-square value helps to determinethe nature of association between the variables.

6.1. Internal Marketing and Organizational Commitment

This section examines the impact of internal marketing on organizationalcommitment of bank employees.

Table 5Internal Marketing and Organizational Commitment: Goodness-of-Fit and Independence

Sr. Statements ScaleNo. 1+2+3+4 5 6 7 �2

1 I find my job meaningful 0.45 0.96 0.52 1.23 3.162 My pay scale gives me satisfaction 15.56 0.35 1.92 1.88 19.71*

3 My job gives me satisfaction 0.01 0.04 0.30 0.24 0.584 I feel a sense of achievement in my job 0.45 0.35 1.82 2.68 5.315 My job motivates me 12.68 0.35 0.57 1.23 14.82*

6 I feel a sense of belongingness for my 4.90 4.65 0.02 9.88 19.45*

organization7 Proud to be associated with my organization 4.90 3.12 1.38 17.70 27.09*

8 My organization has a motivated team 0.08 1.88 1.30 4.71 7.979 My job adds to my professional growth 1.56 0.96 0.26 4.71 7.4910 There are opportunities for career developmental 3.34 0.96 0.02 0.57 4.8911 Training drives my career development 0.08 0.35 0.01 0.24 0.6712 My organization is more than just a place of work 0.45 0.35 0.09 0.24 1.13 Total 44.48 14.31 8.19 45.29 112.27#

Critical Value of Chi-Square Distribution: Critical Value of Chi-Square Distribution:Test of Goodness of Fit Test of Independence* 1% = 11.345 for df = [n-1] = [4-1] = 3 # 1% = 54.776 for df = [c-1]*[r-1] =

[4-1]*[12-1] = 33


Interpretation and Inference – Test of Goodness-of-Fit

The calculated �2 value for majority of the observations/items is less than thetabulated �2 value at 1% level of significance, except for four observations. Hence,the null hypothesis is accepted for the larger number of observations. For theseitems, the observed values match the expected values. Thus, the questions askedto the bank employees for drawing inference on the impact of internal marketingon organizational commitment, are apt and suit the purpose of the study.

Interpretation and Inference – Test of Independence

The calculated �2 value (112.27) is greater than the tabulated �2 value (54.776) at 1%level of significance. Hence, the null hypothesis is rejected in favour of alternativehypothesis. The results lead to the inference that internal marketing andorganizational commitment are associated. Internal marketing has a significantpositive impact on organizational commitment.

6.2. Internal Marketing and Market Orientation

The present section analyses the impact of internal marketing on market orientationof respondents.

Table 6Internal Marketing and Market Orientation: Goodness-of-Fit and Independence


1 My organization communicates new 0.00 1.78 0.46 5.65 7.89developments to employees

2 I am aware of problems associated with 3.49 1.78 0.08 0.27 5.63products and services

3 My organization provides solution to problems 0.16 0.11 0.24 0.72 1.224 I am aware of competitors’ products 0.00 4.00 0.08 2.22 6.31

and services5 I effectively market products and services of 1.70 0.00 0.24 0.01 1.95

my organization6 I share information regarding new products 0.93 1.00 0.08 0.59 2.60

and services with customers7 Frequent use of our products and services by 0.72 2.78 0.76 0.59 4.85

customers8 Only few customers represent queries to 0.16 9.00 0.76 1.37 11.29*

employees Total 7.15 20.44 2.72 11.42 41.73#

Critical Values of Chi-Square Distribution: Critical Values of Chi-SquareTest of Goodness of Fit Distribution: Test of Independence* 1% = 11.345 for df = [n-1] = [4-1] = 3 # 1% = 38.932 for df = [c-1]*[r-1] =

[4-1]*[8-1] = 21



Except for one observation, the calculated �2 value for rest all observations/items isless than the tabulated �2 value at 1% level of significance. Hence, the null hypothesisis accepted. The observed values for items of market orientation match with theexpected values. Therefore, the questions asked to the bank employees for drawinginference on the impact of internal marketing on market orientation are reliable.


The calculated �2 value (41.73) is greater than the tabulated �2 value (38.932) at 1%level of significance. Hence, the null hypothesis is rejected. The results supportthe alternative hypothesis indicating that internal marketing and market orientationare related with each other. Internal marketing has a significant positive impacton market orientation.

6.3. Internal Marketing and Employee Performance

The present section presents the chi-square test results for assessing the impact ofinternal marketing on employee performance.

Table 7Internal Marketing and Employee Performance

Goodness-of-Fit and Independence


1 Organization welcomes employees’ 1.20 0.71 0.16 0.79 2.86suggestions for improving job performance

2 Provision of training for improving job 0.44 0.71 0.96 0.15 2.27performance

3 Provision of training for technical expertise 0.38 0.71 0.13 0.79 2.01for improving my job performance

4 Training helps me towards improving and 13.44 0.93 0.62 0.32 15.32*

accomplishing team objectives5 I am able to meet expectations of my superiors 0.04 0.01 0.16 0.51 0.726 I understand the importance of branch 0.38 0.06 0.13 0.01 0.58

performance for overall business performance7 I am aware about the different products and 5.44 0.06 0.56 0.51 6.57

services offered by my organization8 There is clear communication of business 0.04 0.23 0.00 0.06 0.33

objectives9 I am clear about the goals and objectives of 2.18 2.84 1.28 0.51 6.80

organization Total 23.55 6.26 4.02 3.64 37.46#

Critical Values of Chi-Square Distribution: Critical Values of Chi-SquareTest of Goodness of Fit Distribution: Test of Independence* 1% = 11.345 for df = [n-1] = [4-1] = 3 # 5% = 36.415 for df = [c-1]*[r-1] =

[4-1]*[9-1] = 24



Out of nine observations/items, the calculated �2 value for eight observations is lessthan the tabulated �2 value at 1% level of significance. Hence, for majority ofobservations the null hypothesis is accepted. The observed values for employeeperformance are close to their expected values. Therefore, the questions asked to thebank employees for examining the impact of internal marketing on employees’performance largely comply to the goodness-of-fit and serve the purpose of the study.


The calculated �2 value (37.46) is greater than the tabulated �2 value (36.415) at 5%level of significance. The null hypothesis is thus rejected in support of the alternativehypothesis. The results imply that internal marketing and employee performanceare mutually related and not independent. Hence, internal marketing has asignificant positive impact on employee performance.

6.4. Internal Marketing and Employee Productivity

The present section studies the impact of internal marketing on employeeproductivity.

Table 8Internal Marketing and Employee Productivity

Goodness-of-Fit and Independence


1 I am able to utilize my skills and abilities for 0.06 0.96 0.45 0.23 1.69the benefit of my organization

2 I find my job challenging 0.50 0.96 0.08 0.44 1.983 I am able to perform well in my job 2.72 1.25 0.08 1.77 5.824 Performance feedback helps in increasing 0.06 0.02 0.23 0.90 1.20

my job performance5 Praise and recognition helps in performing 0.50 0.02 0.23 1.09 1.84

better at job6 My job offers me variety in tasks 9.39 1.25 0.01 1.52 12.18*

Total 13.22 4.47 1.07 5.95 24.71#

Critical Values of Chi-Square Distribution: Critical Values of Chi-SquareTest of Goodness of Fit Distribution: Test of Independence* 1% = 11.345 for df = [n-1] = [4-1] = 3 # 10% = 22.307 for df = [c-1]*[r-1]

= [4-1]*[6-1] = 15


Almost all the observations have their calculated �2 value less than tabulated �2

value; at 1% level of significance. Hence, the null hypothesis is accepted. The


observed values for items of employee productivity go with the expected valuesand the general theory holds good. The questions asked to the respondents fordeducing the impact of internal marketing on employees’ productivity are reliableand suitable.


The calculated �2 value (24.71) is greater than the tabulated �2 value (22.307) at 10%level of significance. Hence, the null hypothesis is rejected in favour of thealternative hypothesis that internal marketing and employee productivity areassociated with each other. Internal marketing has a significant positive impacton employee productivity.

7. LIMITATIONS AND SCOPE FOR FUTURE RESEARCH

The study is not without limitations, which however, future research can address.The study analyzed the impact of internal marketing on mainly four variables oraspects of business performance. Future research may be extended to examine theinfluence of internal marketing on a larger number of variables. Also, the presentstudy is a bivariate analysis. There could be a detail study involving multivariateanalysis. The present study has been based on a sample size of 50 respondentsfrom five banks limited to Vadodara city. An interesting and in-depth subject offuture research could be undertaken to include a magnified sample size, acrossbank branches spread over the State; and inclusion of other segments of servicesector as well.

8. CONCLUSION AND DISCUSSION

Internal marketing is a means to engage employees by the management forachieving organizational goals, the ultimate goal being business performance.Internal marketing tends to influence internal parameters of business such as jobsatisfaction, motivation, loyalty, training, career development, organizationalcommitment, market orientation and employee performance. This eventuallyimpact and enhance business performance and is of utmost importance in case ofservice organisations as banks. As the employees are in direct and constant contactwith the customers, their delivery of services; quality of interaction; andperformance plays a crucial role in the fulfilment of organizational goals. Thepresent study analysed these aspects and the significance of internal marketingon mainly four variables affecting business performance such as organizationalcommitment, market orientation, employee performance and employeeproductivity. The study found that for the five selected banks of Vadodara city,the hypotheses that “Internal Marketing is associated and has a significant positiveimpact on Organizational Commitment, Market Orientation, EmployeePerformance and Employee Productivity” have been accepted. Thereby, the study


concludes that for banking firms in India, internal marketing is instrumental andeffective in encouraging organizational commitment; in enhancing marketorientation; in boosting employees’ performance; and in increasing employees’productivity. The study having revealed the efficacy of internal marketing strategiestowards attaining business performance, it recommends the stakeholders andmanagers of firms in the Indian banking industry to engage in internal marketingpractices to motivate their employees to be optimally productive.

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