VOLUME 8 NUMBER 4

1994

Internal Marketing
The Key to External Marketing Success
Walter E. Greene, Gary D. Walls and Larry J. Schrest

on that opportunity for the benefit of its

customers, shareholders, employees,
management, and society.
The extensive change of the recent past is
no doubt going to continue, and in fact will
probably accelerate in the future. This rapid
rate of change is being driven by the
opportunities created by deregulation and
technology. These changes involve virtually
every aspect of the service business: the
local, national and global markets; the
products and services; the technology
surrounding the industry; the structure of
capitalization and balance sheets and the
professional skills and abilities needed to
compete.
This article addresses these important
challenges starting with strategic planning
from the standpoint of professional imagery
that should be cultivated through application
of internal marketing. A literature review of
strategic planning that affect the institutional
and atmospherics imagery is presented as
evidence for the creation and expansion of
internal marketing. The authors realize that
internal marketing is important to all
industries, but that it is extremely important
to the service industry. This article will
address this issue using the financial service
sector, specifically banking, for examples
and recommendations. However, the
concepts and principles apply to all parts of
the service industry.

Introduction
An important ingredient of strategic planning
is a firms core competency. When properly
managed core competency can lead to a
competitive advantage for the firm or an
increase in market share or increased profits,
etc. One form of competitive advantage is
customer service and the result is
unwavering customer loyalty. How can this
be accomplished? Internal marketing is the
key to superior service and the result is
external marketing success. Internal
marketing can be defined as the promoting of
the firm and its product(s) or product lines to
the firms employees. Hence, for this strategy
to be successful top level management must
fully embrace it. Thus, the idea of internal
marketing must originate at the top and be
communicated down to the very bottom of
the firm. Understanding customer
expectations is a prerequisite for delivering
superior service; customers compare
perceptions with expectations when judging
a firms service (Parasuraman et al., 1991).
The service industry is only one industry
among many that has undergone major
change as a result of competitive forces and
deregulation, with more of the same
promised for the future. Change means
opportunity, and the challenge is to capitalize
Journal of Services Marketing, Vol. 8 No. 4, 1994, pp. 5-13
MCB University Press, 0887-6045

JOURNAL OF
SERVICES MARKETING

Strategic Planning in the Financial

Service Sector
A major part of strategic planning (for
customer) analysis is to assess the consumers
current image of the bank, its products/
services and its competitors (Kotler, 1980).
Whether a bank succeeds or fails depends
largely on strategy of which internal
marketing is a major substance. For this
article, strategy is defined as a banks
activities and plans, designed to match the
banks objectives with its mission, and to
match its mission with its environment in an
efficient and effective manner (Thomas,
1988). Peoples attitudes and actions toward
an object are highly conditioned by their
beliefs about the object (Assael, 1987). Image
is the term used to describe the set of beliefs
that a person or group holds of an object
(Levitt, 1983). In this context, image is the
way in which the business professional is
defined in the mind of the client. Image
attributes are both functional and emotional
(Cohen, 1988; Fine, 1990; McGarry, 1958).
In addition, all businesses and its employees
(banks and bankers) will have an image
whether they seek to cultivate one or not.
That image will exist at both conscious and
unconscious levels for all individuals who are
in contact with the bank (Assael, 1987).
Proposition 1. The phenomenon of image
does exist and is an extremely important
ingredient in the successful operation of a
service organization.
Proposition 2. A positive image enhances
the effectiveness of the service
organization at all levels.
Proposition 3. A negative image of an
otherwise qualified representative detracts
from all aspects of the service
organization.
Proposition 4. Image is one of the greatest
potential enhancers of personal
communication; correspondingly, it is one
of its most dangerous potential detractors.

Proposition 5. Image cannot be enhanced

in the short term, because long-term
customer perception is slow to adapt.

At any point in time, the current image of a

bank is likely to lag behind the reality of the
bank (Wheatley, 1983). For example, a
particular bank may continue to be seen as
the market leader long after its quality has
started to slip. Another bank might have a
second-class image long after it has
transformed itself into a first-class institution.
Images can be five to ten years obsolete in the
same way that we are not seeing a real star in
the sky but an image of that star as it was
earlier, since light takes time to travel (Kotler,
1980). Image persistence is the result of
people continuing to see what they expect to
see, rather than what is. This means that it is
very difficult for a bank to improve its image
in a short time, even given a willingness to
spend a great deal of money.
Furthermore, a bank cannot change its
image simply through communications effort.
The image is a function of good deeds, good
words, good actions, and good appearance.
The bank must live out what it wants to be
and must use communications to tell the
story. Some banks attempt to create phony
images through slick communications
campaigns, but this rarely succeeds because
there is too much discrepancy between the
message and the reality.
The components of image one can most
directly program and manage include written
communication programs, institutional
contacts between prospects (customers) and
ones bank, personal visits to ones branch
offices, evaluation of the atmospherics,
relationship (involvement) between him/
herself and prospects, and finally, the way in
which one interacts with prospects.

Proposition 6. Environmental forces tend

to be the leading and lagging indicators
which affect a service organizations
image.

VOLUME 8 NUMBER 4
1994

Institutional Contact

Before one ever has an opportunity to

develop a professional image, other forces
have already begun to shape that image.
Ones professional referral sources, the
comments of existing customers, the message
conveyed through ones printed image all
have an impact on shaping what the
prospective client will perceive when he/she
finally comes face to face. At the very
minimum, ones prospect will walk in, make
telephone, or written contact to request an
appointment or set up a meeting. Personal
selling and image building begin anew at this
point. Therefore, it is essential that the
receptionist/contact person be selected based
on the warmth, friendliness, professional
demeanor, and helpfulness to staff employees.
This sensitivity to all individuals who
make contact with the bank or banker is a
critical ingredient at the switchboard and
reception desk (contact person). This is no
place to economize. Should one need help, it
is available, ranging in scope and cost from
the free brochures of the phone company on
telephone etiquette to customized personnel
training programs conducted by experienced
consulting organizations. Evaluation of the
institutional contact function should be part
of any marketing audit one undertakes.
In a recent conversation with a local
banker, she revealed how she was able to win
successfully a potential competitors
customer. According to her, when the
potential client called by mistake, the
receptionist, rather than saying simply
wrong number, was extremely helpful. One
basic principle ought to be followed in the
bank and management of the customer
contact function: wherever and whenever
possible, separate the reception and
operations functions. For example, the
personality, appearance, dress, and efficiency
of customer contact people must be an
established part of ones personal
communications program.

Proposition 7. Atmospherics may prove

difficult to control because it is all
encompassing.

Atmospherics

In his text Marketing Management, Analysis,

Planning, and Control, Philip Kotler (1980)
uses atmospherics as an umbrella concept for
all the signs communicated by an
organization through its physical facilities,
printed materials, product packaging,
executive and sales staff appearance, and so
on. Focus for a moment on the messages
conveyed in the staging area ones bank
lobby, outer offices, or reception/waiting
room. Does it enhance a favorable image for
ones bank prior to direct contact between the
banker and the prospect.
There are several topics to be considered
when programming the atmospherics for
ones facility. These include bank location,
layout, decor, sound and light level, and the
professional financial service advisors
individual office. The details of layout and
decor are topics better left to architects,
designers, and interior decorators. Design or
the physical arrangement of a room and the
style, quality, texture and arrangement of
furnishings convey subtle but important
image cues to clients. Sound and light levels
must also be controlled. There should be no
glare or interrogation effect. These
variables are associated with certain costs and
to the extent possible one should give him/
her every advantage in setting the stage for
client contact.

Marketing Services
The special characteristics of services present
a number of implications concerning their
marketing. Although many marketing
concepts and tools are applicable to both
goods and services, the relative importance of
these concepts and tools, and how they are
used, are often different, and the advertising

JOURNAL OF
SERVICES MARKETING

of each must reflect these differences. This

article presents six guidelines for services
advertising based on some of the special
characteristics of services.

jobs, they upgrade their capabilities for being

more effective service marketers.
The relevance of marketing thinking to
personnel management is very real. The
banks and insurance companies adopting
flexible working hours are redesigning jobs to
better accommodate individual differences,
which is market segmentation. For example,
Indiana National Banks recent Person-toPerson advertising campaign featuring its
own personnel was designed to motivate
employees as well as external customers and
prospects.
The crucial matter is not that the phrase
internal marketing has attracted some
attention, but rather the complication of the
phrase be understood; i.e., by satisfying the
needs of its internal customers, an
organization upgrades its capability for
satisfying the needs of its external customers.
This is true for most organizations and is
certainly true for banks and financial service
organizations. As Sasser (1976) pointed out,
the successful service company must first
sell the job to employees before it can sell its
services to customers.
The most fundamental difference between
a good and a service is that a good is an
object and a service is a performance
(Lovelock, 1983). The quality of the service
rendered is inseparable from the quality of the
service provider. A rude teller means a rude
bank to the consumer.
Not unlike goods advertising, services
advertising will normally be directed toward
one or more target markets. When the
performances of people are what customers
buy, the advertiser needs to be concerned, not
only with encouraging customers to buy, but
also with encouraging employees to perform.
Well-developed and cultivated advertising not
only shapes the perceptions and expectations
of consumers by promising helpful banking
service, but also helps define for employees
managements perceptions and expectations
of them namely, that we think of him or her

Internal Marketing Promotion

In what Chase (1978) calls high-contact

service businesses, the quality of the service
is inseparable from the quality of the service
provider. High-contact businesses are those in
which there is considerable contact between
the service provider and the customer, e.g.,
banks, health care, financial services, and
restaurants. Human performance materially
shapes the service outcome and hence
becomes part of the product.
Just as goods marketers need to be
concerned with product quality, so do
services marketers need to be concerned with
service quality, which means (in laborintensive situations) special attention to
employee quality and performance. It follows
that in high-contact service industries,
marketers need to be concerned with internal,
not just external, marketing.
Internal marketing means applying the
philosophy and practices of marketing to the
people who serve the external customer so
that the best possible people can be employed
and retained and they will do the best
possible work. Therefore, the phrase internal
marketing refers and concerns marketing to
employees. More specifically, internal
marketing is viewing employees as internal
customers, viewing jobs as internal products,
and (just as with external marketing)
endeavoring to design these products to meet
the needs of these customers better.
Although most executives are not
accustomed to thinking of marketing in this
way, the fact is that people do buy jobs from
employers, and employers can and do use
marketing to sell these jobs on an initial and
ongoing basis. To the extent that high-contact
service firms use the concepts and tools of
marketing to offer better, more satisfying

VOLUME 8 NUMBER 4
1994

as professionals and expect him or her to

perform as professionals.
In order for internal marketing to be
effective, the successful bank must first sell
the idea to employees before it can sell its
service to customers. Advertising is an
important tool for selling products/services;
it is a tool for motivating, educating or
otherwise communicating with employees.

Importance of Image Clues

Although a bank service is intangible in the

sense that a performance rather than an object
is purchased, there are tangibles associated
with the bank service offered (for example,
the facilities of a bank where the service is
performed), and these tangibles can provide
meaningful evidence concerning the service
itself. Through innovative building design
banks (i.e., buildings that are civic spirited,
stylish yet steady or conservative yet
innovative) have found clever ways to invite
customers in, attract attention, and fit into
their communities at the same time (Levitt,
1983).
Shostack (1977) has written about the need
to use tangible clues in bank services
advertising: It is clear that consumer product
marketing often approaches the market by
enhancing a physical object through abstract
associations. But a service is already abstract.
To compound the abstraction dilutes the
reality that the marketer is trying to enhance,
that is, reliance must be placed on peripheral
clues. For example, prior to his death, actor
John Wayne was successfully used as an
advertising spokesman for Californias Great
Western Savings and Loan Association. Well
known for his strong personal views as well
as for his film characterizations of a rugged
and honest cowboy who always stood tall
against evil, Wayne represented tangibility
and credibility in Great Westerns advertising.
The tangibles that a bank may use provide
implicit evidence about the service that the
service itself cannot provide.

Interdependence of Promotion

The labor intensiveness of bank services

introduces a degree of variability in the
service provided which is not present when
equipment dominates the production process.
The ever-present potential for variability in
the provision of bank services is well
understood by those who consume financial
services, and contributes to the important role
that word-of-mouth communication plays in
the selection of financial service suppliers.
The importance for word-of-mouth
communications in bank markets suggests the
opportunity to use advertising to capitalize on
this propensity.
When the consequence of buying
(consuming) a bank service is perceived to be
important, the consumer is often interested in
the opinions of others with appropriate
previous experience. Making a conscious
effort in advertising to leverage word of
mouth might involve a satisfied customer or
an inspired employee (i.e., developing
communication materials targeted at opinion
leaders or featuring comments of satisfied
customers or excited employees in the
advertising itself). What is important and
possible is to design non-personal
communications which capitalize on the bank
service consumers receptivity to more
personal, word-of-mouth communications.
For example, E.F. Hutton emphasizes the
importance of word-of-mouth
communication: People stop and listen when
they know ones broker is E.F. Hutton.

Making Bank Services Understood

One of the problems arising from the

intangibility of bank service is that they are
often difficult to define or grasp mentally.
Services that bring customer and service
provider into direct contact present the
opportunity to custom-fit the bank service
to the customer. Giving customers what they

JOURNAL OF
SERVICES MARKETING

achieve unless coupled with long-term

strategic management advertising
commitment.

want is marketings oldest and most

important idea (Berry, 1987).
Unfortunately, banks and other service
organizations often shackle their contact
employees with thick policy manuals or strict
sets of rules concerning the handling of
specific transactions or non-routine requests.
The end result is more standardized services
that are also more inflexible; more by-thebook services that are also more regimented.
Good bank services marketing involves
giving service providers the freedom to serve
(Berry, 1987). Most bank employees would
rather provide good service than bad service,
would rather be a hero to the customer than a
villain.
Managements of bank services would do
well to take a good look at the extent to
which policy and procedure tie the hands of
bank personnel. They would do well to take a
hard look at the rule book. At the same time,
bank managements would benefit from
considering the possibilities of symbolic
management. Symbolic bank management
involves the use of symbols to nurture shared
values in a bank which guides employees
behavior while preserving their freedom to
serve the customer truly (Berry, 1987).
At Wachovia Bank and Trust, bankers
respond to a customer complaint or problem
before the sun goes down on the day the
complaint or problem surfaces. This value is
known within Wachovia as the sundown
rule (Berry, 1987). At Wells Fargo Bank, a
new manager of the cash management
division remodeled the divisions offices soon
after assuming his new responsibilities. When
asked why this was so important, he said:
The offices looked bad, and I felt this is now
how the best looks (Berry, 1987). Wachovia
and Wells Fargo are using symbolic
management to shape values that in turn
guide bank employee behavior.

Advertising Continuity

The intangibility of bank services

undoubtedly adds to the frequent difficulty
which competing banks have in
differentiating themselves. Whereas goods
can often be made physically distinctive on
the basis of design, packaging, and branding,
services have no physical appearance.
Moreover, physically distinctive goods can be
shown in advertising and associated with
various forms of imagery.
Although differentiation is not easily
attained by banks, its achievement is by no
means impossible. Advertising continuity is
an important strategy in this regard because it
involves the continual use in advertising of
certain distinctive symbols, formats, and/or
themes to build and reinforce the desired
image, regardless of any changes in specific
advertising campaigns. For example,
McDonalds advertising consistently sends
out the same signals: We are fast and
efficient, we are friendly, we are super-clean,
we offer value, we are a family restaurant.
Another example of advertising continuity is
also epitomized by Harris Trust and Savings
Bank in Chicago, which has used its cartoon
lion mascot, Hubert, in its consumer
advertising since the 1950s. Hubert is a
device for tying Harris past advertising
efforts to its present campaign; Hubert is a
means for branding Harris advertising,
and, in the process, for helping the bank to
attain a distinctive image.
Advertising continuity gives a banks
advertising a recognizability which
continually communicates and reinforces its
image. Ideally, consumers should be able to
associate a specific firm with its advertising
even if the firms name is inadvertently left
off a specific advertisement.

Proposition 8. Differentiation in the

service sector is extremely difficult to

10

VOLUME 8 NUMBER 4
1994

not encourage the sale of the new product/

service. Because financial sales personnel are
quick to reject new financial products/
services if the amount of effort required to
sell them outweighs the financial rewards
available, a compensation scheme that does
not directly reward internal promotion will
merely maintain the organizations focus on
its core products/services. Of course, there is
more to a reward system than compensation.
Psychological rewards often influence bank
and financial service personnels behavior
and can determine the success of the internal
promotion strategy.

Promising What is Possible

Since bank customers have only fulfilled

promises to carry away from the service
transaction, it is especially important that
service firms deliver on advertising promises.
Accordingly, when making promises in bank
services advertising, prudence and caution
should rule. In advertising in general, and
bank services advertising in particular, it is
better to promise only that which can be
delivered for a very high percentage of the
time.

Managerial Implications and Conclusion

There are four areas where banks and
financial service organizations should place
particular effort in order to enhance internal
promotion: product/service focus, reward
systems, marketing support, and
organizational harmony.

Marketing Support

Internal marketing must also be supported by

marketing programs such as training,
collateral materials, and information systems.
Training is particularly vital. For internal
promotion to succeed, the bank or financial
distribution channel must be technically
proficient and confident in its ability to sell
the existing and new products/services. The
hallmarks of effective collateral materials are
simplicity, consistency, and effective media.
But, innovative media such as videotapes can
be far more effective than written material.
Information systems are critical to internal
promotion by supporting product
relationships, potential customer needs, and
even competitive trends. Advanced internal
marketing strategies, such as life event
marketing, must be driven by effective
information systems.

Product/Service Focus

The introduction of new products/service

should be introduced at intervals (spacing)
according to a set schedule. The schedule
should be based on the similarities between
new and existing products/services in order to
ease the absorption process and to ensure that
ongoing successes lend credibility to the
overall internal promotion strategy. Another
important consideration is that certain
segments of the distribution channel may be
more effective and efficient with internal
promotion because of distributors (branch,
satellite, or subsidiary) sophistication, unique
location, or customer base. Focusing on the
most promising segments will increase the
return on investment by minimizing the cost
of training, product support literature, and
other materials.

Organizational Harmony

Finally, effective internal marketing depends

on good co-ordination among all parties
involved, including CEOs, managers,
marketing personnel, branches, and the bank
or financial service organizations frontline
selling personnel. Two organizational
problems often emerge that stifle internal
marketing: internal politics and home office

Reward Systems

Many internal promotion strategies fail

simply because existing reward systems do

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JOURNAL OF
SERVICES MARKETING

Internal promotion can create a positive

and/or superior image of the firm and its
product in the mind of the customer.

seclusion. Internal politics must be minimized

at the outset by establishing organizational
and compensation structures that will support
the strategy and avoid conflict.
Home office seclusion, widespread among
financial services firms and bank branches, is
characterized by marketing product/service
managers and support personnel who work in
a home office environment that is detached
from the day-to-day culture of the distributor
or branch. Typical problems include a lack of
timely response to inquiries, ineffective and
uninformed advice, and literature that is
unusable for marketing purposes. To combat
this phenomenon, successful institutions often
require greater exposure of home office
personnel to branch or distribution channel.

References
Assael, H. (1987), Consumer Behavior and
Marketing Action, 3rd edition, Kent
Publishing Co., Boston, MA.
Berry, L.L. (1980), Service Marketing Is
Different, Business, Vol. 30 No. 2, MayJune, pp. 24-9.
Berry, L.L. (1987), Big Ideas in Service
Marketing, The Journal of Services
Marketing, Vol. 1 No. 1, Summer, pp. 5-9.
Bowers, M.R. (1989), Developing New
Services: Improving the Process Makes It
Better, The Journal of Services Marketing,
Vol. 3 No. 1, Winter, pp. 15-20.
Brooks, N.A.L. (1987), Strategic Issues for
Financial Service Marketing, The Journal of
Services Marketing, Vol. 1 No. 1, Summer,
pp. 57-66.
Chase, L.G. (1978), unpublished paper, Alpine
University.
Cohen, W.A. (1988), The Practice of Marketing
Management, Macmillan Publishing Co.,
New York, NY.
Fine, S.H. (1990), Social Marketing: Promoting
the Causes of Public and Non-Public
Agencies, Allyn & Bacon, Needham Heights,
MA.
Flamson, R.J. (1988), The Banking Industry:
Opportunity and Change, Business Credit,
Vol. 90 No. 2, February, pp. 44-6.
Hanna, N. and Wagle, J.S. (1989), Who Is Your
Satisfied Customer?, The Journal of
Consumer Marketing, Vol. 6 No. l, Winter,
pp. 53-61.
Kotler, P. (1980), Marketing Management,
Prentice-Hall, Inc., Englewood Cliffs, NJ.
Levitt, T. (1983), The Marketing Imagination,
The Free Press, New York, NY.

Summary
We Americans live and work in a servicecentered, service-sensitive economy. In North
America, 80 percent of the jobs and 60
percent of the gross national product come
from the performance of services rather than
the production of products (Zemke, 1992).
Organizations that deliver high-quality
service increase or maintain market share and
have a higher return on sales than do their
competitors.
Yet most of us find out every day that
service in North America is, at best,
mediocre. Some banks tell us, Put it in the
mail or use the ATM or phone it in, but do not
talk to me, pal, I am too important to deal
with customers.
Service firms must reach out for the brass
rings of strategic planning and internal
marketing to meet the ever-increasing
competitive challenges of the 1990s and
beyond the year 2000. The firms that do not
or will not embrace the issues of internal
marketing and incorporate those ingredients
into their strategic marketing plan will see
their market share and profit base erode.

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VOLUME 8 NUMBER 4
1994

Lovelock, C.H. (1983), Classifying Services to

Gain Strategic Marketing Insights, Journal
of Marketing, Vol. 47 No. 3, Summer,
pp. 9-20.
Marsh, J.D. (1990), Banks Making PR a
Priority, The Southern Banker, January,
pp. 4-7.
McGarry, E.D. (1958), The Propaganda
Function in Marketing, Journal of
Marketing, Vol. 23 No. 3, pp. 131-39.
Parasuraman, A., Berry, L.L. and Zeithaml, V.A.
(1991), Understanding Customer
Expectations of Service, Sloan
Management Review, Vol. 32, Spring,
pp. 39-48.
Rosenberg, R.E. and Davidson, R.C. (1988), A
Technological Approach to Retail Banking,
The Bankers Magazine, Vol. 171 No. 5,
September-October, pp. 30-3.
Sasser, W.E. (1976), Match Supply and
Demand in Service Industries, Harvard
Business Review, November-December,
Vol. 54 No. 3, pp. 133-40.
Sherden, W.S. (1989), Practical Strategies for
Cross-Selling, The Bankers Magazine, Vol.
172 No. 1, January-February pp. 12-17.
Shostack, G.L. (1977), Breaking Free from
Product Marketing, Journal of Marketing,
Vol. 41 No. 2, April, pp. 73-80.

Thomas, D.R.E. (1978), Strategy is Different in

Service Business, Harvard Business
Review, Vol. 56 No. 3, July-August,
pp. 158-65.
Thomas, J.G. (1988), Strategic Management,
Harper & Row, Publishers, New York, NY.
Wheatley, E.W. (1983), Marketing Professional
Services, Prentice-Hall, Inc., Englewood
Cliffs, NJ.
Wind, Y. (1987), Financial Services: Increasing
Your Marketing Productivity and
Profitability, The Journal of Services
Marketing, Vol. 1 No. 2, Fall, pp. 5-18.
Zemke, R. (1992), The Emerging Art of
Service Management, Training, January,
pp. 37-42.

Walter E. Greene is Professor of Management

at the University of Texas/Pan American,
Texas; Gary D. Walls is Production
Supervisor at Fleetwood Homes, Lexington,
MS; and Larry J. Schrest is Professor of
Economics at Sul Ross State University,
Alpine, Texas, USA.

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