How does internal marketing affect organizational success and competitiveness?

Published on: Feb 15, 2021

Interaction and communication are an important part of our everyday lives. This is true not only in our personal lives, but also in our professional lives, as every organization needs to communicate with its stakeholders in some form. Next to customers, organizations’ own employees are often their most important asset. However, more and more employees are regularly changing jobs and seeking new professional challenges. This can be problematic for organizations, as finding new employees and training them requires a lot of resources. Thus, the question arises as to how organizations can reduce such personnel turnover. This post looks at how organizations can engage not only their customers, but also their own members and the impact this has on customer satisfaction and loyalty.


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In an earlier post, we already addressed the fact that marketing is not an isolated area within organizations, but should be understood as a fully comprehensive, supporting activity that runs through all areas of an organization. One of the most important tasks of marketing is the goal-oriented communication of organizations with their stakeholders. With regard to the direction of communication, a distinction can first be made between external marketing – directed outward – and internal marketing – directed inward. The target audiences of external marketing are usually the organization’s (potential) customers, who are to be addressed via a targeted marketing strategy, whereas the audiences of internal marketing are the employees or organizational members. The approach of internal marketing has its origins in services marketing, however, it was recognized early on that it could be applied to other organizational forms and the areas of application were thus expanded. While a fairly strong understanding exists regarding the explicit activities of external marketing, it is difficult to find a definition for internal marketing. For example, Greene et al. (1994) define internal marketing as follows:

“Internal marketing can be defined as the promoting of the firm and its product(s) or product lines to the firm’s employees.”¹

The distinction between the two directions of marketing is often not made via explicit activities, but rather via the respective objective or orientation. External marketing focuses on customer orientation in that marketing is geared to identifying customer needs and satisfying them through the organization’s own products or services. In contrast, internal marketing focuses on employee orientation by creating a general sense of purpose as well as a consistent corporate identity with which all participants can identify. It is important to note, however, that the two directions of marketing should not be understood as a pair of opposites, but rather that they are interdependent. External marketing is always aligned with organization-specific market conditions, and new marketing strategies are often associated with organizational change. However, the assumption that such change will be accepted by all members without sufficient justification is naive and unrealistic. In order to gain acceptance from organizational members for organizational change, there needs to be a common understanding among all members regarding the identity of the organization. This can be built up and consolidated as part of internal marketing, so that internal marketing forms the basis for external marketing strategies. A similar approach is taken, except that here the marketing mix is applied to organizational members instead of customers.²

Although the approach of internal marketing was developed in the field of service companies, it is perhaps more important than ever for other organizations, especially in the current situation. For many, the current limitations of everyday life are also having an impact on everyday working life. The physical distancing manifests itself in the working environment in particular through the shift to the home office. In order for effective collaboration to be possible despite the distance and the associated restrictions, it is important for all those involved to have a strong self-image with regard to the identity of their organization, since classic control and management systems, as applied by many organizations, are not applicable or are only applicable to a limited extent. However, internal marketing does not only have an impact on the organization, because customers also benefit from suitable internal marketing approaches, even if they themselves are not the direct focus. In practice, internal marketing and the resulting organizational identity often also improve the customer experience. Organizations thus benefit on the one hand from their own members being more satisfied and efficient and on the other hand from more satisfied customers, which is often associated with economic success. Such economic success also results from the fact that loyal employees reduce personnel turnover, so that the organization has to spend fewer resources on finding and training new employees. In practice, the best possible results can be expected when organizations have a consistent identity, represent this to customers via motivated and satisfied employees, and their own products and services have been developed through external marketing in such a way that they are of value to society and solve specific problems or satisfy specific needs.

The internal marketing described above is particularly relevant in the services sector, which has been growing steadily in importance for years and now accounts for almost two-thirds of global economic output (63%, as of 2017).³ Services are inherently more people-centric than traditional industry, so interpersonal relationships with customers and overall customer service are more of a focus. All organizational members who have direct or indirect contact with external stakeholders – especially customers – represent the organization to the outside world. It is important that they have internalized the self-image of the organization and can align their actions with it. Otherwise, discrepancies may arise with regard to perception, which may undermine organizational success. Thus, there is a strong incentive to involve all members in developing a consistent organizational identity that everybody involved can identify with. This not only promotes goal commitment and satisfaction, but also increases effectiveness and efficiency within the organization, as all participants can act in a goal-oriented manner and the required coordination and communication effort is reduced.

In practice, organizations usually align their entrepreneurial activities with market conditions. This essentially includes the needs and wishes of (potential) customers, the currently prevailing competition on the market and the organization’s own situation. Perhaps the most important task of marketing is the goal-oriented communication with the various stakeholders. While external marketing focuses on customer needs, internal marketing focuses on organizational members and enables the establishment of an appropriate self-image regarding organizational identity, which is reflected in the actions of all members. In practice, organizations of any form should always consider both directions of communication in order to achieve the best possible results. However, depending on the organization’s own situation, it may also be appropriate in the short term for one area to be significantly more prominent than the other.

¹ Greene, W. E., G. D. Walls, & L. J. Schrest. 1994. “Internal marketing: the key to external marketing success.” Journal of Services marketing. 8(4): 5-13.

² Piercy, N., & N. Morgan. 1991. “Internal marketing – the missing half of the marketing programme.” Long range planning. 24(2): 82-93.

³ The World Factbook. “GDP – composition, by sector of origin.” Central Intelligence Agency. Accessed February 15, 2021.

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