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The impact of frontline employees'perceptions of internal marketing onemployee outcomesAhmed Shahriar Ferdousa & Michael Polonskya

a School of Management and Marketing, Deakin University,Melbourne, AustraliaPublished online: 05 Feb 2014.

To cite this article: Ahmed Shahriar Ferdous & Michael Polonsky (2014) The impact of frontlineemployees' perceptions of internal marketing on employee outcomes, Journal of StrategicMarketing, 22:4, 300-315, DOI: 10.1080/0965254X.2013.876077

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The impact of frontline employees’ perceptions of internal marketingon employee outcomes

Ahmed Shahriar Ferdous* and Michael Polonsky

School of Management and Marketing, Deakin University, Melbourne, Australia

(Received 2 September 2013; accepted 17 October 2013)

Frontline employees (FLEs) are the face of a service organisation, dealing directly withthe firms’ customers, who, if effectively managed through internal marketing (IM),deliver improved customer experiences. This research develops and empirically testswhether FLEs’ experience of IM programmes influences FLEs’ perceptions of internalmarket orientation (IMO) which, in turn, will have an impact on their organisationalidentification (OI) and job satisfaction (JS) and, ultimately, on their customer-orientedbehaviour (COB). It also tests whether perception of IMO mediates the relationshipbetween employees’ experiences of IM programmes and FLEs’ OI and JS, and, in turn,whether this predicts FLEs’ COB. The hypotheses were tested using a sample of 295frontline salespeople working for a large, general Bangladeshi insurance company. Thestudy found that FLEs’ experience of IM programmes positively influenced their viewsof IMO. Further, FLEs’ OI and JS mediated the relationship between their perceivedIMO and COB. Theoretical and managerial implications are then discussed.

Keywords: internal marketing; internal marketing strategy and programmes;organisational identification; job satisfaction; customer-oriented behaviour; frontlineemployees

Introduction

Frontline employees (FLEs) are the key to delivering competitive advantage in service

firms (Heskett, Jones, Loveman, Sasser, & Leonard, 1994), as they are responsible for the

effective delivery of services and, thus, are critical to determining how customers evaluate

organisations (Lovelock & Wirtz, 2011), resulting in improved customer satisfaction and

retention (Babakus, Yavas, Karatepe, & Avci, 2003; Elmadag, Ellinger, & Franke, 2008).

Given the FLEs’ focal role in the exchange process, it is essential that they (i.e. the FLEs)

positively respond to organisation’s internally focused activities (i.e. internal marketing,

IM) that deliver on externally focused marketing strategies and programmes (Berry, 1981;

Ferdous, Herington, & Merrilees, 2013; Lings & Greenley, 2009).

To achieve employee engagement with a firm’s strategy, organisations develop an

internalmarket orientation (IMO)which is designed to understand and respond to employee

needs (i.e. through internal information generation, internal dissemination of information

and internal responsiveness), thereby delivering the right ‘job products’ (Gounaris, 2006;

Lings, 2004; Madhavaram & Hunt, 2008). The success of IMO is, however, contingent on

how employees view and respond to the process (Carter&Gray, 2007; King&Grace, 2008;

Lovelock&Wirtz, 2011). Past studies have focused mainly onmanagers’ views about IMO

(Lings & Greenley, 2009, 2010), but FLEs may perceive organisational strategies and

actions differently from their managers (Harris & Ogbonna, 2006; Malhotra, Mavondo,

q 2014 Taylor & Francis

*Corresponding author. Email: ahmed.ferdous@deakin.edu.au

Journal of Strategic Marketing, 2014

Vol. 22, No. 4, 300–315, http://dx.doi.org/10.1080/0965254X.2013.876077

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Mukherjee, & Hooley, 2012). Therefore, it is important to study employees’ perceptions of

IMO and assess whether FLEs’ perceptions impact on their job outcomes (Carter & Gray,

2007; Gounaris, 2008; King & Grace, 2008; Lings, 2004; Malhotra et al., 2012).

Within the literature, a variety of human-resource-focused IM programmes have been

discussed (i.e. empowerment, participation in decision-making and formalisation of

communication) where these sets of programmes, when implemented, might alter and/or

improve FLEs’ view of IMO (i.e. organisation’s IM strategy) and lead to positive FLE

outcomes such as organisational identification (OI), job satisfaction (JS) and, ultimately, lead to

improved customer-orientedbehaviour (COB) (Berry, 1981;Dunne&Barnes, 2000;Gounaris,

2008; Higgins, 1996; Payne, 1993; Thomson, 1990; Wieseke, Ahearne, Lam, & van Dick,

2009). This is similar to previous studies that have reported that human resource practices

positively impact employees’ perception of organisational support as well as employees’

overall evaluation of their job conditions (Cardy, Miller, & Ellis, 2007; Harter, Schmidt,

Asplund, Killham,&Agrawal, 2010). This study develops and empirically tests a model of IM

that integratesFLEs’ experiencewith a set of IMprogrammesand their perceptionof IMO,with

links to FLE outcomes. The research contributes to the existing IM literature by empirically

testing the previously hypothesisedbut untested linkbetweenFLEs’ experiencewith a set of IM

programmes and positive perceptions of IMO (Dunne & Barnes, 2000; Gounaris, 2008;

Higgins, 1996; Thomson, 1990). The model also extends the theory by examining whether

perceptions of IMO mediate the relationship between IM programmes and multiple FLEs’

outcomes simultaneously (i.e. OI and JS) leading to positive FLEs’ COB, which has not been

previously examined, although proposed (Gounaris, 2006; Lings, 2004; Wieseke et al., 2009).

The article first discusses the background to key constructs of our study: IM

programmes, IMO and FLEs’ outcomes. Second, we present our theoretical model and

hypotheses, supported by the literature. Third, we describe the research methodology,

analysis and the results. Finally, we present the theoretical and practical implications of

our research, as well as provide directions for future research.

Theoretical background

Internal marketing programmes

While IM programmes, sometimes referred to as IM practices, may encompass various

human-resource-focused activities such as training, rewards, socialisation, participatory

decision-making, involvement, empowerment and communication formalisation (Ahmed,

Rafiq, & Saad, 2003; Foreman & Money, 1995; Gounaris, 2008; Piercy & Morgan, 1991;

Thomson, 1990), authors have conceptualised these IM programmes under three broad

activities: (1) employee empowerment, (2) participation in decision-making and (3)

communication formalisation (Ferdous et al., 2013; Gounaris, 2008). Employees

experience these three aspects of IM programmes simultaneously, and the integrated

corporate IM ‘programme’ is designed to lead to improved understanding of

organisational actions and, thus, increased FLEs’ outcomes (Anaza & Rutherford, 2012;

Gounaris, 2008). Therefore, it has been suggested that when delivered as an integrated set

of activities, they influence FLEs’ perceptions of their job and management’s support of

the employees (Gounaris, 2008; Higgins, 1996; Yoon, Beatty, & Suh, 2001).

Internal market orientation

IMO involves organisational processes for understanding employees’ needs, and responding

to those needs by delivering the right ‘job products’, which, ideally, results in employees

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becoming more customer-focused (Gounaris, 2008; Lings, 2004; Lings & Greenley, 2010).

The development and adoption of IMO is typified by marketing-like activities (i.e. through

internal information generation, internal information dissemination and internal managerial

responsiveness) directed towards its customer-contact FLEs (Lings, 2004). In this study, we

measure FLEs’ perception of the overall IMO process undertaken by management, where

positive perceptions of IMO are likely to result in positive FLEs’ behaviour, such as taking on

the targeted behaviours of IMO (Carter & Gray, 2007).

Employee outcomes

Within the IM literature, OI and JS have been identified as two significant outcomes of IM

targeting FLEs, which, in turn, influence employees’ COB (Berry, 1981; Gounaris, 2008;

Lings & Greenley, 2005; Payne, 1993; Wieseke et al., 2009; Woodruffe, 1995). FLEs’

COB has been described in the literature as behaviours that aim to enhance customer

satisfaction (Peccei & Rosenthal, 1997; Stock & Hoyer, 2005). Authors have argued that

increased COB is the one of the key aims of implementing IM targeting FLEs (Berry,

1981; Gronroos, 1993; Payne, 1993), as FLEs’ COB leads to customer satisfaction and

increased sales (Homburg, Wieseke, & Hoyer, 2009; Stock & Hoyer, 2005).

Conceptual model and hypotheses development

Figure 1 depicts a conceptual model that tests the relationship between FLEs’ experience

of IM programmes and their perception of IMO, and how it affects FLEs’ work outcomes

(i.e. OI and JS), leading to FLEs’ COB, the ultimate aim of IM targeting FLEs (i.e. internal

programmes/actions ! perceptions of strategy ! employee outcomes) (Berry, 1981;

Gronroos, 1993; Payne, 1993). The sections that follow discuss the relationship between

the key constructs in our conceptual model.

FLEs’ experience of IM programmes

Management literature suggests that collaborative goal setting improves employees’

commitment to the associated goals (Locke & Latham, 2002; Sahai & Srivastava, 2012).

Figure 1. The conceptual model.

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In an IM context, collaboration is likely to improve how employees respond to the set of

IM programmes they experience and how they view organisational strategies (i.e. IMO)

and, thus, enable them to see the relevance to themselves and their performance (Gounaris,

2008). Yoon et al. (2001) argue that if FLEs’ experience increased formal management

support, opportunity for participation and authority over their work, it will improve FLEs’

perceptions of the firm and its strategies (i.e. IMO), that is, human-resource-focused

IM programmes can alter employees’ perceptions about their job and their employer

(Cardy et al., 2007; Harter et al., 2010). Employees’ experience of IM programmes will,

therefore, influence employees’ perceptions of IMO (Gounaris, 2008; Higgins, 1996) and,

in turn, affect employees’ behaviours (Anaza & Rutherford, 2012; Gounaris, 2008),

although the link between FLEs’ experiences of IM programmes and their perceptions of

IMO has not yet been empirically explored. Thus, it is hypothesised that:

Hypothesis 1: FLEs’ experience of IM programmes will be related positively to their

perception of IMO.

IM research has posited that there should be a significant relationship between

employees’ experience of IM programmes and OI (Lam, Kraus, & Ahearne, 2010;

Wieseke et al., 2009). For example, Bell and Menguc (2002) found that the way FLEs

perceived management support programmes (one form of IM programmes) positively

influenced employees’ OI (Bell & Menguc, 2002). However, existing studies have yet to

empirically test whether FLEs’ experience with the set of organisational IM programmes

is related to FLEs’ OI (Wieseke et al., 2009). Thus, it is hypothesised that:

Hypothesis 2: FLEs’ experience of IM programmes will be related positively to their

OI.

Employee JS has also been posited as an outcome of effective IM programmes. For

example, Bansal, Mendelson, and Sharma (2001) and Dabholkar and Abston (2008)

proposed that IM-focused programmes positively affected employee’s (i.e. internal

customer) JS. Other studies have also found a positive association between FLEs’

experiences of IM programmes and FLEs’ JS (Ahmed et al., 2003; Babakus et al., 2003;

Gounaris, 2008; Hartline & Ferrell, 1996). Given the existing support for this relationship,

we hypothesise that:

Hypothesis 3: FLEs’ experience of the set of IM programmes delivered by their

organisation will positively associate to FLEs’ JS.

FLEs’ perceptions of IMO

It has been argued within the IM literature that supportive management through IMO

should foster employees’ OI (i.e. increased sense of belongingness with their organisation)

as employees perceiving higher level of managerial support tends to reciprocate by better

engaging with organisational strategies (Lam et al., 2010; Lings, 2004; Wieseke et al.,

2009). Thus, FLEs’ experience of IM programmes should lead to positive perceptions of

IMO, and, in turn, result in employees undertaking the targeted actions designed to create

external customer satisfaction. Given that the literature identifies that FLEs’ experiences

of IM programmes alter perceptions of IMO and FLEs’ OI, this then may lead to IM

programmes indirectly impacting on OI through FLEs’ perception of IMO (i.e. perception

of IMO mediating the relationship between IM programmes and OI). Therefore, we put

forward the following hypotheses:

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Hypothesis 4: FLEs’ perceptions of IMO will be related positively to their OI.

Hypothesis 4a: FLEs’ perceptions of IMO mediate the relationship between their

experience of IM programmes and their OI.

Carter and Gray (2007) posited that positive employee perceptions of IMO should

result in increased employee JS, because employees view the firm as having delivered the

‘right job products’ through the organisation’s IMO responses, which provides

psychological and social benefits to employees. Thereby, employees are more likely to

respond positively to IMO aimed at motivating them to exhibit customer-focused

behaviours. Several studies investigating the impact of FLEs’ perceptions of IMO on their

JS found significant positive relationship between the two constructs in a variety of

contexts and settings (Gounaris, 2006, 2008; Lings & Greenley, 2005; Tortosa, Moliner,

& Sanchez, 2009). As it was posited that perception of IMO is influenced by IM

programmes, FLEs’ perception of IMO may also mediate the relationship between FLEs’

experience of IM programmes and JS. Therefore, we put forward the following

hypotheses:

Hypothesis 5: FLEs’ perceptions of IMO will be positively related to their JS.

Hypothesis 5a: FLEs’ perceptions of IMO mediate the relationship between their

experience of IM programmes and JS.

Customer-oriented behaviour

The goal of IM is to enhance the way FLEs engage with their external customers (Berry,

1981; Gronroos, 1993), yet research has not empirically examined the relationship

between IM programmes, IMO and employees’ COB. It is argued within the IM literature

that employees having a greater sense of belongingness to their organisation (i.e. IO), in

turn, motivate employees to exhibit positive COB (Wieseke, Ullrich, Christ, & van Dick,

2007; Wieseke et al., 2009). This is consistent with general employee motivation theory

which suggests that the more included the employee is in goal setting, the more likely he is

to achieve the targeted goals (Locke & Latham, 2002). Thus, we hypothesise that:

Hypothesis 6: FLEs’ OI will be positively related to their COB.

Hypothesis 6a: FLEs’ OI mediates the relationship between their perception of IMO and

their COB.

The literature also suggests that increased levels of JS result in more employee COB

(Lee, Nam, Park, & Lee, 2006). However, several studies have found an insignificant

relationship between FLEs’ COB and JS (Homburg et al., 2009; Wagenheim & Rood,

2010). While the past findings are equivocal, proponents of IM have argued that employee

JS should, in turn, foster COB (Ahmed et al., 2003; Berry, 1981; George, 1990; Gronroos,

1985). We propose that increased FLEs’ JS predicts positive engagement with customers

(i.e. COB) and that JS might also mediate the relationship between FLEs’ perception of

IMO and COB (Berry, 1981; George, 1990).

Hypothesis 7: FLEs’ JS will be positively related to their COB.

Hypothesis 7a: FLEs’ JS mediates the relationship between their perception of IMO

and their COB.

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Research design and method

Research setting, context and sample characteristics

FLEs who interact with external customers are the unit of analysis used in this study.

Frontline salespeople working within the financial services sector of one of the five largest

Bangladeshi general insurance companies, selling a wide range of insurance products to

businesses clients, were used as the sample population. At present, the Bangladeshi

insurance industry includes 18 life insurance and 44 general insurance companies,

generating approximately (US) $267 million in annual premiums (Deepty & Ahmed,

2011). The Bangladeshi insurance industry is extremely competitive, which has resulted in

companies requiring salespeople to engage face-to-face with their clients on a regular

basis (Ferdous & Polonsky, 2013). As a result, the salespeople (i.e. FLEs) are important in

the customers’ decision process, in comparison with other service exchanges (Andaleeb &

Anwar, 1996; Ferdous & Polonsky, 2013). Therefore, the way FLEs engage with their

customers contributes towards attracting new customers and maintaining relationships

with existing customers. In such contexts, implementing IM is important, as it is

imperative that customer-contact FLEs respond positively to management’s IM activities

by delivering positive COB in their service encounters.

A pencil-pen-paper, self-administered survey was distributed through the organisation

to the firm’s frontline salespeople. Given that the participating organisation conducts

much of its business in English and requires that all FLEs are proficient in English, the

survey was conducted in English. A pre-testing process was undertaken to ensure effective

survey communication involving 25 Bangladeshi MBA students working as full-time

insurance salespeople (i.e. in a FLE role similar to those being targeted), and three

insurance company executives from the targeted organisation. The pre-testing resulted in

only minor wording changes in a few items. The survey was distributed to potential

participants (i.e. FLEs) at their quarterly regional sales meetings, which took place in the

company’s nine offices located across Bangladesh. A total of 563 self-administered

surveys were distributed among all the general insurance company’s frontline salespeople.

A total of 295 usable questionnaires were returned (52.4% of the population). Within the

sample, there were 203 males (69%) and 92 females (31%). The average respondent’s age

within the sample was 35 years (SD ¼ 6.5), and they had worked as salespeople within the

targeted organisation for 4.7 years (SD ¼ 1.9) on average. The majority of respondents

had a bachelor degree (66%), with 13% having a postgraduate degree, 7% having

completed a diploma and 14% having completed higher secondary school.

Measures

Adapted versions of established scales were used to measure the constructs within our

model. Table 1 provides all of the final scale items and their corresponding reliability and

validity. All items were measured on a seven-point Likert-type scale. The scale items used

for measuring the key constructs in the model are discussed below.

Experience of IM programmes is defined as FLEs’ experience (i.e. assessment) with

the set of IM programme and whether this alters their views of organisational strategies

(i.e. IMO) (Gounaris, 2008; Thomson, 1990). The three underlying dimensions of IM

programmes were employee empowerment (four items), participative decision-making

(six items) and communication formalisation (six items). The items measuring these

sub-constructs were adapted from previous validated measures (Gounaris, 2008; Oliver &

Anderson, 1994) (see Table 1).

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Table 1. Measurement scales.

Items SMC

Experience of IM programmes: reflective latent construct, CR ¼ 0.80,coefficient H ¼ 0.82, AVE ¼ 0.59

Empowerment: first-order factor, CR ¼ 0.89, coefficient H ¼ 0.90,AVE ¼ 0.68(1) Management allows me to use my own judgment in solving problems 0.61(2) Management encourages me to take initiatives 0.72(3) Management allows me a high degree of initiative 0.64(4) Management trusts me to exercise good judgment 0.72

Communication formalisation: first-order factor, CR ¼ 0.86, coefficientH ¼ 0.88, AVE ¼ 0.52(1) Usually, my contact with my company involves doing things ‘by the book’ 0.69(2) If a rule does not cover some situation, we don’t make up informal rules

for doing things as we go along0.40

(3) Most things in our company are covered by some formal procedure fordoing it

0.62

(4) Contact with management is on a formal, pre-planned basis 0.34(5) I don’t reach informal agreements by ignoring rules of our company to

handle some situations0.50

(6) When rules and procedures exist in my company, they are usually inwritten format

0.56

Participation in decision-making: first-order factor, CR ¼ 0.86, coefficientH ¼ 0.87, AVE ¼ 0.62(1) Decisions are made at the frontline here 0.66(2) Frontline employees and top management tend to hammer out issues

together in this organisation0.70

(3) Management actively seeks my ideas all the time 0.54(4) Management makes decisions taking into consideration what frontline

employees think0.57

Internal market orientation: reflective latent construct, CR ¼ 0.78, coefficientH ¼ 0.80, AVE ¼ 0.55

Internal information generation: first-order factor, CR ¼ 0.85, coefficientH ¼ 0.85, AVE ¼ 0.54(1) In our company, management try to find out what employees want 0.51(2) In our company, when an employee is not acting normally, management

tries to find out if they have a problem0.52

(3) In our company, management try to find out the employees’ true feelingsabout their work (items dropped as SLF , 0.3)

0.07

(4) In our company, management often talk to the employees to ask aboutaspects of their work

0.57

(5) In our company, there are regular meetings between managers andemployees to discuss matters that the employees wish to address (itemsdropped as SLF , 0.3)

0.05

(6) In our company, management meet with employees to discuss theemployees’ future expectations regarding their work

0.56

(7) In our company, management meet with the employees to try to find outeverything that makes them feel satisfied with their work

0.52

Internal communication: first-order factor, CR ¼ 0.84, coefficient H ¼ 0.85,AVE ¼ 0.57(1) In our company, management normally meet with the employees to inform

matters relating to the organisation (objectives, strategies, etc.)0.48

(continued)

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Perception of IMO is defined in this study as the way FLEs viewed the overall IMO

process, and was conceptualised as having three underlying sub-dimensions: internal

information generation (seven items), internal communication of information (four items)

and internal managerial responsiveness (five items) (Tortosa et al., 2009). As shown in

Table 1, confirmatory factor analysis (CFA) of the one-factor congeneric model of the

Table 1. (Continued)

Items SMC

(2) In our company, management normally inform their employees aboutaspects affecting their work environment

0.67

(3) In our company, management inform all the employees 0.54(4) The company’s authority inform the employees about work problems that

they have verified earlier0.58

Internal responsiveness: first-order factor, CR ¼ 0.85, coefficient H ¼ 0.86,AVE ¼ 0.55(1) In our company, when management find out that their employees are not

happy with their management they take the appropriate correctivemeasures

0.58

(2) In our company, when management receive suggestions from theemployees they make an effort to implement them

0.45

(3) In our company, management change their action when the employeescommunicate their dissatisfaction

0.60

(4) After informing the employees, management act to improve workingconditions

0.53

(5) Management behave in accordance with what employees have beenled to expect

0.56

FLE outcomes constructsOrganisational identification: first-order factor, CR ¼ 0.89, coefficientH ¼ 0.90, AVE ¼ 0.63(1) When someone criticises this company, it feels like a personal insult 0.56(2) I am very interested in what others think about our company 0.57(3) When I talk about this company, I usually say ‘we’ rather than ‘they’ 0.65(4) This organisation’s successes are my successes 0.68(5) When someone praises this company, it feels like a personal compliment 0.65(6) If a story in the media criticised this company, I would feel embarrassed

(items dropped as SLF , 0.30)0.08

Job satisfaction: first-order factor, CR ¼ 0.88, coefficient H ¼ 0.89,AVE ¼ 0.60(1) Satisfaction with overall job 0.57(2) Satisfaction with management 0.70(3) Satisfaction with the organisation’s policies 0.58(4) Satisfaction with support from the company 0.63(5) Satisfaction with opportunities for advancement 0.49

Customer-oriented behaviour: first-order factor, CR ¼ 0.87, coefficientH ¼ 0.88, AVE ¼ 0.54(1) I am always working to improve the service I give to customers 0.39(2) I have specific ideas about how to improve the service I give to customers 0.60(3) I often make suggestions about how to improve customer service in my

department0.64

(4) I put a lot of effort into my job to try to satisfy customers 0.52(5) No matter how I feel, I always put myself out for every customer I serve 0.59(6) I often go out of my way to help customers 0.50

Note: SMC, squared multiple correlations; CR, composite reliability; AVE, average variance extracted.

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sub-construct internal information generation indicated that two items measuring this

construct had poor squared multiple correlations (SMC) value (i.e. less than 0.30)

(Holmes-Smith, Coote, & Cunningham, 2006), and, thus, were dropped from further

analysis (Table 1). The remaining items measuring respective sub-dimensions of

perceptions of IMO were retained for further analysis.

FLE outcomes: the employee outcome variables were OI, JS and COB. OI was

measured using Mael and Ashforth’s (1992) six items. CFA of the one-factor congeneric

measurement model of OI indicated that one of the items had a low SMC value (i.e. below

0.30) and was dropped from further analysis (see Table 1). FLEs’ JS was measured using

five items from Hartline and Ferrell (1996). COB was measured using a six-item scale

adapted from Peccei and Rosenthal (1997).

Analysis and results

Assessment of normality and multi-collinearity

Multivariate normality was evaluated using Mardia’s (1970) multivariate kurtosis statistic,

which indicated violation of normality (Mardia’s statistics ¼ 35.64, p , 0.05). Non-

normality was addressed by undertaking maximum likelihood estimation of CFAs and the

structural model using 2000 bootstrapping samples of the data within version 20 of

AMOS. Bootstrapping assumes a lack of normality of data and provides stronger accuracy

of intervals (Byrne, 2010). Multi-collinearity did not exist among the key variables in the

model as the variation inflation factor ranged from a low of 1.53 to a high of 2.17, which is

below the cut-off point of 10 (Kline, 2005).

Measurement reliability and validity

Item reliability and construct validity were assessed for the measurement and structural

models. Hancock and Mueller’s (2001) coefficient H, an alternative approach measuring

internal consistency which is considered more rigorous than Cronbach’s alpha value

(Holmes-Smith et al., 2006), and Composite Reliability of all the constructs in this study

were equal to, or higher than, the cut-off value of 0.7 (Table 1), thus indicating acceptable

internal consistency for the items retained (Bagozzi & Yi, 2012; Hancock & Mueller,

2001). The statistical power of our structural model approaches 1 given the degrees of

freedom (i.e. df ¼ 200) and usable sample of 295, indicating adequate power for assessing

the overall fit of the structural model (MacCallum, Browne, & Sugawara, 1996).

Chi-square/degree of freedom (x 2/df), comparative fit index (CFI), Tucker–Lewis index

(TLI), incremental fit index (IFI), and root-mean-square error of approximation (RMSEA)

were used to assess the model fit for the CFAs and overall structural model (Byrne, 2010;

Hair, Black, Babin, Anderson, & Tatham, 2006; Holmes-Smith et al., 2006).

Multi-factor CFA was undertaken treating the components of the IM programmes –

employee empowerment, participation in decision-making and communication formalisa-

tion – as first-order reflective latent constructs. The multi-factor CFA of IM programmes

showed good model fit (x 2/df ¼ 2.7, CFI ¼ 0.94, TLI ¼ 0.93, IFI ¼ 0.94, RMSEA

¼ 0.07), suggesting that it was adequate to combine the respective items of the first-order

constructs (Donovan, Brown, & Mowen, 2004; Holmes-Smith et al., 2006; Menguc, Auh,

& Uslu, 2013). Thus, items for each component were combined into single composite

indicators using factor scores (Joreskog & Sorbom, 1989) to form three separate observed

variables (i.e. empowerment, participative decision-making and communication

formality). The IM programmes were then modelled as a first-order reflective latent

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construct in the overall structural model (see Figure 1), which is similar to the approach

undertaken in the works by Gounaris (2008) and Anaza and Rutherford (2012). A multi-

factor CFA for the constructs assessing the components of IMO – information generation,

internal dissemination and internal responsiveness – was also run. The results reported a

good model fit (x 2/df ¼ 2.3, CFI ¼ 0.95, TLI ¼ 0.94, IFI ¼ 0.95, RMSEA ¼ 0.06),

indicating adequacy to combine the items of the first-order constructs (Donovan et al.,

2004; Holmes-Smith et al., 2006; Menguc et al., 2013). The items measuring the

components of perception of IMO were also combined into composite indicators using

factor scores (Joreskog & Sorbom, 1989) to form three separate observed variables

(i.e. internal information generation, dissemination and responsiveness). This was

followed by modelling IMO as a first-order reflective construct in the overall structural

model (see Figure 1), which is similar to the conceptualisation undertaken in the works by

Gounaris (2008) and Lings and Greenley (2009). The FLE outcome variables – JS, OI and

COB – were treated as first-order latent constructs in the overall structural model

(see Table 1 for fit statistics of these measures).

Modelling the five key constructs (i.e. IM programmes, IMO, OI, JS and COB) as a

multi-factor CFA model indicated that all standardised loadings of the measures on their

respective constructs were greater than 0.50 and significant, demonstrating convergent

validity (Kline, 2005). The average variance extracted (AVE) for each construct across

measures was greater than 0.50 (see Table 2), and an examination of the AVE values with

the SMC between constructs identified that all constructs were differentiated from one

another, thus demonstrating discriminant validity (Fornell & Larcker, 1981).

The respondents’ demographic characteristics were examined, using a series of

ANOVAs and t-tests, to identify whether age, gender, education or job experience

impacted on the five major variables used in our study. The results from our analysis

indicated that the variables used in our model did not vary by any of the demographic

characteristics, enabling them to be excluded from further analysis.

Assessment of common method variance bias

Given that all data were self-reported, we assessed whether common method variance

(CMV) had a significant impact on our model. We tested for CMV by comparing the chi-

square difference of the measurement model with and without the introduction of a latent

CMV factor (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003). The chi-square difference

between the measurement model with and without a common method factor was found to

be insignificant (Dx 2 ¼ 22, Ddf ¼ 18, p ¼ 0.232), thereby providing support that our

model was not affected by CMV.

Table 2. Descriptive statistics and correlations.

Variables Mean SD (1) (2) (3) (4) (5)

(1) COB 5.90 0.56 0.54a

(2) JS 5.78 0.68 0.42 0.59a

(3) OI 5.54 0.70 0.50 0.28 0.62a

(4) IMO 5.65 0.65 0.41 0.65 0.37 0.55a

(5) IMP 5.66 0.69 0.30 0.53 0.25 0.73 0.58a

Note: COB, customer-oriented behaviour; JS, job satisfaction; OI, organisational identification; IMP, internalmarketing programmes; IMO internal market orientation.a Fornell and Larcker’s average variance extracted.

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Structural equation model and results

The model fit indices for the overall structural model fall within the accepted ranges for

good fit to the data (x 2/df ¼ 1.96, CFI ¼ 0.94, TLI ¼ 0.93, IFI ¼ 0.94 and RMSEA

¼ 0.05) (Byrne, 2010). This study used bootstrapping in AMOS 20 which can only report

unstandardised paths for specific mediation effects. Therefore, all direct and indirect

effects for testing the hypotheses were reported as unstandardised paths using 95% bias-

corrected confidence intervals (CI) and significant ( p-)values (bootstrapped sample (n)

¼ 2000) (Bartikowski &Walsh, 2011; Byrne, 2010; Strizhakova, Coulter, & Price, 2011).

Table 3 shows the unstandardised direct path effects. The results indicate a significant

positive direct relationship between FLE experience of IM programmes and their

perception of IMO (b ¼ 0.59, CIlow ¼ 0.43 and CIhigh ¼ 0.76, p, 0.01), thus providing

support for H1. Experience of IM programmes, however, did not have a significant direct

effect either on OI or JS, suggesting that H2 and H3 are not supported.

Significant direct paths were found between perceptions of IMO and OI (b ¼ 0.23,

CIlow ¼ 0.26 and CIhigh ¼ 1.2, p , 0.01) and between perceptions of IMO and JS

(b ¼ 0.77, CIlow ¼ 0.47 and CIhigh ¼ 1.1, p , 0.01), suggesting that employees’

perceptions of IMO have a stronger effect on JS compared to their effect on OI, supporting

H4 and H5. Significant direct relationships were also found between OI and COB

(b ¼ 0.29, CIlow ¼ 0.19 and CIhigh ¼ 0.42, p , 0.01), and between JS and COB

(b ¼ 0.23, CIlow ¼ 0.07 and CIhigh ¼ 0.39, p , 0.01) providing support for H6 and H7.

We used the phantom-model approach in AMOS which has the ability to calculate

both total indirect and specific indirect (i.e mediated) effects (Macho & Ledermann, 2011)

(Table 3). The unstandardised indirect effect of experience of IM programmes on

OI through perceptions of IMO was significant at 0.41 (CIlow ¼ 0.17 and CIhigh ¼ 0.76,

p , 0.01), supporting H4a. There was also a significant indirect effect for experience of

Table 3. Unstandardised direct and specific indirect effects.

Bootstrap bias-corrected method 95% CI

PathsUnstandardised

estimates SE Lower CI Upper CI p-valueSupport forhypotheses

Direct effectsIMP on IMO 0.59 0.08 0.43 0.76 0.00 H1: YesIMP on OI 20.07 0.18 20.44 0.27 0.67 H2: NoIMP on JS 0.10 0.11 20.14 0.32 0.35 H3: NoIMO on OI 0.68 0.23 0.26 1.2 0.00 H4: YesIMO on JS 0.77 0.18 0.47 1.1 0.00 H5: YesOI on COB 0.29 0.06 0.19 0.42 0.00 H6: YesJS on COB 0.23 0.08 0.07 0.39 0.00 H7: Yes

Indirect effectsIMP on IMO via OI 0.41 0.15 0.17 0.76 0.00 H4a: YesIMP on IMO via JS 0.46 0.11 0.28 0.74 0.00 H5a: YesIMO on COB (direct effect) 0.12 0.11 20.09 0.33 0.26 –IMO on COB via JS and OI

(two mediators)0.38 0.11 0.19 0.62 0.00 –

IMO on COB via OIa 0.20 0.08 0.06 0.37 0.00 H6a: YesIMO on COB via JSa 0.18 0.07 0.05 0.37 0.00 H7a: Yes

Note: COB, customer-oriented behaviour; JS, job satisfaction; OI, organisational identification; IMP, internalmarketing programmes; IMO internal market orientation.a Assessment of specific indirect effects was conducted in AMOS 20 using the phantom-model approach (Macho& Ledermann, 2011).

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IM programmes on JS through perceptions of IMO of 0.46 (CIlow ¼ 0.28 and

CIhigh ¼ 0.74, p , 0.01), thereby supporting H5a. The direct effect of IMO on COB was

found to be insignificant (b ¼ 0.12, CIlow ¼ 20.09 and CIhigh ¼ 0.33, p , 0.01) (see

Table 3); the indirect effect suggests the possibility of a mediation effect existing between

IMO on COB via JS and OI. The mediation analysis further revealed that JS and OI

mediated the relationship between FLEs’ perceptions of IMO and their COB (i.e. total

indirect effect ¼ 0.38, CIlow ¼ 0.19 and CIhigh ¼ 0.62, p, 0.01). Decomposing the total

indirect effects using a phantom mediation approach (cf. Macho & Ledermann, 2011)

identified that OI has a significant indirect effect of 0.20 (CIlow ¼ 0.06 and CIhigh ¼ 0.37,

p , 0.01) mediating the relationship between perceptions of IMO and COB, whereas, JS

had a significant indirect effect of 0.18 (CIlow ¼ 0.05 and CIhigh ¼ 0.37, p , 0.01)

mediating the relationship between perceptions of IMO and COB. Thereby, the specific

indirect effects appear to exist, supporting H6a and H7a.

Theoretical and managerial implications

By addressing the relationships between the variables in the model (Figure 1), our study

contributes to existing IM theories as well as suggests managerial implications of adopting

IMO and IM programmes.

Theoretical contribution

The research makes a contribution to theory by testing a model of IM (Figure 1) that

integrates FLEs’ experience of a set of IM programmes and their perception of IMO, rather

than management’s view, as well as assesses the links to employee outcomes. This has not

previously been tested in the IM research. Past studies have strongly argued that increasing

the primacy given to the FLEs’ perspective when it comes to the execution of IM strategies

(i.e. through IMO and IM programmes) will result in the achievement of organisational

objectives (Babakus et al., 2003; Berry, 1981; Lings, 2004; Lovelock &Wirtz, 2011). The

findings of our study provide empirical support for this connection, as they find that FLEs’

positive experience of IM programmes and their perceptions of IMO predict FLEs’ OI and

JS, which, in turn, predict their COB.

We also found, using phantom mediation analyses (Macho & Ledermann, 2011), that

OI and JS not only directly affect COB, but also mediate the relationship between

perceptions of IMO and COB. These linkages contribute to the existing literature on

employees’ COB in the following ways. First, the direction and relationship between JS

and COB have been found to be equivocal (Homburg et al., 2009; Wagenheim & Rood,

2010), however, we can confirm that the relationship exists within the FLE context.

Second, we found that COB is also positively influenced by FLEs’ level of OI, which is

consistent with the findings of Wieseke et al. (2007) that FLEs’ engagement with

customers is dependent on their level of OI (i.e. higher OI leads to improved customer

engagement). Third, we have provided empirical support that there is a positive

relationship between perceptions of IMO and FLEs’ OI and JS, which, in turn, predicts

their COB. This extends Wieseke et al.’s (2009) results, which argue that OI should be

considered as the ultimate aim of implementing IM, as we have shown that OI does lead to

FLEs’ self-reported COB, which most authors argue is the true aim of IM (Berry, 1981;

Gronroos, 1993; Payne, 1993). Thus, our study suggests that the ultimate focus of

implementing IM among FLEs should not be limited to employee-focused outcomes (i.e.

JS and OI) which are also significant outcomes of FLEs, but, rather, should aim for

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predicting FLEs’ COB which is in alignment with the aim of IM as suggested by Ferdous

et al. (2013).

Managerial implications

We have shown that the execution of successful IMO is dependent on how FLEs view and

then respond to a firm’s IMO activities. The results highlight that management has to

consider how FLEs experience IM programmes and interpret IMO if they are to be

successfully implemented and, therefore, achieve positive organisational outcomes. Thus,

managers need to ensure that their organisations engage with their employees when

designing IM programmes. Furthermore, IM programmes that are assessed positively by

employees will result in employees viewing IMO positively. This, in turn, will lead to

positive employee outcomes. These programmes should involve empowering FLEs,

involving them in decision-making processes, and formalising communication between

management and their FLEs, thus demonstrating inclusivity.

Although we tested the effectiveness of IM programmes in the financial services

sector, we believe that these IM programmes can be effectively applied in any firms which

provide high-contact services such as real estate, tourism, aviation and nursing, where

FLEs play a vital role in delivering service (Lovelock & Wirtz, 2011). Our study also

found that FLEs’ COB is influenced by how employees perceive IMO via their OI and JS,

therefore, tracking these antecedent variables through internal market research should

enable a better understanding of customers’ experiences with FLEs.

Limitations and future research

We collected data for testing our model from a single company in one industry in

Bangladesh. While this approach allowed us to control for confounding factors across

companies, industries and countries, it does limit the generalisation of our results, although

other IM studies have also used single-company data (Elmadag et al., 2008; Tortosa et al.,

2009). It would be valuable to extend our research into other companies, industries and

countries to confirm the generalisability of our findings. The study is cross-sectional, thus,

we can only suggest functional relationships between variables (Bagozzi & Yi, 2012), and

future longitudinal research could be undertaken. Though our analyses found that CMV

was not an issue within our data, it may be worth including external measures of FLEs.

Acknowledgements

We would like to thank the following people for their helpful feedback and input in the drafting andrevisions of this manuscript: Ian Lings (QUT), David Bednall (Deakin University), Romana Garma(Victoria University), Lisa McQuilkin (Deakin University), Bill Merrilees (Griffith University),Nichola Robertson (Deakin University), and Richard Varey (University of Waikato). We would alsolike to thank the anonymous reviewers.

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