Total Quality Management & Business Excellence

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How to improve service quality: Internal marketing

as a determining factor

Yafang Tsai & Ta-Wei Tang

To cite this article: Yafang Tsai & Ta-Wei Tang (2008) How to improve service quality: Internal
marketing as a determining factor, Total Quality Management & Business Excellence, 19:11,
1117-1126, DOI: 10.1080/14783360802323479

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Total Quality Management
Vol. 19, No. 11, November 2008, 11171126

How to improve service quality: Internal marketing as a determining

factor
Yafang Tsaia and Ta-Wei Tangb
a
Department of Health Policy and Management, Chung-Shan Medical University, Taichung, Taiwan,
Republic of China; bDepartment of Leisure & Recreation Management, Asia University, Taiwan,
Republic of China

The purpose of this study was to investigate the relationship between three internal marketing
practices and service quality. This research adopts a cross-sectional design to examine the
relationship between internal marketing and service quality with structural equation
modelling. The result of the research clearly shows that there are significant positive
relationships between internal marketing practices and service quality. In particular, the
results of the present research demonstrate that training programmes have a strong
association with service quality. However, the relationship from performance incentives to
service quality was not found. Consequently, to deliver excellence service to patients, a
hospital must provide training programmes and establish a clear vision about service
excellence to nurses.
Keywords: internal marketing; service quality; health care marketing; internal market;
human resource management

Introduction
As a result of the changing medical environment of Taiwan, hospitals are encountering increas-
ing competitive pressure. In response to an increasingly competitive environment, hospitals are
being devoted to improving service quality received by the patients. However, organisations
attain competitive advantage by providing excellence service through service contact employees
(Papasolomou-Doukakis, 2003). Therefore, service contact employees play a critical role in the
high quality service delivery process, especially in the service context that involves dyadic and
close interactions between service providers and customers. Further, the quality of the inter-
action between nurses and patients plays a pivotal role in shaping patients service quality per-
ception. Therefore, it is important to understand how to improve the service quality provided by
service employees.
There are numerous methods of improving organisational performance. In terms of market-
ing, it is extremely important to understand customer needs, and to offer products or services that
can meet customer expectation. Furthermore, taking the customer as the focus, it is necessary for
organisations to adopt marketing tactics with a customer orientation (Mohr, 2001). Specifically,
service organisations should pay more attention to internal marketing (Greene et al., 1994),
because service providers have to contact and interact with customers during service procedures
(Carr, 1990; Tansuhaj et al., 1988), and it is essential for service organisations to understand
customer demands.
Organisations can improve service contact employees satisfaction through internal
marketing (Gronroos, 1990), and internal marketing may also lead service contact employees


Corresponding author. Email: avon611@yahoo.com.tw

ISSN 1478-3363 print/ISSN 1478-3371 online

# 2008 Taylor & Francis
DOI: 10.1080/14783360802323479
http://www.informaworld.com
1118 Y. Tsai and T.-W. Tang

to be more willing and able to offer a high quality of service to external customers.
Consequently, internal marketing may be a determining factor on service quality. However,
little research has been conducted to study the relationship of internal marketing on service
quality.
The aim of this research is to explore the relationship between internal marketing and service
quality. The paper is organised as follows. First, we develop several hypotheses regarding the
relationship between internal marketing practices and service quality from a human resource
management perspective. Second, we test our hypotheses with structural equation modelling,
using data collected from 230 nurses in Taiwan hospitals. Finally, implications and limitations
of the research are discussed, and directions for future research are provided.

Internal marketing
Internal marketing views the employees as internal customers, and views the organisation as a
market that comprises both suppliers and demanders of service, who together form an internal
supply chain system (Berry & Parasuraman, 1991; Foreman & Money, 1995). Through inter-
actions between service employees and customers, organisations transmit service promises
and beliefs to external customers, and then influence customers perception about the service
quality provided by organisations. Thus, customer-contact employees play a vital role in satisfy-
ing customers expectations, which in turn influence their perceptions about service quality
(Barnes & Morris, 2000).
Through satisfying internal customers needs, employees become more motivated and com-
mitted to offering a high quality of service, resulting in external customers expectations being
well satisfied (Kotler, 1991). In order to encourage employees to provide service excellence to
the external customer, organisations have to treat employees as internal customers, and satisfy
their needs about providing a service.
Kotler (1991) defined internal marketing as a method that organisations use successfully to
hire, maintain and motivate employees to provide better service to customers. Similarly,
Gronroos (1990) and Varey (1995) argued that internal marketing can be used to change
employee attitudes and behaviours. For example, Tansuhaj et al. (1991) found that internal mar-
keting can improve employees organisational commitment, task involvement, motivation and
job satisfaction. Internal marketing emphasises that organisations can retain employees by
motivating, mobilising, co-opting and managing, while continuing to improve services to
serve external customers (Joseph, 1996).

Service quality
Based on the disconfirmation paradigm employed in the physical product quality literature,
Parasuraman et al. (1988) argued that service quality results from a comparison of perceived
and expected service performance. If perception does not meet expectations, a poor service
quality will be evaluated (Boshoff & Mels, 1995). Therefore, service quality is defined as the
judgement about a service interactions overall excellence or superiority (Parasuraman et al.,
1988).
In the internal service marketing literature, researchers have shown that service quality can
improve customers satisfaction (Gronroos, 1990) and loyalty to the organisation (Zeithaml &
Bitner, 2002; Zeithaml et al., 1996). Furthermore, service quality affects customers behaviours
(such as loyalty to organisation) that contribute to the organisations ability to achieve competi-
tive advantage. The attitude and behaviours of customer-contact employees can satisfy the
expectations of service encounters, which in turn influences the service quality evaluated by
 Total Quality Management 1119

service encounters. Thus, it is important for an organisation to know how they can lead
customer-contact employees to offer excellent services. Because the administrator of service
organisations want to transmit their service value by interaction with customers, they have to
let employees know their service commitment that they give to customers through activities
of internal marketing. They also train the employees to improve their abilities, and the employ-
ees can provide better service quality to customers than before.
Internal marketing is therefore a mechanism for changing employees attitude and
behaviours toward organisational goals, and meeting customers expectation (Gronroos, 1990;
Zeithaml & Bitner, 2002). For this reason, we consider that internal marketing is helpful in
achieving service excellence.

Internal marketing and service quality

Because service delivery occurs through human interaction between service providers and
customers, the service providers during the service delivery process largely determine the
degree of service quality delivered to customers (Malhotra & Mukherjee, 2003). Further,
service quality improves when employees are able and willing to deliver the high-quality
service their customers need. The greater the ability and motivation nurses have, the
better service quality they provide. Therefore, internal marketing may play an important role in
helping employees provide high-quality service to customers. Internal marketing has been
defined in various ways, but these generally include three practices: service training programmes,
performance incentives, and a vision about service excellence (Berry & Parasuraman, 1991;
Gronroos, 1990; Reynoso & Moores, 1996; Tansuhaj et al., 1988). Internal marketing may
improve customer-contact employees abilities and increase their motivation through providing
service vision, service training programmes and performance incentives. Following this, we
discuss the theoretical relationships between internal marketing and service quality.
Internal marketing will lead to greater service quality by providing service training to
employees. External customers of organisations usually appraise the service quality delivered
by organisations based on their experience of their interaction with service providers during
service processes. Employees will be more able to satisfy customers needs if employees
have the sufficient skills, knowledge and abilities needed to more effectively interact with cus-
tomers. Service training programmes improve employees service knowledge and skills, which
in turn enhance service quality received by customers. For example, Batt (1999) found that the
more service training programmes were offered to employees, the better service quality was pro-
vided by employees. Similarly, Johnson (1996) provided evidence of a link between service
training and customer satisfaction. They found that service training programmes were helpful
in facilitating customer satisfaction. Thus, organisations that offer various service training to
employees or ask employees to participate in company training programmes will improve
employee service efficiency (Anton, 2000; Malhotra & Mukherjee, 2003) which can lead to
higher service quality for customers. Thus, the following hypothesis is offered:
H1: Service training programmes are positively related to service quality.
Organisations can easily offer service promises, but promises cant easily be grasped by
organisations if employees are not appropriately rewarded (Zeithaml & Bitner, 2002). Perform-
ance incentives for example, bonuses, strategic rewards, praise, advancement are likely to
induce employees to comply with organisational goals. To encourage service-contact employees
to provide high-quality service, internal marketing uses reward systems that link the rewards
service providers receive with the high-quality service they provide to customers. By providing
1120 Y. Tsai and T.-W. Tang

incentives, service providers will be more willing to deliver high-quality service, resulting in
service excellence being received by customers.
H2: Performance incentives are positively related to service quality.
People delivering service also want to know how their work fits in the broader scheme of
organisation operations, how their work contributes to the firm. They want to understand and
believe in the mission that they are working for (Berry & Parasuraman, 1991). If organisations
want to attract, develop, motive and retain outstanding employees, they have to provide employ-
ees with a clear service vision worth pursuing (Berry & Parasuraman, 1991). Through offering
and communicating organisational visions to employees with passion, organisations can use
internal marketing practices to quickly establish the organisational service culture (Morgan,
1991). When service culture was formed, service providers have come to understand that
superior customer service is expected, and they are more likely to provide service excellence
(Liao & Chuang, 2004). By offering and communicating organisational visions, an organisation
increases employees attention to service quality and enhances service efficiency (Reynoso &
Moores, 1996), thereby enhancing the service quality received by customers.
H3: Vision about excellence service is positively related to service quality.

Methodology
The purpose of this research is to explore the relationship between nurses perceptions of internal
marketing and service quality. To test the hypothesised model in hospital conditions, question-
naires were distributed to 300 nurses of three regional hospitals in Taiwan. The number of ques-
tionnaires returned was 250, representing a response rate of 83%. After deleting records with
ineffective questionnaires, a total of 230 effective questionnaires remained and constituted the
sample for this study.

Measurement instruments
Internal marketing
Internal marketing was assessed using a 15-item scale developed by Foreman and Money (1995).
This scale measures three dimensions of internal marketing: service training programmes (seven
items), performance incentives (three items) and vision about service excellence (five items).
Sample items in the dimensions are, Our organisation views the development of knowledge
and skills in employees as an investment rather than a cost (service training programmes),
In our organisation, employees who provide excellence service are rewarded for their efforts
(performance incentives) and Our organisation offers us a vision that we can believe in
(vision about excellence service). This measure employs a seven-point Likert response scale
ranging from 1, strongly disagree to 7, strongly agree. Cronbachs alpha for service training
programmes, performance incentives and vision about excellence service in the present study
was valued at 0.92, 0.82 and 0.88, respectively.

Service quality
In much research, patients or customers were asked to evaluate service quality, because they
benefit from service quality directly. However, Sergeant and Frenkel (2000) argue that customer
contact employees are well placed to effectively judge the quality of services that they deliver.
Similarly, Boshoff and Mels (1995) also indicate that service providers are quite aware of the
challenges faced by customer interaction, and that their perceptions of service delivery should
 Total Quality Management 1121

receive more attention (Malhotra & Mukherjee, 2003). Therefore, nurses were asked to evaluate
their own service quality, consistent with existing research (Hill & McCrory, 1997; Malhotra &
Mukherjee, 2003; Sergeant & Frenkel, 2000).
Service quality was measured with a modified version of Parasuraman et al.s (1988) 22-item
service quality scale. Scale items were modified to reflect the perceptions of service quality in a
hospital setting. This scale measures five dimensions of service quality: tangible (four-item),
reliability (five-item), responsiveness (four-item), assurance (four-item) and empathy (five-
item). Sample items in the dimensions are, Our hospital has up-to-date equipment (tangible),
When the hospital promises to do something by a certain time, we should do so (empathy), We
tell patients exactly when services will be performed (assurance), Patients feel safe in
their interactions with us (responsiveness), I know what the needs of my patients are
(assurance). This measure employs a seven-point Likert response scale ranging from 1, strongly
disagree, to 7, strongly agree. Cronbachs alpha of the five dimensions of service quality has
the following values: tangibles (0.82), reliability (0.92), responsiveness (0.91), assurance (0.97)
and empathy (0.95).

Data analysis
The items descriptive statistics are presented in Table 1. Composite reliabilities of all the items
ranged from 0.78 to 0.96, above the 0.70 recommended cut-off value suggested by Churchill
(1979), providing enough evidence of the reliability of the scales used.
Structural equation modelling (SEM) was employed to test the hypotheses. In order to test
our hypotheses, we conduct a two-step process of analysis. In the first step, we use confirmatory
factory analysis to verify the distinctiveness of two variables in this study internal marketing
and service quality. In the second step, we conduct structural modelling analysis to evaluate
hypothesised model.

Confirmatory factor analysis

We subjected service training programmes, performance incentives, vision about excellence
service and service quality to a confirmatory factor analysis (CFA), to show that these four vari-
ables were distinct with each other. We specified five first-order and one second-order factor for
service quality and three separate factors for service training programmes, performance incentives
and vision about excellence service. The fit statistics indicated an acceptable fit for the four-factor
model (x2 2303.76, df 535; x2/df 4.3; CFI 0.94; NFI 0.96; TLI 0.95; IFI 0.96)
The fit indexes provide evidence of the construct distinctiveness and convergent validity of internal
marketing and service quality. Against this four-factor model, we tested one alternative model as
model 2. Model 2 was a one-factor model with service training programmes merged with perform-
ance incentives, vision about excellence service and service quality to form a single factor. The fit
statistics indicate that the one-factor model had a worse fit than the four-factor model
(x2 3485.33, df 588; x2/df 5.93; CFI 0.75; NFI 0.72; TLI 0.74; IFI 0.75).
The worse fit indexes of the one-factor model reveal that the common method variation did not
have a strong effect on the relationships among research variables (Podsakoff & Organ, 1986).

Test of hypothesis
To examine hypotheses H1 to H3, we analysed our data using structural equation modelling with
AMOS 4.0. We assessed the fit of the structural model in Figure 1 by adding the predicted paths
to the measurement model of the four-factor model. The model showed good fit (x2 2215.80,
1122 Y. Tsai and T.-W. Tang

Table 1. Measures and summary statistics.

Standardised
Construct/items Mean SD loadings
Service training programmes (Cronbachs alpha 0.92).
We prepare to perform well. 4.65 1.05 0.88
Our organisation views the development of knowledge and skills in 4.99 0.96 0.78
employees as an investment rather than a cost.
Skill and knowledge development of employees happens as an 4.69 0.94 0.83
ongoing process in our hospital.
The hospital teaches us why we should do things and not just how 4.84 0.97 0.87
we should do things.
The organisation goes beyond training and educates employees as well. 4.72 0.99 0.83
In this organisation, we are properly trained to perform our service 4.48 0.98 0.85
roles.
This organisation has the flexibility to accommodate the differing 4.55 1.02 0.86
needs of employees.
Performance incentives (Cronbachs alpha 0.82).
Our performance measurement and reward systems encourage 4.68 1.02 0.84
employees to work together.
We measure and reward employee performance that contributes to our 4.52 0.99 0.88
organisations vision.
In our organisation, employees who provide excellence service are 4.76 0.91 0.85
rewarded for their efforts.
Vision about excellence service (Cronbachs alpha 0.86).
Our organisation offers us a vision that we can believe in. 4.66 1.00 0.81
Managers communicate our organisations vision well to us. 4.88 0.99 0.83
The organisation uses the data which it gathers from employees to 4.68 0.95 0.86
improve our jobs, and to develop the strategy of the organisation.
Our organisation communicates to employees the importance of their 4.63 0.99 0.80
service roles.
The organisation places considerable emphasis on communicating 4.55 1.00 0.83
with us.
Tangible (Cronbachs alpha 0.89).
Our hospital has up-to-date equipment. 4.90 0.95 0.91
The physical facilities of the organisation are visually appealing. 4.73 0.89 0.86
We are well-dressed and appear neat. 5.06 0.85 0.85
The appearance of the physical facilities of the hospital is in keeping 4.88 0.85 0.86
with the type of services provided.
Reliability (Cronbachs alpha 0.92).
I will finish the assignment in the requested time. 4.92 0.85 0.86
When patients have problems, I am sympathetic and reassuring. 5.10 0.83 0.87
I always do everything right, first time. 5.07 0.96 0.86
I provide my services at the time I promise to do so. 5.10 0.89 0.92
I keep records accurately. 4.90 0.87 0.85
Responsiveness (Cronbachs alpha 0.91).
I tell patients exactly when services will be performed. 5.22 0.87 0.87
I provide prompt service to my patients. 5.19 0.96 0.92
I am always willing to help patients. 5.23 0.92 0.93
I respond to patients requests promptly. 4.98 0.99 0.81
Assurance (Cronbachs alpha 0.97).
Patients can trust me. 5.36 0.93 0.93
Patients feel safe in their interactions with me. 5.43 0.97 0.96
I serve my patients in a good manner. 5.44 0.92 0.94
I get adequate support from the hospital to do my jobs well. 5.47 0.95 0.94

(Continued)
 Total Quality Management 1123

Table 1. Continued.
Standardised
Construct/items Mean SD loadings
Empathy (Cronbachs alpha 0.95).
I am sensitive to individual differences among patients. 5.29 1.00 0.90
I give patients personal attention. 5.26 0.95 0.92
I know what the needs of my patients are. 5.31 0.94 0.94
I have patients interests at heart. 5.37 0.94 0.84
I offer services at times convenient to all my patients. 5.40 0.95 0.93

df 532; x2/df 4.17; CFI 0.95; NFI 0.96; TLI 0.95; IFI 0.96). Those results
suggested that the research model was an appropriate representation of the data. The parameter
estimates for the hypothesis model are reported in Figure 1.
As predicted, service training programmes (b 0.41, p , 0.001) and vision about service
excellence (b 0.17, p , 0.01) were positively related to service quality. Thus, we found evi-
dence to provide support for Hypothesis 1 (service training programmes are positively related to
service quality), and Hypothesis 3 (vision about service excellence is positively related to service
quality). In addition, H2 proposed a positive relationship between performance incentives
and service quality. However, the result in Figure 1 shows no significant relationships for
performance incentives with service quality (b 0.07, p . 0.05). Thus, Hypothesis 2 was
not supported.

Discussion
The aim of this research was to further our understanding of the relationships among internal
marketing practices and service quality in a hospital setting. In the research model, we examined
the relationships among three internal marketing practices (service training programmes, per-
formance incentives and vision about service excellence) and the service quality delivered by
nurses. The results support our hypotheses and further demonstrate that there are different
effects of three internal marketing practices on improving service quality. In sum, our study

Figure 1. Results of structural modelling on the relationship between internal marketing and service quality.
Notes:  p , 0.05;  p , 0.01;  , 0.001.
1124 Y. Tsai and T.-W. Tang

contributes to the theoretical development of the service quality literature by furthering existing
knowledge of the relationships between internal marketing practices and service quality.
As predicted, the results demonstrated that the more service training programmes and a clear
service vision provided by hospital, the better service quality patients receive. The results of this
research imply that internal marketing can not only improve the knowledge, skills and abilities
nurses need to meet patient demands, making nurses able to deliver high-quality service, but it
can also enhance nurses willingness to provide high-quality service by building visions, thereby
enhancing the quality of service delivered by nurses.
Our second hypothesis, about a positive relationship from performance incentives to service
quality, was not supported. There are several possible reasons for these results. One explanation
is that, vision about service excellence may have an indirect effect on service quality, because it
might foster nurses service commitment toward patients, which, in turn, improves service
quality. This is an interesting issue that should be addressed in future research. Second, the
sample size for the present research may not have been large enough to detect significant results.
More importantly, the relationship observed between training programmes and service
quality was stronger than service quality for clear service vision. According to the results of
our empirical analysis, we suggest that providing service training programmes to employees
is more strongly related to service quality than a clear service vision. One possible explanation
might be that service training programmes can directly upgrade the knowledge, skills and abil-
ities nurses need to meet the needs of patients, and help nurses to respond better to patients
requirements, thereby enabling them to deliver high-quality service.

Future research and managerial implications

Although present research finds a positive relationship between internal marketing and service
quality, we still know little about the mechanism by which internal marketing has an effect on
service quality. However, a more theoretical explanation of causal mechanisms is needed about
the effect of internal marketing on service quality. The service climate determines how individ-
uals behave, by influencing how they think and feel about certain aspects of their environment
(Salancik & Pfeffer, 1978). Hence, the service climate embedded in the organisations might
influence and regulate employees attitudes and behaviours toward customers. Furthermore,
many features of internal marketing such as service training are likely to facilitate a service
climate. For those reasons, we argue that internal marketing may improvement service quality
via service climate. Future research should explore the mediating effects of service climate
on the relationship between internal marketing and service quality. Future research also
should explore other variables, which may influence the service quality, such as transformational
leadership and service leadership behaviour.
The findings of this study also provide practical recommendations for hospitals to improve
service quality. First, our results demonstrate that training programmes have the strongest relation-
ship with service quality. This suggests that training programmes are especially important in affect-
ing service quality. By providing various service training programmes, nurses will be more able to
provide high-quality service to met patients expectations, resulting in higher service quality.
Therefore, we suggest that hospitals should provide adequate service training programmes to
nurses based on their different needs to enhance their service skills, knowledge and abilities.
Second, in order to implement internal marketing successfully, hospitals must offer a vision
that provides organisational purpose and meaning of service excellence to their nurses. Through
establishing a vision about service excellence, nurses will be more willing and enthusiastic to
deliver high-quality service.
 Total Quality Management 1125

Limitations
Some limitations of this research should also be considered. First, internal marketing and service
quality were assessed via employees, giving rise to concerns about common method bias. To
evaluate the potential threat of common method variance bias, we conducted a Harmans
one-factor test (Podsakoff & Organ, 1986). If the problem of common method variance
exists, a confirmatory factor analysis including all scales should have a good fit. The
one-factor model had a worse fit (x2 3485.33, df 588; x2/df 5.93; CFI 0.75;
NFI 0.72; TLI 0.74; IFI 0.75) than the measurement model (x2 2303.76, df 535;
x2/df 4.3; CFI 0.94; NFI 0.96; TLI 0.95; IFI 0.96). The results indicate that
common method variance was not a serious threat in this study.
Second, the study was conducted as a cross-sectional analysis. Given the cross-sectional
nature, it is difficult to determine the direction of causality among the variables (Bobko &
Stone-Romero, 1998). To provide a better and clearer understanding of the causal relationship
between research variables, longitudinal or experimental research designs are needed for future
research.

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