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The 1 PPM National Conference on Management Research “ Manajemen di Era Globalisasi”


Sekolah Tinggi Manajemen PPM, 7 November 2007

The Effect of Internal Marketing on Job Satisfaction and Organizational


Commitment: An Empirical Study in a University Setting

Sabrina O. Sihombing
Maredo Gustam
University of Pelita Harapan
Karawaci

Abstract
The competition in higher education institutions becomes more competitive than ever. To win
the competition, the institutions need to satisfy the customer (i.e., students and potential
students). Satisfied customer can be achieved if the employees are satisfied. Internal
marketing is a concept which emphasizes that employees are internal customers and jobs as
internal products. Jobs should be developed and to motivate employees in order to satisfy
employees’ needs and wants. Therefore, internal marketing relates to job satisfaction. Job
satisfaction itself is one of important factors that explain organizational commitment. The
purpose of this article is to test the effects of internal marketing on job satisfaction and
organizational commitment. The data for this research was obtained through self-
administered questionnaire from lecturers in a private university in West Java. Structural
equation modeling (SEM) was used to analyze the data. The findings show that internal
marketing was a significant predictor of organizational commitment. This article provides
limitations of the study, and directions for future research.

Key words: internal marketing, job satisfaction, organizational commitment

Background to the research problem


The competition in higher education institutions becomes more competitive than ever. To win
the competition, the institutions need to satisfy the customer (i.e., students and potential
students). Satisfied customer can be achieved if the employees are satisfied (Schultz 2002;
Kotler 2000; Pitt, Bruwer, Nel, and Berthon 1999).
Internal marketing is a concept which emphasizes that employees are a first market
(Gronroos 2001; Ewing and Caruana 1999). According to Kotler (2000), internal marketing
should be as a priority before external marketing. As stated in the beginning, excellent
services to customers are resulted from satisfied employee. Therefore, in relating with to win
competitions, successful marketing can be achieved if the firms are involved both in external
and internal marketing (Caruana and Calleya 1998).
According to Berry and Parasuraman (1991 cited by Caruana and Calleya 1998), the
concept of internal marketing focus on employees are internal customers and jobs as internal
products. Jobs should be developed and to motivate employees in order to satisfy employees’
needs and wants. Therefore, internal marketing relates to job satisfaction. Job satisfaction
itself is one of important factors that explain organizational commitment (Mathis and Jackson
2003).
The purpose of this article is to test the effects of internal marketing on job satisfaction and
organizational commitment. Specifically, the aim of this research is to examine the effects of
internal marketing on lecturers’ satisfaction and commitment.
This article is organized as follows. First, the research questions are presented. Next,
justifications for the research are provided. Then, the theoretical framework and hypotheses
are presented. Research method is provided in the next section. This article concludes with a
discussion of results, limitations of the study, and directions for future research.

Research Questions
Three research questions are considered in this study.
1. Does internal marketing positively impact on lecturers’ job satisfaction?
2. Does internal marketing positively impact on lecturers’ commitment toward their
organization?
3. Does lecturers’ job satisfaction positively impact on organizational commitment?

Justifications for the Research


This research can be justified on these there grounds as follows: (1) the importance of internal
marketing, job satisfaction, and organizational commitment, (2) the interdisciplinary approach
to assess the relationship between internal marketing, job satisfaction, and organizational
commitment, and (3) limited research of internal marketing in a university setting.

The importance of internal marketing, job satisfaction, and organizational commitment.


Successful marketing can be achieved if the firm is involved in external and internal
marketing (Caruana and Calleya 1998). External marketing is marketing directed at people
outside the company, whereas internal marketing is the task of hiring, training, and motivating
able employees who want to serve customers (Kotler 2003).
Internal marketing is important for organization. This is because the concept of internal
marketing connected with other concepts such as job satisfaction and organizational
commitment. Specifically, internal marketing has positive impact on employee job
satisfaction (Hwang and Chi 2005). Internal marketing has also positive impact on
organizational commitment (Caruana and Calleya 1998).
It can be stated that researching and understanding the relationship between internal
marketing, job satisfaction, and organizational commitment would support institutions of
higher education. The institution can better understand factors that influence their employees’
commitment. These understanding would support their lecturers.

The interdisciplinary approach to assess the relationship between internal marketing, job
satisfaction, and organizational commitment. This research applies an interdisciplinary
approach to examine the relationship between internal marketing, job satisfaction, and

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organizational commitment. In the specific, the internal marketing concept is based on
marketing field where job satisfaction and organizational commitment are based on
organizational studies. The interdisciplinary research is a research which focus on
understanding people behavior more comprehensively and it is a tool to improve social
science research (Deshpande 1999; Murray and Evers 1989; Horton 1984).

Limited internal marketing research in a university setting. Internal marketing is a critical


issue facing marketing professions, HR managers, and executives in general (Pitt et al., 1999).
This is because internal marketing expresses the relations between management and
employees (Lee and Chen 2005). Despite internal marketing has been examined in
management fields such as public sector (Ewing and Caruana 1999), life assurance (Ahmed
and Rafiq 1995), international airlines (Frost and Kumar 2001) and manufacturer (Lee and
Chen 2005; Piercy 1995), there is a gap exists in a university setting. Specifically, the lack of
internal marketing research in a university setting triggers our curiosity. Since the aim of a
university is to prepare students for the real world (Comm and Mathaisel 2003), a better
understanding in internal marketing as one important factor that influence job satisfaction and
organizational commitment is a must.

Literature Review
Internal marketing
Internal marketing was originally derived from the notion of the employee are first market.
The major point of the concept is ensured that employees feel that management cares about
them and their needs (Ewing and Caruana 1999).
Besides internal marketing emphasize s on employee are first, internal marketing also
include several aspects (Schultz 2002; Gronroos 2000). First, internal marketing as an active,
coordinated, and goal oriented approach to all employee-oriented efforts. Second, internal
marketing emphasizes on the need to understand employee as people. In the specific, human
resources manager in a firm should understand the people so they can motivate and satisfy the
employee. In order to motivate and satisfy employee, firm should have marketing-like
approach to the employee. In other words, a firm should threat employees as customers.
Finally, internal marketing also includes the implementation of specific corporate or
functional strategies.
Foreman and Money (1995 cited by Preston-Broady and Steel 2002) observe that some
researchers believe that internal marketing is synonym with human resources management
(HRM) concept. On the other hand, other researchers (e.g., Gronroos 2000; Rafiq and Ahmed
2000; Ewing and Caruana 1999) support that the concept of internal marketing has much in
common with HRM concept but they are not the same.
In short, internal marketing emphasizes on the need to view people as internal customers.
As internal customers, employees should be treated as the way firm treats customer.

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Job satisfaction
Organizational commitment and job satisfaction play important role in organization behavior
variables which still challenging for further research (Brown and Gaylor 2002).
Job satisfaction is one important factor that influences positive employee behavior (Arnett,
Laurie, and McLane 2002). In other words, when individual is satisfied with his job, that
individual feels more responsible and committed to the organization.
Job satisfaction is defined as a positive emotional state resulting from evaluating one’s job
experiences (Mathis and Jackson 2003). Job satisfaction can be achieved when employees (1)
enjoy their work (2) have a realistic opportunity about their career (3) like the people with
whom they work (4) they like and respect their supervisor, and (5) believe their pay is fair.

Organizational Commitment
The concept of internal marketing is connected with the concept of organizational
commitment (Jarvi 2000). Previous research about organizational commitment can be found
in several areas such as governmental agency (Abbot, White, and Charles 2005; Coleman,
Irving and Cooper 1999), higher education (Cetin 2006; Brown and Gaylor 2002), health
industry (Samad 2006), services management (Beatson and Lings 2005), and engineers and
technicians (Jaros 1995)
Organizational commitment is defined as the degree to which employees believe in and
accept organizational goals and desire to remain with the firm (Mathis and Jackson 2003, 75).
Another definition of organizational commitment is one’s own investment in an organization
and inclining to attitudes resulting in social qualities (Balay 2000 cited by Cetin 2006)
Organizational commitment has several different classifications (see Mowday, Porter,
Steers 1982; Meyer and Allen 1991). However the most widely used classification are Meyer
and Allen’s (1991) classification. Meyer and Allen classified organizational commitment into
three components of commitment: continuance, normative, and affective commitment.
Continuance commitment involves profit associated with continued participation and a cost
associated with leaving. Normative commitment, on the other hand, is the internalized
normative pressure to act in a way which meets organizational goals and interests. Then,
affective commitment is described as the relative strength of an individual’s identification
with and involvement in a particular organization.

Hypotheses and the Research Model


Three hypotheses are developed based on the literature review above:
1. Internal marketing will be positively related to job satisfaction.
2. Internal marketing will be positively related to organizational commitment.
3. Job satisfaction will be positively related to organizational commitment.

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Figure 1. The Research Model

Job
Satisfaction

H1

H3
Internal
Marketing

H2 Organizational
Commitment

Source: developed for this research

Research method
Data collection
There were two stages in this research. The first stage was a pilot research to examine
reliability and validity instrument. The second stage was the actual research. The data for this
research was obtained through self-administered questionnaire from lecturers in a private
university in West Java. The design sampling for this research was a purposive sampling.
There were two main concerns for respondents: (1) respondents should be a lecturer and (2)
respondents should at least have worked one year in the university.
This research applied two-step process to obtain a good response rate. First, researchers
brought questionnaires to all faculties. In each faculty, researchers met respondents (i.e.,
lecturers) and informed them about the survey. When possible, researchers tried to give
questionnaires to lecturers directly. However, when researchers could not meet lecturers
directly, then researchers left questionnaires to the administration staff of each faculty so s
(he) can give questionnaires to lecturers whom researchers could not meet.
Second, we contacted those respondents in 3 to 14 days in order to obtain questionnaires.
Researchers also contacted the staff administration to collect the questionnaires. However, the
questionnaire survey took a month to be collected.

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The anonymity of the respondents was considered in this research. The questionnaires
were assured the anonymity of the respondents. In order to obtain good response rate, this all
questionnaires were also provided with a gift from researchers.

Research Instrument
Existing constructs with multiple-items from previous internal marketing, job satisfaction,
and organizational commitment studies were employed and modified based on the results of
the pilot study. Internal marketing was adopted from Money and Foreman (1996 cited by
Caruana and Calleya 1998). Following Money and Foreman, development and reward were
dimensions of internal marketing construct. Job satisfaction was adopted from Spector (1999).
Organizational commitment was adopted from Allen and Meyer (1990). All variables will be
measured by a 5-point Likert-scale.

Pilot study
There were two main objectives in conducting pilot study in this research. First, the pilot test
was aimed to assess reliability and validity the instrument (Matsuno and Mentzer 2000).
Second, pilot study was used to reduce the number of items used in this research to a more
manageable number (Matsuno and Mentzer 2000). In the specific, the original items in the
questionnaire were 77 items. Therefore, there is a need to reduce those items to become easily
understable and theoretically relevant items (Kellor and Hult 1999). A relatively short
questionnaire also can be easily administered to respondents (Kohli, Jaworski, and Kumar
1993).
Following Ahmed, Rafiq and Saad (2003), items in the questionnaire were deleted when
the corrected item-total correlation was below 0.30. Then, item-total statistics were again
computed to achieve value greater than 0.3. The result produced that original items of 77
items were reduced to 36 items.

Reliability and validity of the measures.


The goodness of measures in this research was assessed through reliability and validity.
Reliability is defined as the consistency and stability of a score from a measurement scale
(Davis, 2005). Reliability was measured by applying several tests: the Cronbach’s alpha and
average variance extracted (AVE). The cut-off point 0.7 (Hair, Black, Babin, Anderson, and
Tatham 2006; Bagozzi, Davis and Warshaw 1992) was applied as the cut-off point for
coefficient alpha and composite reliability.
A measurement scale is valid when that scale measures what it is supposed to measure
(Davis, 2005). The key aspect of validity that guided this research was construct validity.
Construct validity is the extent to which a set of measured items actually reflects the
theoretical latent construct those items are designed to measure (Hair et al. 2006, p.776).
According to Hair et al. (2006), the rules of thumb of construct validity are: (1) standardized

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loading estimates should be 0.5 or higher, (2) average variance extracted should be 0.5 or
greater, (3) average variance for two factors should be greater than the square of the
correlation between the two factors, and (4) construct reliability should be 0.7 or higher.

Data analysis
To test the hypotheses, structural equation modeling (SEM) was employed. SEM is a
multivariate technique that has ability to assess simultaneously the fit and measurement model
and structural model (Landis, Beal, and Tesluk 2000).
Five indices were used to assess the goodness of fit of the structural models: (1)
CMIN/DF, (2) GFI, (3) AGFI, (4) RMSEA, and (5) RMR. First, CMIN/DF is regarded as a
measure of absolute fit and model parsimony complexity in SEM literature because it is
unaffected by the sample size (Hair et al. 2006, Bagozzi 1981). There is no clear guideline
about what value of CMIN/DF is minimally acceptable. However, two suggestion is that the
ratio is as low as 1.0 (Hair et al. 2006) and as high as 5.0 (Kelloway 1993). Therefore, the cut-
off value from 1 to 5 was adopted in this research.
Second, GFI is similar to an R-squared multiple regression coefficient because it
represents the proportion of the observed covariance explained by the model-implied
covariance (Kline 1998). According to Hair et al (2006), no absolute threshold acceptability
levels have been established (Hair et al. 2006). Two recommendations are a value close to
0.90 is marginal acceptance level (Hair et al. 2006) or above 0.90 indicate satisfactory model
fit (Kelloway 1993). That is, values close to 0.90 and above were deemed acceptable in this
research.
Then, AFGI is an extension of the GFI. This index is similar to the GFI in that the value of
the measures ranges from zero to one with higher value indicating that the model fits the
sample data well. Values close to 0.90 are marginal acceptance level (Hair et al. 2006) or
above 0.90 indicate satisfactory model fit (Kelloway 1993), and were applied in this research.
Fourth, RMSEA expresses model fit per degree of freedom (Hair et al. 2006). In this
research, RMSEA values ranging from .05 to .08 are deemed acceptable (Hair et al. 2006).
Finally, RMR as the mean of residuals between observed and estimated input matrices. It is
used to compare the fit of two different models with the same data and is best suited to the
analysis of standardized observed variables (Joreskog and Sorbom 1982). In this research, an
RMR value equals to or less than 0.05 suggested that the model fit the data well (Hulland,
Chow, and Lam 1996).

Results
Response rate
A purposive sampling approach was used to collect data from lecturers in a private university.
Out of the 250 questionnaires distributed, 132 were returned. Three questionnaires were

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rejected due to incomplete response. Then 129 questionnaires were usable questionnaires,
giving response rate 51.6 per cent.

Statistic descriptive
The means, standard deviations, and correlations for development, reward, affective
commitment, continuance commitment, normative commitment, and job satisfaction are
shown in Table 1 and 2.
Table 1. Mean Scores and Standard Deviations of the Variables

Variable Mean Std. Deviation

Development 1.420 0.3490


Reward 0.487 0.1528
Affective commitment 2.097 0.3487
Continuance commitment 0.771 0.1806
Normative commitment 1.359 0.3166
Job Satisfaction 3.107 0.3058
Source: analysis of field data

Table 2. Correlations

Dev Reward Affect Conti Norma Satis


Dev 1
Reward 0.643** 1
Affect 0.200** 0.311** 1
Conti 0.175** 0.282** 0.567** 1
Norma 0.387** 0.433** 0.569** 0.490** 1
Satis -0.172 -0.164 0.248** 0.027 -0.073 1
** Correlation is significant at the 0.01 level (2-tailed)

Source: analysis of field data

Reliability and validity of measures


Evidence of the internal consistence of the constructs is shown in Table 3. Cronbach’s alpha
for each construct is between 0.691 to o.839. Average variance extracted for each construct is
between 0.991 to 0.997.

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Table 3. Reliability Coefficients of the Instruments
Variable Cronbach’s AVE
Alpha Value

Development 0.839 0.995


Reward 0.792 0.995
Affective commitment 0.782 0.991
Continuance commitment 0.691 0.991
Normative commitment 0.757 0.998
Job Satisfaction 0.821 0.997
Source: analysis of field data
Confirmatory factor analysis
Confirmatory factor analysis was run to assess validation of the measures. Although those 36
indicators in the questionnaire indicated significant loadings, experience has shown that a
large number of indicators can be unwieldy (Granzin and Painter, 2001, p.82). Then, this
research applied composite formation technique (Landis et al., 2000). The rationale for
creating composite in practice has been driven by practical concern. This is because SEM
analysis requires a larger sample size as the number of indicators increases. Researchers can
adopt composite formation technique to reduce the indicators. Then, the second confirmatory
factor analysis was conducted. The result yield the good fit of a model (GFI = 0.936, AGFI =
0.864, CMIN/DF = 2.171, RMSEA = 0.096 and RMR = 0.04).
In summary, CFA results showed evidence of construct validity. The results showed that
(1) standardized loading estimates were higher than 0.5, (2) average variance extracted of the
constructs were greater than 0.5, (3) average variance for two factors were greater than the
square of the correlation between the two factors, and (4) constructs reliability were higher
than 0.7.

Structural model
To test the structural relationships, the hypothesized paths were estimated. The results are
reported in Table 4. The fit of the model is acceptable because the goodness of fit indices is
satisfactory.

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Table 4. Structural Model Results

Hypotheses Path Standardized CR Absolute fit


Regression
Weight
H1 Job Satis Å Int Mark -0.265 -2.467 GFI = 0.936
H2 Org Comm Å Int Mark 0.557 4.592 AGFI = 0.864
H3 Org Comm Å Job Satis 0.210 1.938* CMIN/DF = 2.171
RMSEA = 0.096
RMR = 0.004

* Not significant

Source: analysis of field data


Hypothesis 1 stated that internal marketing will be positively related to job satisfaction.
The path coefficient for the relationship between internal marketing and job satisfaction was
significant, but its direction was the reverse of the predicted direction. The relationship
yielded a standardized path coefficient of -0.265 (CR = -2.467). In spite of its statistical
significance, this result does not support hypothesis 1.
Hypothesis 2 stated that internal marketing will be positively related to organizational
commitment. This hypothesis was supported because the loading of job satisfaction Å
internal marketing path was significant (CR = 4.592).
Hypothesis 3 stated that job satisfaction will be positively related to organizational
commitment. However, this hypothesis was not supported because the loading of
organizational commitment Å job satisfaction path was not significant (CR = 1.938).

Conclusion and limitations


In conclusion, the research model supported only one of the three hypothesized relationship.
That is, internal marketing is positively related to organizational commitment. These research
findings should be viewed with several limitations in mind. First, this research used self-
report measures, which may cause common method variance (Podsakoff and Organ, 1986).
Second, the design sampling applied in this research, that is, a non-probability sampling.
Therefore, the findings may not be generalizable to other universities. Third, still relating to
design sampling, this research used full-time lecturers and part-time lecturers as respondents.
The differences in benefits and other things that related to employment status may influence
to respondents’ opinion on internal marketing, job satisfaction, and organizational
commitment.

Research implications
This research has both theoretical and managerial implications. There are two theoretical
implications. First, this research enriches research on internal marketing, job satisfaction, and

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organizational commitment. However, this research found that internal marketing was
negatively influence job satisfaction. This result was not expected because previous study
(i.e., Hwang and Chi 2005) has found that internal marketing positively influence job
satisfaction This research also found that job satisfaction does not significantly influence
organizational commitment. The result of this research in which internal marketing negatively
related with job satisfaction may offer interesting insights for theory.
Second, this research applied the composite formation technique in structural equation
modeling analysis. This research provides empirical evidence that the adoption of composite
formation does have an impact on model fit. Specifically, the composite formation technique
produces a well-fitted model.
This research provides managers with the importance of internal marketing on
organizational commitment in a university setting. Internal marketing was originally
developed from the base of the employee are first market. The concept point outs that
management should care about their employees. Furthermore, the success of internal
marketing program lies with management (Varaglu and Eser, 2006). Despite the research
finding that job satisfaction was related negatively with internal marketing, the research
finding also show that organizational commitment was positively related with internal
marketing. Again, through better understanding and better application on internal marketing,
institutions are able to keep their lecturers.

Directions for future research


There are several directions for future research. First, to enhance external validity, future
research should obtain a representative sample from other universities. This is because the
diversity inherent in individual, then the relationship assessed in this research must be tested
under different sample before any firm generalizations can be offered. Furthermore, future
research should be limited only to full-time lecturers.
Second, once future research use the self-report questionnaires, then the common method
variance should be minimized (see Podsakoff, MacKenzie, Lee, and Podsakoff, 2003; Avolio,
Yammarino, and Bass, 1991; Posakoff and Organ, 1986). Finally, as stated above, the result
of this research in which internal marketing negatively related with job satisfaction may offer
interesting insights for theory and practice. Therefore, further research on internal marketing
and job satisfaction appears to be valuable and necessary.

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