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Developing a Framework for Marketing
the Services of an Industrial Scientific

Professional Organisation. An Examination
of the Market Leader

A Thesis presented in partial fulfilment
of the requirements for the degree of

I\{asters of Business Studies

in Marketing
at l\{assey University

Michael John Sherrard

1994



s),Joq136b& &

L^n*

Dcaq



Abstract

The aim of the thesis was to develop a framework to assist in the marketing

planning of scientific and industrial professional organisations. The government

policy to restructure the Department of Scientific and Industrial Research (DSIR)

into Crown Research Institutes (CRIs) provided the impetus for this research. For

the purposes of this study two samples were drawn from the scientific and

industrial research industry. Employees from all levels and disciplines within the

DSIR (n:19) were interviewed, followed by clients of the industry (n:26). The

interviews aimed to gain respondents opinions and perceptions of the profession,

marketing, the DSI\ and the changing environment. Therefore, a qualitative

semi-structure interview format was deemed appropriate. The findings of this

study revealed that clients in the industry were dedicated to the advancement of

scientific and industrial knowledge for business in New Zealand. However, the

respondents perceived that it is the role of the government to fund pure research,

and assist in the funding of commercial result oriented research. Resulting from

the government policy, it is now imperative for the DSIR to seek commercial

funding. This government policy inhibits the development of long-term

relationships between the DSIR and industry. Thus, gaining greater revenue from

industry is problematic for the DSIR. This study also revealed that both the DSIR

employees and industry clients were optimistic about the inrpending changes to

the business environment. This optimism was however, contingent on the change

to CRIs to be the last major change resulting from government policy. A.lthough

the respondents were optimistic it was implicit from the interviews that they were

unsure of appropriate business planning and strategies in the changing

environment. These findings suggest the need for marketing strategies to include

education and communication elements internally to the professional organisation

and subsequently externally to clients within the industry. The major outcome of

the study has been the development of a framework to assist this market planning.



u

Acknowledgements

I would like to acknowledge the assistance of the following people for their

contribution in making this study possible:

My supervisor, Associate Professor Norman Marr, for his guidance, patience and

willingness to offer invaluable advice and support.

I would like to thank Mr Kevin Duckworth, for the opportunity and assistance to

investigate a diverse and very complex industry.

AII the Scientific and Industrial researchers and their clients, who gave their

invaluable time to participate in my study, and especially to those respondents that

added comments of encouragement.

My colleague and friend, Eric, for his help in clarifying my results and offering

suggestions in the final stages of the study.

On a more personal note, I would like to thank my partner Cate, and my parents

Isabelle and Evan , who instilled me with confidence, enthusiasm, and support to

complete this project.



Table of Contents

Abstract
Acknorvledgements
Table of Contents

Introduction

1.1

T.2

1.3

1.4

1.5

Background

Thesis Objectives

Background to the Extant Literature

Background to the Research

Chapter DeveloPment

2 Extant Literature Revierv

2.1

2.2

Introduction

Services Marketing Literature

2.2.1 The EuroPean Scholars

2.2.2 The Marketing Function

2.2.3 The Misuse of Marketing

DePartments

2.2.4 Homogeneity of Service Organisations

2.2.5 Service Encounter

2.2.6 ComPonents of a Service

2.2.7 Summary

Professional Services Literature

2.3.1 General and Descriptive Research Focus

2.3.2 Product Based Strategic Orientation

2.3.3 Organisational Dilemma

2.3.4 Summary

Ir{arketing Audits Literature

2.4.1 Definitions of Marketing Audits

2.4.2 Strategic Value of Marketing Audits

Page

I

3

4

5

5

7

8

l0
ll

12

l5
l6
17

17

l8
20

2l
2l
23

24

25

25

ur

I

ll

Itl

2.3

2.4



iv

2.4.3 Components of a Marketing Audit

2.4.4 Methods of Measurement in Marketing

Audits

2.4.5 Service Marketing Audit

2.4.6 Marketing Audils and Service Quality

2.4.7 Summary

Internal Marketing, Organisation Climate

and Culture Literature

2.5.1 The DeveloPment of Internal

Marketing as a Marketing EntitY

The Internal and Extemal Customers

Customer Relations

Importance of Promises

The Process and ImPlementation of

Internal Marketing

2.5.6 Internal Marketing, Organisational

Culture and Change

2.5.7 Organisation Cultural Consistency

2.5.8 Summary

Industrial Scientifi c Profession and

DSIR Specific Literature

2.6.1 Summary

Present Study

Research Design

26

26

27

28

29

2.5

2.5.2

2.s.3

2.5.4

2.5.5

29

29

3l
32

JJ

34

37

37

39

40

43

43

2.6

2.7

3

3.1

3.2

Introduction

Research Methodologry

3.2.1 Procedure

3.2.2 Sample Selection

3.2.3 Research Instrument

3.2.4 Method ofAnalYsis

45

45

45

48

5l
55



4

v

Research Findings - Internal Interview
Results and Discussion

4.1

4.2

Introduction

Employee Beliefs Regarding the Role of the

DSIR and its Scientists

4.2.1 Introduction

4.2.2 Colleague Hesitancy towards a Greater

Level of Commercial Work

4.2.3 Productivity of the DSIR Resources

Employees' Attitudes of the Impending

Change to Commercial Crown Research

Institutes (CRIs)

4.3-l Introduction

4.3.2 Effects of the Upcoming Change on

ResPondents' Sections

4.3.3 Importance for Respondents' Section

to Undertake More Commercial

Work

4.3.4 Factors Constitutin g an Ideal

Operating Environment for the DSIR

Marketing, Planning, and Change in the

Industrial Scientifi c Profession

4.4.1 Introduction

4.4.2 CRls Sustaining Long Term

RelationshiPs with Large Clients

4.4.3 Appropriateness ofMarketing

Assistance for the DSIR

Chapter Summary

Introduction

Dedication to Scientific and/or Industrial

Research

5.2.1 Introduction

57

57

57

58

60

4.3

62

62

62

4.4

5.1

<,)

67

68

68

69

7l
74

4.5

Research Findings - External Interviews

Results and Discussion

77

79

79



vt

5.2.2 Research and DeveloPment

Budget Allocation

5.2.3 Importance ofProfessional

R&D Advice

Scientific and Industrial Research

Buyer Behaviour

5.3.1 Introduction

5.3.2 Information Sources

5.3.3 Scientific Professional

Organisation Choice

5.3.4 Comparison of Scientific

Professional Organisations

Based on Techniques

Awareness of Structural Changes to the

DSIR and the Market Environment

5.4.1 Introduction

5.4.2 Knowledge of Changes

5.4.3 Level of Optimism for the Change

to CRIs

Image of DSIR an.ly'erv IRL

5.5.1 Introduction

5.5.2 Image of the DSIR

5.5.3 Market Expectations of IRL

5.5.4 Factors Constituting an ldeal DSIR

Market Requirements of Scientific and

Industrial Research

5.6.1 Introduction

5.6.2 Services Demanded by the

Market

5.6.3 Technology Transfer

5.6.4 Foundation for Science and

Research Funding

The Market's Perception of the "Client-

Company" Relationship with the DSIR

5.7.1 Introduction

5.7.2 Level of Business Relationship

5.7.3 Opportunity for the Development

of a Long Term Business Relationship

80

5.3

8l

82

82

83

83

5.4

84

84

84

85

86

88

88

88

93

94

95

95

95

100

100

l0l
l0t
l0l

103

5.5

5.6

5.7



vll

5.7.4 Perceived Expense of Commissioning

the DSIR

5.7.5 The Level of Personal Contact Between

the DSIR and the Market

5.8 ChaPter Summary

6 Conclusions

104

106

r07

6.1

6.2

6.3

6.7

Introduction

Limitations of StudY

To Investigate Factors that Both Enhance

and Inhibit the Transition from a Public

Organisation into a Private Enterprise

Determine the Key Factors to Success

of the Professional Service

Develop a Framework that will Aid in the

Strategic Decision Making Process of

Industrial Scientific Professionals

Suggestions for Future Research

References

Appendices

110

110

ll0

tt26.4

6.5

l13

ll5

l17

t29



3

vru

List of Tables

3.1 Internal ResPondents bY Position

List of Figures

Flow of Literature Review

Level of Government Funding for R&D as a

Percentage of Total Revenue

R&D Expenditure as a Percentage of GDP (1991)

3.1 StePs in the Research Process

2

49

46

2.1

2.2

2.3

8

40

4l

3

4
4.1 Respondents' Perception of Colleagues

Hesitancy to Undertake More Commercial

Work

Respondents'Beliefs of whether the Resources

ofthe DSIR are used ProductivelY

Respondents' Agreement that the DSIR should

be doing more Commercial Projects

Respondents' Agreement to the DSIR becoming

the'R&D Arm' of Large Organisations

Respondents'Opinions as to whether Marketers

can assist the DSIR in the Future

58

6l
4.2

4.3

4.4

4.5

69

72

f,
5.1 PositionofResPondents

78



rx

5.2 Total New Zealandand Overseas Respondent

Companies with In-House Research Sections 78

5.3 Respondents' Allocation of Research Budgets

and whether they have In-House Research

Facilities 80

5.4 Level of Importance Indicated for Gaining Outside

Specialised Advice on Scientific and Industrial

Matters 82

5.5 Sources of Informational Referral by

ResPondents when deciding on a

Scientific and Industrial Organisation 83

5.6 Level of Respondents' Own Perceived

Awareness of DSIR Restructuring 86

5.7 Level of Agreement that the Changes to the

DSIR will be Positive 87

5.8 Image of the DSIR by Respondents 89

5.9 Level of Agreement by Respondents that

the DSIR is a "State of the Art" Research

House 9l

5.10 Level of Agreement by Respondents that

the DSIR can Change 94

5.11 The Services that Respondents Indicated

as Applicable to their Organisation - Part A 96

5.12 The Services that Respondents Indicated as

Applicable to their Organisation - Part B 96

5.13 Respondents'Perception of the Style of

Business Relationship they have with the

DSIR

5.14 Level of Agreement by the Respondents that

the DSIR Represents Value for Money

r02

6.1 A Framework of KeY Managerial

Considerations for Marketing the

Services of an Industrial Scientific

Professional Organisation

l0s

6

ll4



Chapter One

Introduction

1.1 Background

The last eight years have brought some substantial changes in the New Zealand

economy. Private industries from telecommunications to transportation have been

deregulated, the country has been opened to foreign investment, and government

support has either been reduced or discontinued completely to some business sectors'

A resultant area of bold restructuring that has occurred from the economic shif is

that over this time successive New Zealand governments have undertaken an agenda

of transforming a number of government departments into competitive' state-owned-

enterprises.

There is less than ever before clear boundaries between government agencies and

private enterprise. organisations and their clients are hurriedly attempting to learn

how to do business in this new environment where it is increasingly difficult to

determine what is now a public good and what is a private good.

These changes have unsettled private and public organisations, but more importantly,

the changes have left both types of organisations open to competition' This has

required re-assessment of how business plans and operates, and how to establish a

basis on which to comPete.

Professional Services are a section of business that have been greatly impacted by the

changes in the economy. Service Professionals try to identi$ what may row be their

key factors to success while they continue to struggle to adapt and implement product

marketing models and techniques to their unique business environment'

Industrial Research Limited Historical Background

One research service profession that has been directly affected is the small and

specialised industrial scientific profession. one of the latest government departments

to be considered for restructuring into a commercial, state-owned-enterprise is the



2

Department of Scientific and Industrial Research (DSR)' The DSIR is being

reformed into ten Crown Research Institutes (CRIs). This quasi-privatisation of the

DSIR is causing professionals and their client's within the industry to review their

business planning and basis for competition'

The DSI& was the largest industrial scientific organisation in New Zealand- Since its

inception in 1926, the DSIR's role has been to assist New Zealand's development

through better understanding and management of resources and application of science

and technology to expand and improve industry. This includes pure research work

that has no specific end client. Each of its ten divisions is expected to contribute to

this aim both through work for the crown and industry. This aim is embodied in the

DSIR's mission statement:

"Making Science Work for New Zealand"

@SfR Industrial Development Divisional Statement of Intent 199011991,1990)

The DSIR employs about 2500 people, and provides scientific Research and

Development (R&D) and consultancy services to industry and government bodies' It

generates over $200million of science a year, which corresponds to about 7oo/o of

New Zealand's investment in R&D.

In 1987 the DSIR was "commercialised" by the Labour Government, as paft of its

public sector reform. The public sector reforms were designed to liberate the

government of all but essential public sector assets. Then in July 1990 the

organisation was restructured again, creating ten "megadivisions" that were

characterised by a more horizontal management structure than was previously in

place. This reinforced the "User-Pays" system which was implemented in 1985 and

introduced commercially-oriented management objectives (such as a comprehensive

system of financial controls). The aim of these policies was to make the DSIR

divisions more responsive to the needs of New Zealand industry, less dependant on

crown funding, and accountable for its activities'

Commercial revenue has been the fastest growing segment of the organisation's

business. For example, in 1989-90, the former DSIR earned $50million from contract

work. However, today most of the organisation's funds are still allocated on a

contestable basis (on behalf of the crown), by the Foundation for Research, Science'

and TechnologY (FORST).



3

one of the ten cRls, Industrial Research Limited (IRL), is expected to continue the

tradition of the Department of Industrial Research, as a major influence in the

industrial scientific marketplace. Section 3.2.2 provides detailed information on the

selection of the Department of Industrial Development for this study'

Recognition of the potential for competitive planning in the industrial scientific

profession offered by an effective study of the new market environment and a lack of

marketing models to aid in the planning process has stimulated this study of a

professional service in New Zealand. Objectives have been developed for the study as

outlined in sections 1.2 to 1.4. Section 1.2 presents the overall thesis objectives'

section 1.3 the objectives of the extant of literature, and section l'4, the research

objectives.

1.2 Thesis Objectives

Using the work published by recent service marketing authors as a foundation' the

research objectives of this thesis are outlined below:

. To investigate factors that both enhance and inhibit the transition from a public

organisation into a private enterprise

. Determine the Key Factors to Success of the Professional Service'

. Develop a framework that will aid in the strategic decision making process of

industrial scientifi c professionals.

The research outlined in Chapter One is designed to achieve the above overall

research objectives through the following four stage process: a review of the extant

relevant literature was undertaken followed by in-depth interviews within the case

study organisation and with their clients. Finally, an analysis of the interview

transcripts and questionnaire data was undertaken'



L.3 Background to the Extant Literature

The key authors whose work is drawn upon in this study are christian Gronroos and

Evert Gummesson (both from the Nordic School of Management), Christopher

Lovelock, Benjamin Schneider, Neil Morgan, Nigel Piercy, and william George'

These authors, while not specifically researching the topic area of the present study,

have made significant contributions to developing models and philosophies primarily

concerned with the management and marketing of service organisations, especially

professional and industrial services.

The majority of discussions divided into five main areas:

. Service Marketing Literature.

. Professional Service Marketing-

Marketing Audit Literature.

. Internal Marketing, Organisational Culture and Climate Literature'

. Industrial Scientific Professional and Department of Scientific and Industrial

Research PS[R) Literature.

The first section briefly reviews the broader area of marketing strategies, plans,

models, definitions, and thought developed for service organisations' The next

section deals more specifically with the unique marketing needs of the sub-section of

services: professional services. Following is the section concerning the method of

investigation involved in this services marketing study, marketing audits literature'

The extant literature on internal marketing, organisational culture and climate is also

important to review, as the scope of the present study includes investigating within

the chosen service industry market leader. Lastly, the literature on the privatising of

public departments is reviewed, with literature pertaining specifically to the history

and changes of the DSIR.



5

The objectives of the review of the extant literature relating to professional service

organisations are to:

Present the current knowledge and development in each of the key areas of

concern in professional service marketing.

. present the findings of the current research in professional service marketing.

. Identify and compare any similarities and differences in the literature.

1.4 Background to the Research

Using the foundation provided by the extant literature, a primary research study was

designed to investigate the marketing management of the Industrial Scientific

profession. In-depth interviews were carried out with employees of the case study

organisation. The preliminary results gained from these interviews aided the

development of a second round of in-depth interviews with past, present' and

potential clients of the case study organisation. The information sought intended to

fulfil the following objectives:

. Determine market and employee perceptions and opinions of the Industrial

Scientific Profession.

. Determine market and employee perceptions of the o/dDSIR and the rrew IRL.

. Identiff DSIR employees' attitudes'and perceptions'to marketing.

1.5 Chapter DeveloPment

The conceptual discussion and primary research presented in this thesis consists of six

chapters. Chapters Two and Three present the conceptual basis of the research.

Chapter Two presents the extant literature on five areas of research that cumulatively

develop a basis for the present study. Chapter Three presents the research design for

the present study, investigating the DSIR and clients of the industrial scientific

profession, and addressing the overall thesis objectives by focusing on the specific

objectives of the research.



5

Chapters Four and Five present the research findings. Chaper Four presents results

from discussions with DSIR employees. Chapter Five complements the internal DSIR

findingp with a presentation ofthe opinions and perceptions of clients in the industrial

scientific market.

Chapter Six concludes the study with a summary of how the research results address

the overall thesis objectives. The limitations of the study are recognised and

suggestions for further research proposed'



7

Chapter Two

Extant Literature Review

2.L Introduction

The objectives of the review of the extant literature are to:

Present the current knowledge and development in each of the key areas of concern

in professional service marketing.

o Present the findings of the current research in professional services marketing '

. IdentiS and compare any similarities and differences in the literature

The review of extant literature for this study is broadly discussed in five sections. The

first section reviews the broader area of marketing strategies, plans, models, definitions,

and thought developed for service organisations. The next section deals more

specifically with the unique marketing needs of the sub-section of services: professional

services. Following is the section concerning the method of investigation involved in

this services marketing study, marketing audits literature. The extant literature on

internal marketing, organisational culture and climate is also important to review, as the

scope of the present study includes investigating within the chosen service industry

market leader. Lastly, the literature on the privatising of public departments is

reviewed, u,ith literature pertaining specifrcally to the history and changes of the DSIR-

Figure 2.1 illustrates the progression of the five sections of literature review.



8

Figure 2.1. Flow of Literature Review

,r7 Services Marketing Literature

In the late 1970's marketing thinking and practice was moving into the service

industries, albeit to a limited extent. It was then that the basis for today's models of

marketing in the service sector were formed. Therefore, it is appropriate to begin with

a review of the very early theorists in services marketing.

There has been a long debate between academics and practitioners as to the differences



9

between goods and services. In 1969 Johnson asked whether goods are different than

services, initiating the goods versus services debate. Johnson's (1969) dissertation was

prompted by three descriptive Journal of Marketing articles during the 1960's @egan'

lg63; Judd, 1964; Rathmell, 1966) that are credited with beginning the "service

revolution".

Following the intense interest in buyer behaviour during the 1960's, Blois (1974)

proposed a model of services marketing based on theory in buyer behaviour' He also

commented on the infrequent literature on services'

The debate on whether service marketing differs from product marketing was at its

height during the 1970's. The discussion on this topic was regarded as predominantly

one-sided, as the new services marketing academics had to defend the legitimacy of

their research (Swartz, Bowen & Brown, 1992; Fisk, Brown & Bitner, 1993)'

An influential article by Lynn Shostack, in 1977, has been deemed by subsequent

scholars, as having altered the course of thinking about services marketing. The article

made a series of thought provoking assertions including, "could marketing itself be

myopic in having failed to create relevant paradigms for the service sector?". She

further commented that "service industries have been slow to integrate marketing into

the mainstream of decision making and control because marketing offers no guidance,

terminology, or practical rules that are clearly relevant to services" (cited in Fisk et al.,

1993, p69).

Research into service, up to and including 1980, identified that a service offering is

immaterial and physically intangible (Rathmell, 1974; Kotler & Connor, 1977;

Gronroos, 1980). The client cannot see, feel or taste a service and, therefore, he or she

will have substantial evaluation problems of the service offering. As the client is not

able to evaluate the abstract service they will look for tangible clues in the service

oflering which can be used as a basis for an evaluation of the service (Gummesson,

1979; Lovelock, Langeard, Bateson & Eigler, l98l). Furthermore, services are often

consumed as they are produced. This characteristic creates the emergence of a

buyer/producer interaction (Smith & Turnbull, 1990). The service producing firm and

its representatives approach the clients.

Finally, services are activities, not things, although physical goods or things may be

needed either to support or facilitate the service consumption (Rathmell, 1974). This

means that a service is produced in a process which simultaneously is the service- The

output of the production process, of the service, cannot be separated - more than to a



Lo

limited extent - from the process itself. This process takes place in the presence of the

consumer and with the consumeds co-operation (George, 1977; Gronroos, 1982;

Johnston, 1993).

Since the acceptance of fundamental differences between service marketing and

product marketing, one direction of research has been to study the service component

that is in all product offerings. This area of investigation is developing to demonstrate

the legitimacy and importance of service in gaining customer satisfaction' Quinrq

Dorley and Paquette (1991) concluded from their recent study that manufacturers are

now able to develop only a limited competitive advantage in terms of the products they

offer. The extent to which price and product range are important to gain customer

orders is decreasing. The result has been for manufacturers to give more attention to

service, including the handling of customer enquiries before, during and after a

purchase, and how a product is provided, for the gaining of a competitive advantage'

2.2.1 The EuroPean Scholars

Shostack's (1977) contention for the development of new thoughts on services

marketing appeared to be influential throughout the world. This is evidenced by the

emergence of ideas in the late 1970's, and into the 1980's in Europe, especially

Scandinavia. The Scandinavian academics have been termed the "Nordic School of

Thought" (Gronroos, 1989; Gronroos, l99l). The Nordic School ideas, derived

primarily from two leaders, Evert Gummesson and Christian Gronroos, have had a

significant reciprocal impact on the development of ideas in America (Fisk et al., 1993)'

The research is characterised by a move away from the structure of marketing

determined by the 4P's of the marketing mix (consisting of Price, Promotion, Product

and Place).

It can be observed how the research approach of the Nordic School has shaped the

rapid progression of innovative and revolutionary ideas surrounding services marketing,

services quality, internal marketing, and service management, since their inaugUration

around the late 1970's-

In contrast to the American Network of researchers, the Nordic School of Services,

focused upon the development of genuine service-oriented knowledge, adopting a

marketing as opposed to an operation's or production perspective' The production

orientation of the USA researchers was a concern expressed by Wyckham, Fitzroy and

Mandry in their critical review of services marketing in 1975.



tl-

In contrast to the traditional, predominantly quantitative statistical survey techniques,

the methodology adopted by the Nordic School was also unique. Close relationships

between practitioners and academics enabled numerous practical experiments and case

studies to form the basis for the continual pursuit of better marketing concepts. This

action-oriented, inductive and primarily normative research methodology facilitated the

development of major breakthroughs, new frameworks and concepts'

Marketing thought in the academic establishments, as well as among practitioners' is

based on the marketing mix approach. Gronroos, explains that "The marketer' who in

the organisation structure is placed in a marketing department, plans various means of

competition, and blends them into the marketing mix, so that a profit function is

optimised" (1989, p53). The marketing mix model is widely considered to be the

general marketing model through almost all the western world. what is easily

forgotten is the fact that this model was developed in North America using empirical

data concerned mainly with consumer packaged goods and durables. IUoreover, the

marketing environment is in many respects quite specific, eg a huge domestic market, a

certain media structure, for instance, as far as television and radio are concerned, and a

non-oligopolistic, highly competitive distribution system (Calonius, 1986; Gummesson,

1987; Gronroos, 1989).

The marketing mix model has been used in environments outside those the empirical

evidence behind the model covers, that of the American consumer packaged goods

markets. For example, in industrial markets and in the marketing of services, the

marketing mix has "... already had a powerful impact" (Gronroos, 1989, p53)'

2.2.2 The Marketin g Function

This new research, promoted by the European scholars, has focused on the need to

develop a greater understanding of the "marketing function" based on the customer

relations and marketing situations that exist (Turnbull & Valla, 1987; Gronroos, 1989;

Gummesson, 1987; Morgan & Piercy, 1990). The research has been highly empirical

but has also been conceptual. It relies heavily on close contact between the researchers

and the participant practitioners and on case studies as research method, although

quantitative methods have also been used to support the extensive qualitative findings.

One of the key issues in the

function of an organisation.

Nordic School research is the view of the marketing

This function must be firstly distinguished from the



L2

marketing department. Gronroos makes the distinction that "the latter (marketing

department) is an organisational solution only, whereas the size and diversity of the

former (marketing function) depends on the nature of the customer relations" (1989,

p55). Therefore, the marketing function is spread over a large part of the organisation

outside the marketing department, and the department cannot be the only specialists to

undertake all of the activities that have an impact on the present and future buyer

behaviour of the customer.

The outcome of this research has been that many firms have responded to the need for

marketing to be an organisational activity and reduced the importance of their

marketing departments (Gummesson, I987;Gronroos, 1989; Morgan, 1990a)' The

marketing responsibilities have been delegated to areas of operations, resulting in an

acceptance that many staffand support functions include elements of marketing in their

duties. It is, therefore, appropriate to review the extant literature on research

investigating the applicability of marketing departments within service organisations.

2.2.3 The Misuse of l\{arketing Departments

product producing companies tend to have a marketing department that historically

does not interact much with other departments of an organisation. This means that

they are not fully meeting the needs of the market, owing to their lack of co-ordination

within the whole firm.

In the literature on marketing, the marketing department is generally suggested as the

most developed way of organising for modern marketing (Kotler, l99l). It is also

suggested that such an organisational structure will work in many types of service

industries, like insurance, health care, retailing and consulting (Kotler, l99l).

However, there are a large number of marketing managers and marketing directors that

feel frustrated with their role as heads of marketing departments in service

organisations (Gronroos, 1983, Sherrard, 1992)- Moreover, Gronroos (1983)

produced empirical material, from Sweden and Finland, which gives several examples

of small and large service firms that do not have any marketing department or unit

responsible for marketing activities. Donnelly and Berry go as far to state that "...the

marketing department stage, which may be common in many service industries today

(l9gl), may be an unnecessary and even dangerous era for many service firms" (1981,

psz)-

Industrial companies tend to have more interdependence between the marketing



L3

department and other departments of the organisation (Gronroos, 1980). This is due to

the need for the whole organisation to plan, develop and deliver industrial offerings to

the consumer, compared to the ability of consumer goods organisations who plan their

marketing effort solely in the marketing department @est, 1990).

Gronroos (1980) feels that the establishment of a marketing department is not a useful

means of introducing marketing into a service organisation. Indeed, he claims that

successful service organisations often do not have a marketing department, or they are

very small departments. More recent research supports this claim by stating that the

presence of a department of marketing often causes the other sections of the

organisation to feel they no longer have to undertake marketing activities, a task many

would prefer to leave well alone (Morgan, 1990c; Morgan & Piercy, 1990). Therefore'

if the marketing department is fairly small and top management keep the total

marketing responsibility, the other departments of the organisation may accept that

they still have marketing tasks to perform, although there are marketing people in the

company.

It is important that the small marketing department is concerned with the overall co-

ordination of the marketing activities of the organisation and/or is treated as a specialist

on some marketing activities, such as advertising, not as marketing specialists

responsible for the total marketing function (Morgan & Piercy, 1990). When the rest

of the organisation begins to see the marketing department as overall marketing

specialists Gronroos fears that "... the movement towards a production-orientation

begins" (1980, p503).

Gronroos (1980) feels that the main reason for a service company becoming service

orientated instead of marketing orientated, is a failure to see the nature of service

marketing. "The marketing of physical goods has been applied to service organisations

without noticing that the marketing of services seems to be different" (Gronroos, 1980,

ps02).

Gronroos, (1983) empirical research has some general findings that were observed for

service organisations of varying sizes. Firstly, that the presence of a marketing

department may at some time be "useful", but in the long term it becomes a hindrance

to the development of a marketing orientation in the service organisation. As long as

there are marketing specialists somewhere in the organisation, they are expected to

implement marketing, while other departments of the firm do only other tasks.

Gronroos (1983) found that the only time this situation did not exist was when the

marketing manager was such a personality that he or she ovelTun the formal



L4

organisation, developing a customer orientation. Otherwise, the marketing manager

was likely to be overrun by the organisational constraints. This causes a very strong

reliance on, what Gronroos calls "traditional marketing activities" (1983, p518),

including personal selling and advertising desigrq rather than the more desirable

interactive marketing (Interactive Marketing defined as "...involving personnel,

physicaUtechnical resources and operational routines to interact with the traditional

marketing activities, for long run success.' (1983, p508)).

Secondly, the responsibility for the planning and implementing of both "the traditional

marketing function and the interactive marketing function should be delegated down in

the organisation as much as possible" (Gronroos, 1983, p5l8)- Gronroos (1983)

suggests to the level ot, say, a regional or branch manager, who also has operational

responsibilities. He thinks this is necessary as the interactive function of marketing can

be monitored by the person who has direct control over the personnel who deal with

clients.

Thirdly, at the head office level, Gronroos (1983) suggests that some type of marketing

coordination and marketing planning and support is appropriate. This means that each

'unit'of functional marketing activities are still working towards the overall goals of the

organisation. This may include the implementation of an internal marketing programme

to initiate employees to the benefits and techniques involved in a marketing orientation.

This level of marketing planning and development would be classified by Gronroos as

the responsibility of a "Marketing Coordinator"(1983, p5l8).

Finally, Gronroos's (1983) study revealed that the planning of the total performance of

the firm is actually undertaken by the marketing coordinator of the organisation. This

is because the marketing coordinator is supporting all kinds of marketing activities on

the local level and coordinates the traditional and interactive marketing functions as

well as the internal marketing throughout the organisation. As was stated earlier by

Gronroos (1983), the interactive marketing concept requires that marketing on the

interactive level is linked rvith operations and the use of technology and other physical

resources. Therefore, it was concluded that, there is no need for a limited marketing

plan that is accompanied by operational or other sub-plans. That the marketing

coordinator can be responsible for developing "marketing-orientated corporate action

plans" (Gronroos, 1983, p5l8), which encompass, not only traditional and interactive

marketing planning, but also cover operations, personnel, internal marketing, and

technologry.



L5

2.2.4 Homogeneity of Seruice Organisations

Morerecentlyanextensionandre-examinationoftheservicesliteratureuptothemid

1980's has prompted the investigation of the level of homogeneity between various

types of service organisations. The results suggest that between service sectors there

are large enough differences in business operations and markets to prompt the

development of service sector specific marketing styles (unrnrla & Donaldson' 1988'

Mcl-ean, 1994)-

It is important to firstly distinguish between the marketing function of an organisation

and its marketing department. The marketing function is defined by Gronroos as ""' all

activities which influence the preference of the consumers towards the offerings and'

therefore, also the success of the company and its chance of staying alive in the long

run. The marketing department, on the other hand, is the organisational entity which is

responsible for some, but not necessarily all, marketing activities performed by the

firm" (1980, P502).

In the goods sector, especially consumer goods, the marketing department can plan and

implement most of the marketing activities, ie the marketing department is in almost

total control of the marketing function' In the industrial sector the situation is

somewhat different, owing to greater interdependence between different business units

and dePartments (Webster, 1978)'

In the service sector the situation is viewed by many marketing academics and

practitioners as very different (Gronroos, 1980; Gummesson, 1978; Webster' 1978).

The marketing manager is in a ,,sideJine.. (Gronroos, 1980, p502) situation and can

control only a minor part of the marketing function' The marketing manager usually

does not have the authority or the resources to manage the buyer/seller interaction'

Therefore, he/she cannot plan and implement activities within the purchasing and

consumption process of the marketing function' These tasks are left to the final

provider of the service in the organisation, such as the desk clerk' airline steward or

consulting engineer (Kotler & Bloom, 1984; Sherrard' lgg2)' Gronroos (1980)

indicates that people in the personnel section, operations department and other

departments are often quite prejudiced against their activities simultaneously being the

concerns of the marketing manager'

Consequently,themarketingdepartmentismainlyengagedinmassmarketing
activities, such as planning advertising, designing brochures' personal selling to

industrial buyers and possibly market research' This means that under Gronroos'



l_6

,,Three Stage Model" (1980, pa98) of marketing to service customers (Stage One:

Creating Interest; Stage Two: Purchase; Stage Three: Guarantee Resale), the

marketing departments of service organisations are mainly concerned with the

marketing activities to create interest, thus leaving those activities that influence sales

to people in the organisation who are not particularly interested in marketing. This

highlights the misuse of an organisational structure that has been developed for the

goods-producing sector, and not for service organisations that depend on people for

the marketing of their offer (Lovelock, 1988; Kelly, 1992). The literature on the

reliance and importance of people for the service offering will be reviewed next'

2.2.5 Seruice Encorrnter

Although a service is an interaction between a customer and a complex system, a very

important element of many services is a person-to-person encounter' However, in the

research to date there have been very few models or theories developed for determining

the factors of these dynamic interactions between persons (Solomon, Suprenant,

Czepiel & Gutman, 1985; Goodwin & Bradford, 1992). Hence the employees of the

service providers have been somewhat neglected in service research (Bolton & Drew,

leel).

More recently scholars (Bitner, Booms & Tetreault, 1990) have investigated the buyer

and seller interaction that takes place during the purchase and post-purchase period of

the service provided by manufacturing organisations, and especially by the non-

marketing specialist employees in a service organisation. This interaction is termed the

"seryice encounter" (Bitner et al., 1990, p7l), and takes place for service providers

when a customer and a service firm employee interact.

The co-ordination of this encounter is very important in service delivery success

(Normann, l99l) but, as indicated by earlier research (Gronroos, 1980; Morgan &

piercy, 1990), it is undertaken by employees not typically interested in marketing

activities. The importance of this part of the service interaction for gaining customer

loyalty is due to the high level of trust and commitment that develops on both sides of

the encounter (Morgan & Chadha, 1993). This suggests service quality problems could

occur owing to poorly trained or motivated'part-time'marketing employees'



LI

2.2.6 Components of a Service

The characteristics of the service offering discussed above, lead to some conclusions

about what the consumer actually thinks about the service' In 1980 Gronroos

identified severar components in the service context that will determine the consumer's

evaluation of a given service offering's ability to satisfy his or her perceived needs' This

early research has become generally accepted over the following decades @isk et al''

1993). The dependent components are:

(1) ,,The Means of Production: The technological resources and the human

resources of the organisation are important. This includes the client's

perception of the organisation's facilities and employee behaviour.

(2) The Production Process: The method in which the production resources are

used in order to produce the service. For instance, the capabilities and

behaviour of consultants and their way of taking advantage of the other means

of production, will have an impact on the client's evaluation of the service'

Simultaneous purchasers or consumers: people who may influence the

preference of a given client." (Gronroos, 1980, p497)
(3)

The first two components that Gronroos (1980) states determine a consumer's

evaluation of a service offfering would seem to be very similar' That is, as services are

usually produced and consumed simultaneously, it would seem logical to assume that

the means of production and the production process are hard for the consumer to

differentiate (Rushton & Carson, 1985). For example, both determinants mention the

behaviour of employees in the client's evaluation of the service.

2.2.7 Summary

For more than two decades marketing academics have focused on a broad range of

issues rerating to the marketing of services. It is well established in the literature that

services marketing is different than product marketing' Specifically' services have

distinct components to distinguish them from products.

The services marketing literature has recently progressed to also include studies of the

differences betveen various service sectors. The increasing number of scholars who

are investigating these within service differences have developed models on the



L8

marketing of individual service sectors, such as Professional Services'

The European Scholars, especially from the Scandinavian countries, developed

strategic initiatives for service organisations based on research that broadened the

product based ,Marketing Mix' definition from the united States. The argument for

this 'back to basics' approach was that continual reexamination and adaptation of the

product based 'Marketing Mix' model would never sufticiently encompass services

marketing.

The importance of people in a service offering has prompted several areas of research

within services marketing. These include investigations of: the marketing function

throughout a service; the relevance of marketing departments in services; and the

service encounter during the service marketing exchange process.

2.3 Professional Services Literatu re

Prior to the 1990's, limited academic research had been canied out in the marketing of

professional services. The first research into the marketing of professional services was

undertaken in the United States (Wittreich, 1966; Turner, 1969; Kotler & Connor,

1977). Since this early research the literature has developed to determine that

professional services need to be considered separately from product and non-

professional service marketing, because models and concepts cannot be easily

interpreted for professional services (Gummesson, 1979; Bloom, 1984; Lovelock,

l9g4). Consumer models are of only limited help to industrial and professional service

marketers.

professional services are a subset which is differentiated from other services by being

mainly of an advisory nature and being operated by skilled professionals' Early on,

Gummesson, developed the following criteria to help distinguish professional services

from other products offered in the market:

The service should be provided by qualified personnel, be advisory, and focus

on problem solving.

The professional should have an identity, ie, be known in the market for his/her

specialities and under a specific name such as "architect' or "management

consultant".

The service should be an assignment given from the buyer to the seller'



L9

The professional should be independent of suppliers of other services or goods.

(1978, p91)

A definition of professional status has been developed by Bennion (I989), expanding

on Gummesson's (1978) identity criteria of a professional service. Bennion's definition

stated that the development of private practice should form a tradition of service and

have a governing professional institution, with one of its roles being to enforce

specifi ed codes of conduct.

In many professions the idea of marketing has traditionally been foreign and distasteful.

While this view is still present in some professions, several developments in the last l5

years are causing professionals to regard marketing as a legitimate management

function. These developments include:

The revision of legal sanctions and ethical standards. Several highly publicised

court cases, brought by professionals, United States federal agencies and

consumer groups, deregulated the professional body's right to prevent their

members using a wide range of marketing communications and promotion

tools.

An oversupply of professions. There is more competition to retain present

customers and gain new customers owing to increased numbers in many
o

professions.

A declining public image. The high esteem in which professionals were held in

the past no longer exists, owing to such things as a poor image of professionals

portrayed by the media and malpractice suits. This situation has made it both

acceptable and practical to use marketing techniques to increase their public

image and to increase the satisfaction levels of their clients (Wheatley, 1983;

Kotler & Bloom, 1984; Bloom, 1984; Fay & Bell, 1990; Morgan & Piercy,

1ee0).

Professionals are realising that different styles of marketing can be applied to

professional services (Crane, 1989b). One style can be described as the hard sell and

"push" technique. Another style is more traditional and avoids advertising and hard

selling techniques. Professional services can rely on advertising and selling only

minimally, and should concentrate instead on carefully designing services, pricing

strategies, and effective distribution networks to achieve profitable results (Kotler &

Bloom, 1984; Teas, Dorsch & McAlexander, 1988; Souter & McNeil,1992)-

Societat changes in the past 15 years have made it important for professionals to be



20

aware of, firstly, what it means to become marketing orientated and, secondly, what

professional service marketing encompasses. Kotler and Bloom (1984) define a

marketing orientation as:

,'A marketing orientation holds that the main task of the organisation is to

determine the needs and wants of target markets and to satisfy them through

the design, communication, pricing and delivery of appropriate and

competitively viable offerings." (Kotler & Bloom, 1984)

While Kotler and Connor (1977) more specifically define professional services

marketing as:

"Professional service marketing consists of organised activities and programmes

by professional services firms that are designed to retain present clients and

attract new clients by sensing, serving, and satisfying their needs through

delivery of appropriate services on a paid basis in a manner consistent with

credible professional goals and norms." (Kotler & Connor, 1977.' p68)

In New Zealand, similar trends were developing in the middle of the 1980's. Fay and

Hoogsteden (1983), and Bell and Wallace (1985; cited in Fay & Bell, 1990) published

work which encouraged a marketing orientation by professionals. The Commerce Act

of 1986 made it illegal for a profession-wide scale of fees to be charged (Sherrard,

lgg2). This provided encouragement for individual professionals or their companies to

communicate more freely to the market through advertising and promotion.

2.3.1 General and Descriptive Research Focus

In spite of the growing services marketing literature and the recent awareness and

demand from professionals for marketing techniques, professional services suffer from

a dearth of literature on marketing, especially in New Zealand. It has aroused only

limited academic focus and little empirically based study (Morgan & Piercy, l99l).

The studies that have been undertaken in professional services are largely US based,

general and descriptive (Wittreich, 1966; Turner, 1969; Kotler & Connor, 1977;

Gummesson, 1978; Bloom, 1984; Kotler & Bloom, 1984). This literature has generally

been of a theoretical nature, attempting to develop conceptual frameworks for the

professions through the adaptation of product marketing models and other service

sectors into the professional service paradigm (Morgan & Piercy, 1991). As with other

professional services, industrial scientific professionals have expressed particular



2L

concern about how to adapt to the present competitive environment (Morgan, 1990c).

The limited number of marketing concepts and techniques that are easily applied to

professional service organisations has been a major barrier to the implementation of
marketing within the industrial scientific profession (Benjamin, 1990). Therefore, the

use of marketing techniques within the profession is unco-ordinated in nature and there

is disagreement as to the most effective method of developing successful relationships

with clientele.

This disagreement, it could be suggested, may be due to the inconsistency of the

development of the research in the professional service area. An example of the

present literature available to service professionals is a study by Crane in 1989. Crane's

(1989a) study showed that over 80 percent of clients relied on personal referral when

selecting lawyers. While in contrast Babcock (1991), has more recently documented

that journal articles prescribe marketing within professional services as including

product-based tactics of advertising and sales 'cold' calling. The two types of research

conclusions ofler very different strategic implications for the service professional.

These types of references, disregarding the specific strategic and planning imperatives

of professional services marketing (Gronroos, 1990; Morgan & Piercy, l99l), are

presently the predominant type of reference available to management in the professions.

2.3.2 P roduct Based Strategic Orientation

However, academic studies have commonly applied a strategic orientation to

professional services marketing, albeit based entirely on the transference of product-

based strategies. For example, in a 1988 study by Hensel (1988), a strategic

orientation was applied to professional services marketing based entirely on the

transference of product positioning strategies to professional services. Shimpock-

Vieweg (1991), applied the'marketing mix'to the services of libraries, continuing the

product-based orientation for professional services strategy development.

2.3.3 Orgnisational Dilemma

Early research of professional services by Gummesson (1979) investigated the

marketing and purchase of professional services. The population sample was 50 people

who were interviewed from various professional services. Gummesson (1979)

identified an organisational dilemma that occurs in professional service firms. Unlike



22

product marketing where it is possible to separate marketers from other areas of the

organisation, the marketer of a professional service usually takes part in the operation

of assignments. Gronroos (1980), concurrently identified this organisational dilemma

in consumer service firms through research on banks and travel agencies.

Gummesson (1979) looked at three areas which are affected by the organisational

dilemma. Firstly, within the organisational structure, it is common for professionals to

spend most of their time doing assignments. Consequently, it is less common for

executives in the professions to only do marketing or administration. The dilemma

Gummesson (1979) found is that professionals become less effective if they spend less

and less time on assignments. These findings have been validated in more recent

studies (Morgan & Piercy, 1990; Howard, l99l, Crane, 1993), including the marketing

of scientific/high technology goods and services (Rooks & Weinroth, 1993), indicating

the need for internal marketing to the professionals within a service firm.

Gummesson (1979) explains the two parts to this dilemma: firstly, as Wittreich (1966)

had previously discovered, clients are buying a professional service, therefore, firms

must be capable of delivering the professional service. Secondly, "firms need

professionals that sell, not professional salespeople!" (Gummesson, 1979, p308).

Gummesson (1979) explains that practitioners must not mistake the marketing

department for the marketing function of professional service firms, and that the task of

marketing must be carried out by the whole firm, and the marketing department (if one

exists) is only part of this.

Secondly, the organisational dilemma has implications for the marketing activities of an

organisation. Gummesson (1979) found that promotional activities are the major

marketing activities for a professional service firm. Except for some aspects of

advertising, all areas of promotion are person intensive and often require the

involvement of highly qualified professionals. Also, professionals must be near the

promotional activities being undertaken, because exhibitions, contests, giving lectures

etc, require the professional to attend personally. Gummesson (1979) determined that

marketing costs usually equal time costs of professionals as the promotional activities

are labour intensive. Alternatively, if a full time marketer is employed by a professional

service, Morgan (1990b), and Morgan and Piercy (1990) more recently observed that

the marketing responsible employee would not normally have partner or upper level

management status. The result is a disempowered marketing co-ordinator within the

organisation, who does not have the status to manage the professionals' interactive

marketing training and tactics. This result, Morgan and Piercy (1990) suggest, is due

to the "widespread ignorance" many professionals have of what marketing is and its



23

beneficial role in a professional service.

Gummesson (lg7g), followed by Lovelock (1984), state implications of the

organisational dilemma for the determination of marketing costs. Professionals, from

all types of industries, did not know their marketing and sales costs or purchasing

costs. Gummesson (1979), initially identified two types of marketing costs, the first

being costs associated with creating awareness and favourability towards the firm and

the second type being sales costs associated with negotiations with a specific client.

The managerial implications of the study by Gummesson (1979) determined that

marketing effort should be allocated to specific areas within a professional service firm.

Firstly, train all members of an organisation in marketing, as they must be aware of

what is expected of them and how to get the most out of a marketing department.

Secondly, determine the promotional activities your firm will most probably undertake

and work out who shall do what. Lastly, Gummesson (1979) advises professionals not

to allocate less time to marketing in busy times. A firm must look to the long term and

maintain a fairly constant revenue. Recently academics have cautioned professionals

not to base their promotional mix solely on advertising. The results of studies in the

professions found that more personal promotional activities are most likely to succeed

in appealing to clients of professional services (Hengleson, Brown & Birren, 1990;

Hodge, Brown & Lumkin, 1990).

The prescription Gummesson (1979) detailed for professional services has been widely

cited, especially in the United States (Fisk et al., 1993). This interest suggests the

validity of Gummesson's (1979) work, and the practical relevance of the study's

managerial implications.

Research undertaken by Bloom in 1984 in the United States, found that marketing does

occur in professional service organisations. He stated that, "Professionals of all types

now aggressively use marketing tools" (Bloom, 1984, pl02). Kotler and Bloom (1984)

stated that marketing has gained widespread acceptance in service organisations,

especially non-profit organisations, and that in the mid-1980's professional service

organisations were becoming increasingly interested in marketing. These studies are

not supported by Morgan and Piercy's l99l United Kingdom study.

2.3.4 Summara

There is an acceptance of the need to review present sales or marketing techniques of



24

professional services, to determine what is presently understood as marketing by

professionals, and what would improve their marketing effort' Jozefowics' after a

review of earlier professional services marketing studies noted:

,,It is time for all professional service firms to undertake a systematic review of

allbasicassumptionsaboutmarketingandaskthemselveshardquestionsabout

themannerinwhichtheyaremarketingthemselves.',(1990,p74)

Although this statement offers a worthwhile prescription for professionals, it could be

suggested that the varied academic studies on professional services marketing, leading

to conflicting strategic implications, could be a major cause for the lack of consistency

and strategic orientation within professional organisations' The future research

implications, therefore, include the need to develop a unified model of the professional

serviceandconsequentstrategicmarketingimplications.

2.4 l\{arketing Audits Literature

The most significant part of the literature review concerns the extant literature on

marketing audits to assess the methods and content included in previous audit

techniques. This important review is appropriate as the current professional service

research includes both an internal marketing audit and a client audit' However' it must

be stressed that the auditing literature is primarily product-based and in some cases is

not applicable to service organisations'

In 1959 Shuchman suggested the concept of marketing audits, later developed and

formalised by Kotler, Gregor and Rogers in 1977. The year 1977 was also important

for the recognition of service marketing as separate from product marketing' with the

Journal of Marketing article by Shostack (1977): "Breaking Free from Product

Marketing." Despite the timely and widespread recognition of both of these areas of

marketing, overall the marketing audit and services rnarketing literature have developed

independently (Berry, conant & Parasuraman, l99l). However, it is germane to

review the marketing audit literature and discuss its limitations for service

organisations.



25

2.4.1 Definitions of Marketing Audits

The early definitions of marketing audits have tended to remain as the core of modern

definitions (Berry et al., 1991). Kotler et al. (1977) and Mokwa (1986) accept

Shuchman's explanation of a marketing audit that focuses on ""'a systematic' critical'

and impartial review" (1959, pll). More specifically, Shuchman states that ""'

marketing audits are: (1) programmed appraisals, (2) critical evaluations of the

assumptions that underlie objectives and policies, (3) prognostic as well as diagnostic'

(4) designed to identify opportunities and weaknesses, and (5) preventative as well as

curative medicine" (1959, Pl8)'

Major topics which have been focused on in rnarketing audit literature include the

strategic value of audits, the components and specific questions to be covered' and the

methods of measurement in conducting marketing audits (Berry et al., 1991)'

2.4.2 Strategic Value of Mnrketing Audits

Many authors agree with and reiterate Shuchman's (1959, pl8) view that a marketing

audit is "...both preventative and curative medicine" (Kotler et al'' 1977; Berkowitz &

Flexner, 1978; Mokwa, 1986; and Payne, l9S8). However, these authors extend the

possible strategic benefits of marketing audits initially outrined by Shuchman (1959).

Kotler et al. (1977), Berkowitz and Flexner (197s), and Payne (1988) discuss the

ability of a marketing audit to help create a marketing orientation within an

organisation. Mokwa (1986) states that marketing audits can stimulate decision

making and awareness by policy makers of the nature of marketing (Berry et al'' l99l)'

However, if the feature of a marketing audit to be an "impartial review" is considered

(Shuchman, 1959, pll), then the auditing may be undertaken by an outside' unbiased

party. consequently, an increased awareness of marketing as suggested by Mokwa

(1986), and ultimately, a move towards a marketing orientation may not occur for

policy makers or the organisation in general. This is because they have not been

exposed to the implementation of a marketing audit, the organisation has just been

analysed and presented with the findings. Capella and Sekely (1978)' concluded that in

the undertaking of marketing audits, a common problem was friction between the

auditors and the employees of the organisation. These results, it could be suggested'

would not help facilitate a marketing orientation within the audited organisatiorq as

suggested by Kotler et al. (1977), Berkowitz and Flexner (1978) and Payne (1988)'



26

2.4.3 Components of a Marketing Audit

Kotler et al. (1977) and Naylor and Wood (1978) have comprehensively detailed the

components and specific questions for the implementation of a marketing audit' The

marketing audit is given six major components by Kotler et al' (1977)' They are: the

marketing environment, marketing strategy, marketing organisation, marketing

systems, marketing productivity and the marketing function, whereas Naylor and wood

(1978) propose the four 'Marketing Mix' elements (Price, Promotion, Place' and

Product)asfouroftheirsevencomponentsofamarketingaudit.

The marketing audit literature rarely places any distinction on the difference between

tangible goods and services. This is particularly evident when analysing the

components that are included in marketing audits' Wilson (1982)' identifies 24 audit

components, only two of which are concerned with services' These are the "Service

Element in Marketing" and "Service Business" (cited in Berry et al', 1991' p256)' In

1983, Wheatley developed a marketing audit that was designed for professional

services. This audit contained components such as "Practice Environment" and

"service Mix", that are context-specific for professional service organisations'

Since these studies, interest has grown in the need for future research to develop

marketing audit components that move away from the product orientated marketing

mix and concentrate on the structure and needs of services (Berry, et al', l99l)'

2.4.4 Methods of Measurement in Marketing Audits

ln 1977, Kotler and colleagues stated that the method of measurement in marketing

auditing was not particularly sophisticated. The most popular measurement approach

has been open-ended, check list questions (Berkowitz & Flexner, 1978; Naylor &

wood, 1978;Wilson, l982;Wheatley, 1983; Mokwa, 1986;Payne, l9s8)' Berry et al'

(1991) feel that these types of measurement, while they may stimulate further questions

or can be tailored to specific organisations, increase the subjectivity of data

interpretation.

Gronroos (1989) and Gummesson (1987), complement the use of open-ended or

probing questions with a more interpretable quantitative part to some sections of an

audit. Therefore, the respondent is giving an easily measurable answer that is then

justified with an open-ended question, such as, 
*Why do you say that?"'



27

overall, there has been comparatively little examination of the measurement techniques

used in marketing audits (Berry et al', l99l)'

2.4.5 Service Marketing Audit

The literature reviewed above reflects the deficiency of information on conducting a

service organisation marketing audit. Indeed, most of the studies on marketing audits

assume that marketing success factors are the same for goods-producing and service-

producing organisations. This could be due to the fact that most of the general

constructs of marketing audit literature were developed before service literature

became widespread in the 1980's (Shostack' 1977;Berry et al'' l99l)'

Today, not only has it been accepted that goods and services differ, but also that

service organisations can be quite different from one another' Thomas discusses two

types of services, ,,people based" and "equipment based* (1978, pl59)' Lovelock

(1983), describes different strategies that need to be considered within five matrices of

service types, while Zeithaml, Parasuraman and Berry (1985) undertook an extensive

empirical study and found several differences in marketing orientation and practices

among service organisations'

Berry et al. (1991) commented that the marketing audit literature up to the early 1990's

has not only omitted suffrcient documentation on the service sector and failed to

distinguish between service types, but there is little evidence of the inclusion of internal

marketing within audit methods. Developments on service marketing audits research

have more recently included reviewing the culture and climate within the service

organisation, to comptement the external audit (Bharadwaj, Varadarajan & Fahy'

1993). As the services oflered by an organisatio n are its employees' in the pure service

situation, it is critical to manage how the service willbeoffered' To make it possible to

achieve this, an understanding of the organisation and the employees' operating style'

learning style and how they perceive the service offering process is necessary

(Baharadwaj et al., 1993). This is in addition to the traditional external marketing audit

of determining how a service or product rs being received' the second half of the

exchange Process.

Since services marketing differs from goods marketing, and within services there are

differences, the usefulness of the extant marketing audit literature for service

organisations is fairly restricted. While the general marketing audit literature does not

take into account specific aspects of services marketing' the "context-specific"



28

marketing audit studies have a restricted scope of application across different types of

services and are generally limited in their applicability to specific types of professional

services (Berry et al., l99l).

2.4.6Marketing Audits and Seruice Quality

An area that is directly influenced by the effectiveness of internal marketing is the

quality of service that is provided by an organisation's people. Interest in the

measurement of service quality has become popular recently (Cronin & Taylor, 1992)'

The delivery of higher levels of service quality is the strategy that is increasingly

becoming the accepted key to service providers' efforts to position themselves more

effectively in the market (Parasuraman, Zeithaml & Berry, 1988). Customers evaluate

an organisation's service quality by comparing their perceptions of the service they

receive with their expectations of the service (Gronroos, 1982; Parasuraman, Zeithaml

& Berry, 1985). Based on previous research with service organisations in 1985,

parasuraman et al. (1988) reduced ten measures of perceived service quality into five

specific components: tangibility, reliability, responsiveness, assurance, and empathy.

This subsequently became an accepted model of measuring perceived service quality,

namely, 'SERVQUAL".

However, several researchers have also identified that service quality is both difficult to

define and measure (Parasuraman et al., 1985; Bitner & Zeithaml, 1989; Brown &

Swartz, 1989; Cronin & Taylor, lgg2). Indeed, Cronin and Taylor stated that "...

current conceptualisation and operationalisation of service quality (ie SERVQUAL) is

inadequate" (1992, p55). Their recent study (1992) results suggest that customer

satisfaction should be concentrated on more to achieve long term, repeat purchase

behaviour from service customers. More specifically, their findings suggest that (l)

customer satisfaction has a significant effect on purchase intentions, and (2) service

quality has less effect on purchase intentions than does customer satisfaction.

Another generally accepted aspect of service quality has recently been questioned by

Bolton and Drew (1991). In contradiction to Parasuraman and colleagues' (1985'

lggg) proposal that higher levels of perceived service quality result in increased

consumer satisfaction" they suggest that satisfaction is actually an antecedent of service

quality.

Consequently, the service literature has left confusion as to the relationship between

customer satisfaction and service quality. This distinction is important to researchers



29

and service managers because they need to know if their key objective should be to

have consumers who are 'satisfied' with their perforrnance or to deliver the maximum

level of 'perceived service quality'(Cronin & Taylor, 1992)'

2.4.7 Summary

A summary of the marketing audit literature reveals that:

(l)
(2)

(3)

(4)

scholars generally agree on the meaning of a marketing audit,

the literature is largely conceptual and normative,

a list of open-ended, probing questions is the most popular

and accepted apProach ProPosed,

that the differences required to audit services, including

internal marketing, have been until recently largely omitted.

2.5 Internal Marketing, organisation climate and culture

Literature

The centrality of a professional's performance in the marketing effiorts of a professional

service increases the significance of internal marketing and the development of an

appropriate organisational culture. Although internal marketing is a central focus for a

professional service, as concluded in the previous section, it has typically been

overlooked in the generic marketing audit literature. Therefore, it is appropriate to

review the extant literature on marketing within the organisation for this study, to

complement the marketing audit literature reviewed. First, the emergence of thinking

about internal marketing in the literature is reviewed. Second, studies into the

implementation of internal marketing are covered, including extant literature on

organisational culture and its importance in service marketing planning and change'

2.5.1 The Development of Internal Marketing as a Marketing Entity

with the development of services marketing theories, marketing is changing (Gronroos,

1990). More emphasis is now being placed on keeping customers and cross-selling to

existing customers (Berry, 1983; Gronroos, 1983; Levitt, 1983; Gummesson, 1987)'

This focus is especially important in industrial markets that are often smaller than

consumer markets, with a major investment cost being the development of customer



30

relationships (Tansuhaj, Randall & McCullough, 1991). The concepts of relationship

marketing and interactive marketing were developed to describe marketing planning

towards the existing final customers and other stakeholders of an organisation

(Christopher, Payne & Ballantyne, l99l). However, to develop and retain long term

successful relationships with existing service customers, there must be a consistently

desired service offering, that is tautological.

Moreover, the customers of a service firm perceive more than the end result of the

service production process (Gronroos, 1985). Customers also perceive the way in

which the end result is reached during the buyer-seller interaction, ie the "functional

quality of the service" (Gronroos, 1985, p26)). According to empirical research

undertaken by members of the Nordic School of Thought (Gronroos, 1983, 1985,

Gummesson, 1984), the functional quality of a service can quite often be the most

important variable for "competitiveness and marketing success in the long term"

(Gronroos, 1985, pl26).

An effective interactive marketing performance from employees who do not normally

belong to the marketing department of a service organisation, Gronroos (1985)

believes, will create excellence in the functional aspect of the service. The concept of
internal marketing has been introduced to describe the method of creating this

excellence in the functional aspect of a service.

Here the role of the employee is vital. The marketing specialists of the marketing

department are not the only human resource in marketing, often they are not even the

most important resource (Piercy & Morgan, l99l). During customer contacts these

marketing specialists in both product and service offering organisations are often

outnumbered by a variety of employees u'hose main duties are production, deliveries,

technical service, claims handling, and other tasks traditionally considered non-

marketing. However, the skills, customer orientation, and service mindedness of these

persons are critical to the customers' perception of the firm and to future patronage

behaviour. This culture is especially important in service organisations as the employee

is the vehicle by which the organisation's offering is presented to the market (Gronroos,

1e83).

The subject of internal marketing has a growing literature base. Some of the studies are

general and conceptual (Gronroos, l98l; Gronroos, 1985), while others are more

orientated to specific industries (Berry, l98l; George, 1984). A consensus is being

reached in this literature regarding the fundamentals of an internal marketing approach

(George, 1986). The internal marketing concept holds that employees precede other



3l-

customers as the initial market of the organisation (Sasser & Arbeit, 1976; Berry, 1980;

George & Compton, 1985). The objective of the internal marketing function is to

develop motivated personnel within an environment which supports customer

consciousness (Gronroos, 1981;Moeller & Schneider, 1985; Mitchell, 1992).

During the past fifteen years the concept of internal marketing has emerged first in the

literature on services marketing and later in the service management literature (Berry,

l98l; Gronroos, 1981, 1985; George, 1984). Without using the concept itself, Eigler

and Langeard (1976) initially discussed the need for marketing services internally in

organisations. Recently, this concept has also entered the literature on industrial

marketing (Gronroos & Gummesson, 1985). In the literature on service management,

the internal marketing concept has also been included, for example, by Normann

(1984), and in the context of managing services in the public sector, by Gronroos

(1987) and Gronroos and Monthelie (1988). Heskett mentions this phenomenon,

observing that successful service firms have achieved their position "... by turning the

strategic vision inward" (1987, pl20), they target key employee groups and customers,

rather than only customers. This strategic vision, while newly operationalised for

service marketers, was initially developed by Drucker in the 1950's (Drucker, 1954).

The three intervening decades were the period when marketing, and then services

marketing, became established in business literature.

Internal marketing is a management strategy. The focus is on how to develop

customer-conscious employees (Bowen, 1986). The premise of internal marketing is

summarised by Gronroos, he states that "...Internal marketing is that the internal

exchange between the organisation and its employee groups must be operating

effectively before the firm can be successful in achieving its goals regarding external

markets" (1990, p222).

2.5.2 The Internal and External Customers

As the implementation and responsibility for marketing is spread throughout the

organisation, research has identified a need for the marketing employees to take on the

role of marketing to the organisation (Eigler & Langeard, 1976; Gronroos, l98l;

George & Compton, 1985; Gummesson, 1987; Heskett, 1987; Piercy & Morgan,

l99l). This has been termed the "internal customers" (Gronroos, 1989, p55) of the

marketing responsible employees, who may influence the final customer directly or

indirectly. These internal customers must be co-ordinated and taught the benefits and

techniques of successfully marketing to the e>iiternal customers.



32

The employees involved in marketingJike contacts with the customers, more often than

not, greatly outnumber the marketing specialists (Gronroos, 1989). These employees

are termed "part-time marketers" (Gummesson, 1987), as their main employment is in

another area of the organisation. As marketing tasks are spread throughout the

organisation, the marketing specialists can only take care of a part of the marketing

function. Therefore, marketing becomes a major part in the planning and decision

making of top management, aided by the marketing specialists who may assist in, say,

market research, personal selling, and advertising. Therefore, the Nordic School of

Marketing concludes that "... it is more correct to view marketing as market-orientated

management than as a separate function only" (Gronroos, 1989, p56).

There are two specific areas that the Nordic School of Business (Gronroos, 1989)

research has identified as part of the marketing concept. The vital role that customer

relations plays in the development of effective long term business profitability, and the

role that promises play in customer and sellers' satisfaction fulfilment. These areas will

be discussed separately.

2.5.3 Customer Relations

The Nordic research has determined that marketing centres around the relationship an

organisation has with its customers, where "... the objectives of the parties involved are

met through various kinds of exchanges" (Gronroos, 1989, p54). These exchanges

will, it is hoped, develop and maintain long term relationships with clients. This

understanding of the centrality of marketing as exchange is not new. Bagoz.zi,in 1975,

stated that "most contemporary definitions of marketing explicitly include exchange in

their formulations" (p32) and that the exchange process also involves intangible and

symbolic aspects. This view of relationships and the many aspects of exchange is built

on by Relationship Marketing researchers: Christopher et al., with regard to "internal

clients". They state that "The internal market, the heart of the entelprise, is the subject

of all change processes as well as the author of them. The task is to work more cross-

functionally, more participatively, more politically in the common interest of customers,

staffand shareholders, building a platform on which to grow" (1991' p28).

The development of customer relations is not simply the exchange between two parties,

the buyer and the seller, but involves many parties. Often contacts in channels of

distribution and supply, financial controllers etc. are involved in the development of a

relationship (Kotler, l99l).



33

2.5.4 Importance of Promises

Calonius (1989), has identified the concept of fulfilling promises as part of marketing

exchange. In the establishment and maintenance of customer relations the seller

promises certain things. These may include, services, goods, future commitments, and

financial solutions. The buyer also gives a set of promises towards the relationship.

These promises encompass expectations of the exchange of goods or services and, if
these ixpectations are fulfilled, then future relations are achievable.

The above discussion has resulted in the Nordic researchers (Gronroos, 1989)

suggesting a definition of marketing that encompasses all of the marketing mix,

emphasised by the American marketing academics, and the new areas that have resulted

from the empirical research in Europe. This definition, based on the industrial

marketing research need for interaction, the services marketing research need for client

relations and the concept of a promise in the buyer behaviour research by Calonius

(1989), is articulated as:

"Marketing is to establish, develop and commercialise relationships, so that the

objectives of the parties are met. This is done by a mutual exchange and

keeping of promises." (Gronroos, 1989, p57)

This approach of a complete re-examination of the definition of marketing also

encompasses the client's trust in a firm's resources and, therefore, includes internal

marketing to assist in meeting external client promises. This direction of research

thought, especially for services, has not been the direction of all research on marketing

within the organisation. With the recognition of services marketing as a legitimate

autonomous subject, a number of studies on internal marketing (Berry, l98l; Piercy &

Morgan, l99l) have focused on the present product oriented 'Marketing Mix' (Product,

Price, Promotion, Place), or an adaptation of the 'Marketing Mix to undertake

marketing for the internal customers. Piercy and Morgan summarise this view by

explaining: (that) internal marketing is the development of a marketing

programme aimed at the internal marketplace in the company, that parallels and

matches the marketing programme for the external marketplace" (1991, p84).

Gronroos (1989) considered that the extant literature on internal marketing viewed the

topic too narrowly by using only traditional marketing activities internally. He

proposed that it is important that "internal marketing should be viewed as a managerial

philosophy, which has strategic and tactical implications throughout the company and



34

its various business functions" (Gronroos, 1989, p56). Consequently, the first group to

target for developing an internal marketing system is the upper level management, not

the client contact employees. Then various departments and employees representing

different positions in the organisation need to be included, after gaining top

management support, in planning and implementing internal marketing.

Although Gronroos (1935) may not agree with the extant literature on internal

marketing, his argument is based on a preliminary step in traditional marketing

activities. The process of undertaking traditional marketing in all forms of business will

always begin with the gaining of support and approval from management. The broad

implication for research in service organisations is that there is a need to include

auditing and evaluation within a firm, towards effective internal marketing, to

complement traditional surveying of the external market. This will result in a greater

likelihood of meeting the objectives of both parties in the marketing exchange,

including the keeping of promises.

There seems to be debate on the terminology most appropriate for internal marketing.

To assist in the clarification of marketing within the organisation, it is appropriate to

review the extant literature on the process and implementation of internal marketing.

2.5.5 The Process and Implementation of Internal Marketing

"Marketing for a number of years has been long on advice about what to do in a

given competitive or market situation and short on useful recommendations for

how to do it within company, competitor and customer constraints experiences,

with both managers and students arguing strongly that these parties are often

strategy-sophisticated and implementation-bound" (Bonoma, I 985, p26).

"... it appears that our technical literature in marketing is lacking a practical

response to the executivers question: 'We know what marketing is, but how do

we do it?' " (Piercy & Morgan, 1991, p82-83)

Piercy and Morgan (1991) agree with Bonoma (1985) as to the problem of

implementing marketing in business, but also feel that there is a deficiency of relevant

language and conceptual models in present marketing literature to deal with the

implementation issue. Despite the awareness of this lack of strategies for marketing

implementation, at present it is evident that business now understands what marketing

is, but not exactly how to use it. This issue is particularly relevant for industrial service



35

organisations that are made up of professionals, all relatively new areas in marketing

literature.

The whole orientation and focus of traditional marketing is on the customers and

competitors of the market and on matching organisational resources to be competitive

in the market-place. Ohmae discussed the "Competitive Triangle" (1987, p92) in

marketing, where strategies must consider Customers, Competitors, and your Company

as interrelated. Piercy and lr{organ expand on this traditional viewpoint and say that

"... while analysing markets and developing strategies to exploit the external market-

place remains quite appropriately our central focus, it is frequently not enough on its

own to achieve the implementation of marketing strategies" (1991, p83).

Gronroos (1990) identifies two aspects of management processes in internal marketing.

First of all the attitudes of employees and the motivation for customer consciousness

and service mindedness have to be managed. He describes this as the "Attitude

Management" (1990, p22\ aspect of internal marketing. Edvardsson, Edvinsson, and

Nystrom previously explained this type of management when they observed that

"...there is a need for a more pro-active mental management view where service

companies create the future rather than adapt to existing conditions" (1988, pl68).

Second, Gronroos (1990), explains that managers, contact personnel, and support

personnel need information to be able to perform their tasks as leaders and managers

and service providers to internal and external customers. He describes this as a

"Communication lr,Ianagement" (1990, p22\ aspect of internal marketing. More

recently, Chorn includes organisational culture and leadership styles in his "Alignment

Theory" (1991, p20). Chorn's (1991) research in Europe, the United States, and

Australia revealed that superior performance is associated with high degrees of

alignment between the above elements, strategy, and the competitive situation. The

"Alignment Theory" has proven diffrcult to operationalise. One insight gained from the

concept is the need for internal auditing to assess the fit of the aforementioned elements

towards designing internal and external marketing programmes.

Berry (1981) and Gronroos (1983, 1990) haveboth outlined the overall objectives of

internal marketing as being twofold. The objectives are as follows:

To ensure that the employees are motivated for customer-orientated and

service-minded performance and thus successfully fulfil their duties as

"part-time marketers" in their interactive marketing tasks; and

To attract and retain good employees. (Gronroos, 1990, p225-226)

(l)

(2)



36

Gronroos later outlines the situations that call for the implementation of internal

marketing systems:

(r)

(2)

(3)

When creating a service culture in the firm and a service orientation

among employees, and

when maintaining a service orientation among the personnel; and

when introducing new goods and services as well as marketing

campaigns and activities to the employees' (1990, p226)

To enable employees - managers, supervisors and others - to

understand and accept the business mission, strategies, and tactics as

well as the goods and services and marketing campaigns of the

organisation;

To develop a service-orientated management and leadership style among

managers and suPervisors; and

To teach all employees service-orientated communications and

interaction skills. (Gronroos, 1990, p227)

Gronroos (1990) states that a service culture is lacking in most firms today' In such

cases internal marketing is often seen as a means of achieving such a culture' Indeed,

current literature in both services marketing and organisational culture lead to the

argument that a uniform and relevant organisational culture is one of the most

important ingredients for successfully marketing services. This is especially appropriate

for professional services as the service being offered is generally consistent with the

style of the individual professional within the organisation- However' Burack (1991)

argues that, at present, after reviewing the research on service culture, there has been

too little time or thought devoted to the collection of data to facilitate organisational

culture analysis and to establish a foundation for change.

Gronroos (1990) states that most organisations will' at best, be creating a service

culture. It is pertinent to review what goals he discusses as important for the first level

of internal marketing (ie. creating a service culture). The goals are:

(l)

(2)

(3)

It is essential to achieve the first goal, as employees cannot become marketing

orientated if they do not understand the organisation's meaning of marketing

orientation. However, the second and third goals, while obviously worthwhile,

Gronroos (1990) does not offer any method to teach, train or guide managers to

develop a service orientated leadership style and communication and interaction skills



37

for emploYees.

2.5.6InternalMarketing,OrganisationalCultureandChange

A number of authOrs have commented on the need to offer some incentives to

employees who want to change or adapt to the new style of service-orientation (Berry'

l98l; Gronroos, 1983, 1990; Piercy & Morgan' 1991)' Incentives often encompass

more than just monetary rewards. They may include: added responsibility and decision

making; up-to-date information and feedback on the performance of the organisation'

and input into the development of the internal marketing programme to help guarantee

success (Schneider, I 988)'

zemke(1988) observes that "while it is possible to change the focus and practices of

an organisation's culture, it is critical to preserve to a considerable extent what has

gone before and build on it to make the change "' Honoring and learning from the past

doesn't mean we have to be trapped by it" (cited in Gronroos' 1990' pZ l)' Gronroos

(1990) also urges management to move slowly and to make incremental changes'

although he does admit that in some cases there is not time to move slowly and change

occurs at a very rapid pace. Examples of this rapid change are the many government

organisations in New Zealand that are being privatised or becoming State Owned

Enterprises.

2.5.7 Organisation Cultrrral Consistency

In service organisations clear cultural values are particularly important for guiding

employee behaviour (Gronroos, 1990). Schneider and Bowen (1985) have found that

when employees identify with the values of the organisation' they are less likely to

leave the company. Furthermore, customers seem to be more satisfied with the service

being offered.

A rogical inference is that a strong positive relationship exists between cultural strength

and cultural consistency, and between culture and the eflectiveness of marketing

activities (webster, l99l; Bowen, 1992). Therefore, as the strength and consistency of

an organisation declines so too will the effectiveness of marketing strategies' Webster

(1991), advances the notion that employees at all levels of a service organisation should

hold consistent views and beliefs of the role of marketing in their organisation'



38

Research undertaken by Webster (1991), found that even though there is

acknowledgement for the need to maintain a consistent culture, there is evidence to

suggest that it does not exist in service organisations. Webster (1991) chose four

primarily consumer based service categories to investigate for cultural consistency.

Her findings highlight that 360 respondent employees, from various levels within the

organisations surveyed, have significantly different attitudes regarding the components

of the current marketing culture and the desired/ideal marketing culture. However,

there is no relationship between the level of the employee within the organisation and

the level of agreement with the actual or ideal marketing culture items.

However, the presence of a strong culture is not desired in all situations. If the

surrounding environment has changed and new ways of thinking are necessary, a strong

culture may impede change (Gronroos, 1990).

A service strategy requires that service concepts related to the business mission and the

strategy be defined. If the service concepts are not clearly defined, the firm lacks a

stable foundation for discussion of goals, resources to be used, and standards for

performance. As previously stated, the service concept states what should be done, to

whom, how, and with what resources, and what benefits customers should be offered.

If these issues are not clarified, the personnel will of course not understand what they

are supposed to do. Moreover, goals and routines do not form a clear and

understandable pattern, because there is no clear and well-known service concept to

which to relate. If the service concepts are not clearly understood at the middle

management level, it will be difticult to perform supervisory duties in a consistent way.

Managers as well as the rest of the personnel easily feel a disturbing role ambiguity.

Zemke (1983) observes that if an organisation has to change, the changes should be

slow and incremental. Of course, this is not always possible. As discussed above, an

organisation may be forced to change suddenly. It must never be forgotten that in all

areas, but especially in services, a cultural change means that people have to change.

The impact on people of a change in culture will also affect the strategic capabilities of

a service. Bharadwaj et al. (1993), recently proposed that people are an essential asset

of a service organisation, and the monitoring and management of their performance and

culture is necessary to remain competitive. Their recent study concluded that "the

greater the'people'intensity of a service industry, the greater the importance of culture

as a source of competitive advantage" (1993,P92).



39

2.5.8 Summary

It is generally accepted by scholars that the offering of a consistently desired service

will arow for the development of a sustainabre long term relationship with clients' The

inherent people component of a service offering therefore, creates the need to

understand and support employees for success' This internal focus is needed prior to'

and during, the period a service offering is being promoted to external clients'

Operationally, employees become the'internal customers''

The subject of internal marketing has a growing literature base' Some of the studies

are general and conceptual, while others are more oriented to specific industries' A

consensus is being reached in the literature that the marketing specialists of a service

organisation are not the only human resource in marketing' often they are not even the

most imPortant resource.

organisational culture and leadership styles are included in Chorn's (1991) "Alignment

Theory". He states that these elements must be aligned to strategy and the competitive

environment for a superior performance. Internal and external marketing programmes'

chorn (1991) suggests, should be designed by considering the aforementioned elements

through internal auditing.

After reviewing the research on service culture, Burack (1991) concluded that there

hasbeentoolittletimeorthoughtdevotedtothecollectionofdatatofacilitate
organisational culture analysis and to establish a foundation for an eflective change'

either as a mandate or by choice, in service professionals' The present study is

classified as a "people intensive" service investigation' as the industry under

examinationcomprisesserviceprofessiona|s.Thisprescribestheneedfortheinternal

investigation of the scientific industrial services, an internal audit'



40

2.6 Industrial scientific Profession and IRL Specific Literature

In the New Zealand science and technology 'industry', changes to funding and

infrastructure have occurred for more than a decade. Since 1980, the total government