Modeling Internal Marketing and Employee Loyalty: A Quantitative Approach

This study develops a structural model and tests it in a hospital to identify how internal marketing quality influences employee organizational loyalty. Data were collected from 240 respondents from a private hospital in Taiwan. All survey information was coded for statistical analyses and entered into a computer database. The data were analyzed using descriptive statistics, factory analysis, and structural equation modeling (SEM). SEM analysis indicated a good fit between the hypothesized model and the sample data. Results indicated a significant path coefficient of .63 between internal marketing and employee loyalty. The test results show the strong role of internal marketing on employee loyalty.


Introduction
The healthcare industry has recently become more market-oriented driven than ever before. Because of increasing competition, the healthcare industry is classified as labor-intensive and service-based that relies on employee abilities and intentions. Employees have a powerful effect on how consumers perceive an organization (Harris & Chernatony, 2001;King, 2010) and consequently play important roles in the organization. Taiwan has recently witnessed an increasing concern for management quality in healthcare services. To make a profit and enhance manage, managers must improve internal marketing and employee loyalty in hospitals.

Inter-Marketing
The literature review indicates numerous definitions and activities to address internal marketing. Rafiq and Ahmed (2000) identified five main elements of internal marketing: (a) Employee motivation and satisfaction; (b) Customer orientation and customer satisfaction; (c) Inter-functional co-ordination and integration; (d) Marketing-like approach to the above; (e) Implementation of specific corporate or functional strategies. These elements help to deliver consistently high-service quality in every organization.
Based on the internal-marketing literature and elements of the Galpin organizational influence system, Ahmed, Rafiq, and Saad (2003) indicated the elements of internal marketing: strategic rewards; internal communications; training and development; organizational structure; senior leadership; physical environment; staffing; selection and succession; inter-functional co-ordination; incentive systems; empowerment; and operational/process changes. Gounaris, Vassilikopoulou, and Chatzipanagiotou (2010) used the scale by Gounaris (2006) to measure-internal marketing quality as three components: (1) Collect internal-market related intelligence that helps specify employee needs and expected value; (2) Establish internal communication between supervisors and subordinates; and (3) Respond to employee needs and expected value.
Internal marketing helps hospitals attract and retain qualified human resources to deliver excellent service to patients. Based on the internal marketing literature, this study modifies and administrates an internal-marketing scale to obtain data of hospital internal-marketing.

Employee Loyalty
Employee loyalty has long been a topic of employees because of its link to behaviors such as attendance, turnover, and so on. Establishing loyalty achieves company long-term business objectives (Antoncic & Antoncic, 2011). Therefore, employee organizational loyalty plays an important role in industries, when employees believe in company objectives, work for the common welfare, and accept company objectives. Numerous studies have investigated organizational loyalty (e.g., Chun, 2009;Coughlan, 2005;Whiting, Podsakoff, & Pierce, 2008).
Over the last 30 years, various definitions for loyalty have appeared in the organizational literature (Coughlan, 2005). Graham (1991, p. 255) defined organizational loyalty as: identification with and allegiance to organizational leaders and the organization as a whole, transcending the parochial interests of individuals, work groups, and departments. Representative behaviors include defending the organization against threats; contributing to its good reputation; and cooperating with others to serve the interests of the whole. Niehoff, Moorman, Blakely, and Fuller (2001) offered another view of loyalty in their studies: "Loyalty is defined in terms of active behaviors that demonstrate pride in and support for the organization. Defending the organization against criticism, emphasizing the positive aspects of the organization, and refraining from complaining about the organization are examples of such behaviors." Consequently, increasing employee loyalty is exceedingly important to the company, and many factors can be used to measure employee loyalty. Reda and Dyer (2010) used a scale to measure employee loyalty. This measure included six items such as, "This organization deserves my loyalty," and "I do not feel any obligation to remain with my current employer" (reverse scored). All items were rated on a 5-point Likert scale (5 = high loyalty). Loyalty is a feeling of employee positive orientation to the future direction and development of the company, which has an effect on current operations. Higher employee-loyalty exists in a company when employees believe in the company objectives, accept the objectives as their own, work for the common welfare, and want to stay in the company (Antoncic & Antoncic, 2011). www.ccsenet.org/ass Asian Social Science Vol. 9, No. 5; Employee loyalty can be defined as the degree to which people feel a part of the organization. Employees possessing higher organizational loyalty work hard, commit to the organization, and so on. Based on previous research findings and availability, this study modifies and administrates an employee-loyalty scale to obtain hospital data.

Internal Marketing and Organizational Loyalty
Employee loyalty and retention are critical issues currently facing the Taiwan healthcare industry. To cope with recent challenges within the healthcare industry, managers must engage in internal marketing of their various services. Internal marketing has been used as an effective management tool to increase employee motivation, satisfaction, and productivity (Masri, Oetjen, & Rotarius, 2011). Previous research has noted the importance of internal marketing and organizational loyalty for the healthcare industry (e.g., Peltier, Nill, & Schibrowsky, 2003;Peltier, Pointer, & Schibrowsky, 2008).
Various studies have noted internal marketing is an important factor influencing employee loyalty. Therefore, the primary business concern of health care is to use internal-marketing strategies to effectively enhance and develop the organizational commitment of nurses and reduce turnover to promote organization competitive advantage (Chang & Chang, 2009). Researchers have commented that to maintain employee loyalty, certain factors must be considered in the organization: offering employee benefits related to financial and work care, providing professional and personal development, informal support such as supervisor support, providing a good work environment, and so on (Ali & Al-Kazemi, 2005;Lee, 2008;Roehling, Roehling, & Moen, 2001;Solomon, 1992). Cunha (2002) also showed significant support for the hypothesis that employee loyalty increases when firms provide a good work environment, opportunities, and mutual support. These factors and a good work environment are good strategies for internal marketing in organizations.
Finally, the author considered the strong association of internal marketing to employee perceptions of organizational loyalty. Employee loyalty increases when organizations have good internal-marketing strategies.
Internal-marketing factors influence employee organizational loyalty.
Based on the previous literature presented in this paper, internal marketing perceptions are significantly and positively related to employee loyalty. Therefore, the following hypothesis is proposed: H1: Employee perceptions of internal marketing have a significant-positive effect on organizational loyalty.

The Questionnaire
The questionnaire in this study includes two scales, "Internal Marketing Scale" (IMS) and "Organizational Loyalty Scale" (OLS), with 35 statements related to employee perceptions on internal-marketing quality and organizational loyalty. This study used an 18-item IMS scale derived from internal-marketing research, a 17-item OLS derived from the organizational-loyalty literature, and a 5-point Likert-type ranging from "strongly agree" to "strongly disagree." Each item was anchored at the numeral 1 with the verbal statement "strongly disagree" and at the numeral 5 with the verbal statement "strongly agree." Participants responded to items on a Likert-scale of 1 to 5, indicating the degree to which they agreed or disagreed with statements concerning their beliefs on internal marketing and organizational loyalty. The questionnaire was pre-tested with hospital employees to ensure that the format, wording, and question sequence were appropriate. Such feedback was instrumental in refining the quality of the measures.

Subjects and Data Collection
Data were collected using a self-administered questionnaire sent to employees of the healthcare industry during 1 month. The hospital in this study was chosen as the research object because it has a long history and good management style in Taiwan. To obtain more returned questionnaires, the author obtained permission from the hospital superintendent to survey hospital employees, yielding 240 completed questionnaire surveys.

Data Analysis
The quantitative analysis of the questionnaires was conducted using SPSS and LISREL according to the following statistical methods: First, frequency distributions were obtained to check for data-entry errors and to obtain descriptive statistics. Second, the measures of internal marketing and organizational loyalty were factor-analyzed. Factor analysis determined the underlying factors that may account for main variation sources among people's responses to both the internal-marketing scale and the organizational-loyalty scale. In IMS, the six factors were clearly extracted using varimax rotation. They explained 74.95% of the cumulative variation. In OLS, the six factors were also clearly extracted using varimax rotation and explained 85.22% of the cumulative variation.
Finally, SEM was used to perform data analysis, as a confirmatory technique to understand the relationship effect between variables, and to understand the relationship between internal marketing and employee organizational loyalty. Fit-assessment is a basic task of SEM modeling and more commonly-used measures include: Chi-Squared, root mean square residual (RMR < .05), root-mean square error of approximation (RMSEA < .08), standardized root-mean residual (SRMR < .05), comparative fit index (CFI .90), normal fit index (NFI > .90), ≧ relative fit index (RFI > .90), parsimony goodness-of-fit index (PGFI >.50), parsimony-adjusted NFI (PNFI > .50), and so on.

Exploratory Factor Analysis
To identify and validate the factor structure of internal marketing (18 items) and organizational loyalty (17 items), an exploratory factor analysis (EFA) was conducted. In the IMS, EFA by principal component analysis was used to detect the factor structure of the 18-item questionnaire using eigenvalues greater than 1.0 as the selection criterion (Kasier, 1960). The Kaiser-Meyer-Olkin measure of sampling adequacy (KMO) is .923. The factor analysis was well-suited to this study. The rotated component matrix shows the item convergence into six factors. The factor loadings exceeded .56, and six factors identified and explained 74.95% of the total variance. These statistics shows adequate support for the population involved in this research (Field, 2005). Table 2 lists the factor analysis results for employee internal-marketing.
In the IMS, the items loading highest on Factor 1 were Item 1, Item 2, Item 3, Item 4, and Item 5. Because the item-loading on Factor 1 focused on employee work support, this factor was labeled "work support." On Factor www.ccsenet.org/ass Asian Social Science Vol. 9, No. 5; 2, two items, Item 6 and Item 7, had factor loadings higher than .60. Because the items referred primarily to organizational atmosphere, Factor 2 was labeled "organizational atmosphere." Factor 3 also included two items. Items in this factor related to organizational communication. Thus, Factor 3 was named "organizational communication." Items loaded on Factor 4 concerned employee educational-training in this organization. Factor 4 consisted of three items, including Item 10, Item 11, and Item 12. Factor 4 was named "educational training." In contrast to the previous four factors, Factor 5 included a more specific orientation. Items were related to offering good salaries, promotion opportunities, and good fringe benefits. Therefore, Factor 5 (Item 13, Item14, and Item 15) was named "motivation." Finally, the items loading highest on Factor 6 were Item 16, Item 17, and Item 18. Items loaded on this factor concerned organizational empowerment. Thus, Factor 6 was labeled the "empowerment" factor.
In the organizational loyalty scale, KMO is .894. Minimum eigenvalues were used to determine the number of factors to extract in the final solution of organizational loyalty. Six factors were extracted on organizational loyalty. The minimum factor loading exceeded .52 and the total variance explained was 85.22%. These statistics also show adequate support for the research population (Field, 2005). Table 3 lists the factor-analysis results for organizational loyalty.
In the OLS, the items loading highest (> .812) on Factor 1 were Item 1, Item 2, and Item 3. Because the item-loading on Factor 1 focused on employees who work the hardest, this factor was labeled "hard-working." On Factor 2, two items (Item 5 and Item 6) had factor loadings higher than .80. On this factor, the items related to giving organizational advice or suggestions. Factor 2 was named "advice." Items loaded on Factor 3 concerned how to help colleagues in the workplace. Therefore, Factor 3, Item 7, Item 8, and Item 9 were labeled as "assistance" factors. Items loaded on Factor 4 referred to employees actively participating in educational training. Factor 4 consisted of two items, including Item 10 and Item 11. Factor 4 was named "actively." Three items on Factor 5 related to working for the public benefit and never engaging in private matters during office hours. Thus, Factor 5 was named "public benefit." Finally, the items loading highest on Factor 6 were Item 15, Item 16, and Item 17. Items loaded on this factor concerned obeying manager instructions in this organization. Therefore, Factor 6 was labeled the "obey" factor.

Structural Model
This study develops and tests an internal-marketing model on employee organizational loyalty. The data were analyzed by SEM using LISREL and the full model presented in Fig.1 was estimated under the assumption of no correlated measurement error. SEM results are shown in Table 4. The test result for the measurement model shows that NFI, NNFI, CFI, IFI, and RFI all exceed .90, except two values of GFI and AGFI are slightly lower than .90. This is because the GFI and AGFI values are considerably influenced by variations in sample size and non-normality of the measures. Consequently, certain researchers have recommended the CFI as an alternative measure of fit (Burton, Lichtenstein, & Garretson, 1998). The chi-square/df ration is also slightly higher than 3, which is considerably influenced by sample size. The RMR index is .0475, which is smaller than the recommended maximum of .05. The PNFI (.755) and PGFI (.582) all exceed .50, well within accepted guidelines. The relevant fit indices indicated that the proposed research model is a moderately good fit to the observed data.
After establishing model adequacy, variable relationships were examined in this study. Following the hypothesis confirmation, internal-marketing dimensions have a significant effect on employee organizational loyalty. Path tests showed a significant positive link between internal marketing and organizational loyalty. This finding is also supported in theoretical expectations in the literature review. The standardized path coefficient between two latent variables was .63. This result means that for every 10% increase in internal-marketing perceptions, there is an expected 6.3% decrease in employee organizational loyalty. The structural equation results show (see Fig. 1 and Table 4) that employees who perceive good internal marketing in the hospital are more likely to have higher organizational loyalty.
www.ccsenet.org/ass Asian Social Science Vol. 9, No. 5;  Note: All path coefficients were significant with a p-value of less than .001

Discussion
An exploratory factor analysis was performed to examine the domains underlying internal marketing and organizational loyalty. Although other instruments have assessed employee self-perceived internal-marketing or organizational loyalty, this study is the first known attempt to explore self-perceived conditions between internal marketing and organizational loyalty in a private hospital in Taiwan. This study attempts to "discover" rather than to "confirm." The results suggest that six factors affect how employees perceive internal marketing.
Organizations that provide employees with good work support, an organizational atmosphere, a communication channel, educational training, motivation, and empowerment, possess enhanced success in internal marketing activities. The extent to which qualities such as a well-maintained environment, good facilities, and educational training are well provided determines employee tendency to avail themselves of organizational services.
Given the results of this study, the model tests show convincing support for a strong relationship between internal marketing and employee loyalty. This inference is particularly noteworthy because employee-loyalty perceptions decreased by 63% with every 100% increase in positive internal-marketing situations. In conclusion, the analysis confirms the research hypothesis that employee perceptions of internal marketing are significantly related to their organizational loyalty.
The findings of this study should help inspire practical implications for institutions to increase employee loyalty and suggest that employee-loyalty is influenced by internal marketing directly. If an organization wants to develop a quality-based strategy to increase employee loyalty, they must know how work support, atmosphere, communication, educational training, motivation, and empowerment influence employee loyalty. The finding lends support to the argument that organizations should engage in employee internal marketing to enhance organizational loyalty, which is consistent with research (Lambert, Hogan, & Barton, 2001;Niehoff, Moorman, Blakely, & Fuller, 2001;Rahman, Musa, Zahari, Rahman, & Khalid, 2011).

Limitations and Future Research
This study suffers from several limitations related to the measurement and interpretation of the results. The first limitation is that the study respondents were limited to employees from one private hospital in Taiwan and the study was conducted in a limited geographic region. Thus, the study findings were determined under a specific set of conditions in which not every medical-industry sector was represented. The restricted nature of the sample suggests that any generalization of findings to other contexts should use caution.
Second, because the data were collected from only one culture, the extent to which these findings can be extended to other countries is questionable. National cultural differences may influence internal marketing and employee loyalty on the organizational context. Thus, generalizations to other cultures may be limited, and future researchers can examine this model in other cultural contexts. Finally, future research should examine not only context quantity, but also context quality.