In this chapter, we will focus on internal and channel marketing. In many ways, this chapter is the application of the circle of satisfaction and the service profit chain. It is also an extension of the CADDIE business-marketing planning process – marketing action plans directed towards internal marketing and channel marketing.

Initially, we explain the importance of internal marketing. We will present a key premise of internal and channel marketing – that customers, the organisation’s staff, and channel partners should be considered as co-producers of value. As a result, internal and channel marketing can work with and amplify an external marketing strategy.

Although often overlooked, the idea of internal cooperation and collaboration to reach organisational objectives is not a ‘new’ idea; Drucker, (1973) states that internal, channel, and external marketing are fundamental to business success. Cooperation and collaboration are constant themes in business and even more vital in areas where knowledge and ideas need to be shared (Amabile, Fisher, & Pillemer, 2014).

As we discovered earlier, the importance of internal and channel marketing is highlighted in the contemporary organisational defifinition of marketing.

In recent years, many organisations have stressed the importance of being customer centric and adopting a relational approach. This approach is consistent with how marketing is evolving and it extends beyond external customers to internal customers and channel partners. To achieve quality relationships with external customers, progressive marketing practitioners recognise that the first step is to develop quality relationships with their own staff and channel partners. A relational approach to staff and suppliers has always been important, however, as low-cost producers ‘move upwards’ and adopt the marketing concept and practice  a marketing philosophy there is increased pressure on established organisations to increase efficiencies, reduce the cost of their products [as a % of sales], and establish a unique product value proposition that positions the product favourably in the consumers’ considered set of products.

It may be worthwhile to remember that all products have an experience component and some product experience is a dominant or determinant component – therefore it is worthwhile to consider the theatre metaphor and the insights it provides.

When creating marketing action plans it should be apparent that there is still a need to liaise with other disciplines to achieve organisational objectives. 

Staff who span the boundary between the customer [B2B or B2C] and the organisation are óften referred to as ‘boundary spanners. They are more likely to be marketing staff. Take a waitperson in a restaurant as a common example – they must represent the organisation to the customer and then represent the customer to the organisation.

According to Gronroos (2007) the overall premise of internal marketing is that boundary spanners must have the necessary skills and commitment to the organisation to enable them to effectively communicate the unique product value proposition to external customers. He suggests that a focus on internal marketing is vital for an organisation to achieve its objectives. The adoption of an internal marketing program is the first step an organisation can take towards becoming a customer-focussed organisation and the first step in managing profitable exchange relationships with its customers (Gronroos, 2007).

It is also important to keep in mind that boundary spanners are often representing an organisation and asked for opinions on the quality of the organisation and the value of their products. This is often communicated to customers [B2B & B2C] but also to channel partners that may influence the communication channel.

It is also important to keep in mind that boundary spanners are often representing an organisation and asked for opinions on the quality of the organisation and the value of their products. This is often communicated to customers [B2B & B2C] but also to channel partners that may influence the communication channel.

It is also important to keep in mind that boundary spanners are often representing an organisation and asked for opinions on the quality of the organisation and the value of their products. This is often communicated to customers [B2B & B2C] but also to channel partners that may influence the communication channel.

It is also important to keep in mind that boundary spanners are often representing an organisation and asked for opinions on the quality of the organisation and the value of their products. This is often communicated to customers [B2B & B2C] but also to channel partners that may influence the communication channel.

It is also important to keep in mind that boundary spanners are often representing an organisation and asked for opinions on the quality of the organisation and the value of their products. This is often communicated to customers [B2B & B2C] but also to channel partners that may influence the communication channel.

It is also important to keep in mind that boundary spanners are often representing an organisation and asked for opinions on the quality of the organisation and the value of their products. This is often communicated to customers [B2B & B2C] but also to channel partners that may influence the communication channel.

Given that products evolve and expectations are always increasing the marketing action plan for internal and channel marketing must recognise that closing the quality gaps is a continuous process – and this requires everyday and as needed research to ensure organisational objectives are achieved. When service quality is evaluated as poor [by either the customer or the organisation] how an organisation recovers is important to customer evaluations of satisfaction: Fast and effective handling can salvage a situation. A failure to adequately address issues may result in: Negative word of mouth [WOM-]; The creation of consumer terrorists; Likely employee disenchantment.

Clearly, it is easier to make big improvements when the quality is lower than when the quality is higher. Nevertheless, complacency is the enemy of high perfroming organisations.

For most people going to market is a social encounter and consumers approach rewards and avoid punishments. With this in mind consumers approach shopping encounters that are rewarding. 

Marketing channels form due to the specialisation of third-party organisations that have the ability to perform services more effectively and efficiently and therefore add value to the channel – this is often referred to as outsourcing. Outsourcing services vary from product to product and may include – manufacturing, logistics, insurance, wholesaling, retailing, and after sales service.

Although retailing is describes as the ‘tail’ some channel services are before the market and some channel services are after the market. Therefore, a marketing channel may not necessarily end with a retailer-customer exchange [e.g., a car needs to be serviced after it has been purchased]. Due to the impact on customer satisfaction, care needs to be taken when an organisation appoints an intermediary or accepts an intermediary role as part of a marketing channel.

There is a saying ‘out of sight – out of mind’. In this slide we see a number of photographs of an organisation involved in designing, manufacturing and delivering clothing for an international retail clothing company. Keep in mind customers are only aware of hidden services when something goes astray.

A key communication strategy is to build channel harmony, and to establish a balance of Push and Pull strategies: Customer Push: through channel interest, awareness and support; Customer Pull: through customer preference, commitment, and loyalty

It is easy to think of market channels as being critial for the upstream and downstream movement of goods, however, most often there are marketing channels with services, ideas, experiences, people, and place dominant products.

Organisations that are committed to good relationships will often have a ‘relationship pipeline’ where they actively nurture a mutually beneficial relationship. Naturally, these organisations often talk about: CLV [customer lifetime value]; SLV [supplier lifetime value]; ELV [employee lifetime value]. Although CLV has received attention, unfortunately, SLV and ELV are neglected areas in academic marketing literature.

The purpose of the marketing channel is to improve the flow of products and each intermediary in the channel should add value to the total product. Often the presence of intermediaries brings order to what would be chaos. They may perform or coordinate enabling and peripheral services that bring commodities to the market [just consider coffee beans from field to cup to see the complexity]. Each B2B intermediary or channel partner relies on the effectiveness and efficiency of the marketing channel [the old saying, “a chain is only as strong as its weakest link” is relevant]. The marketing channel requires cooperation and careful management to avoid conflict. Often there is a dominant partner in a channel and the dominant partner may coordinate the channel.

The benefits of channel cooperation: Speeds up inventory replacement; Improves customer service; Reduces distribution costs

Steps to improving channel cooperation include: Unifying channel to maintain market order; Agreeing to direct efforts toward common objectives; Precisely defining each channel member’s tasks

Sources of channel conflict include: Disagreements arising among channel members; Communication difficulties jeopardising coordination; Increased use of multiple distribution channels by manufacturers creating conflicts with distributors and retailers; Intermediaries diversifying into and offering competing products; Producers attempting to circumvent intermediaries and dealing directly with retailers