The purpose of this chapter is to provide the theoretical background to the topic of employer branding and internal marketing. First relationship value management will be explained followed by employer branding with discussing ways to attract employees and ending by a section on internal marketing which aims at the retain part. The chapter also intend to review previous research in these fields of employer branding, internal marketing and internal communication.
Relationship Value Management
Relationship value management clearly states the important role employees have within a company (Payne & Holt, 2001). The following sections will show the composition within a company and the employees. It will also show the link between employer branding and internal marketing.
The 6 Markets Model
Relationship marketing has increased in interest during the last decade (Payne & Holt, 2001) as marketing has moved from transactional marketing to relationship marketing (Christopher, Payne & Ballantyne, 2008). Relationship marketing understands the benefits of customer retention, puts efforts into relationships and explains internal marketing as a key for being able to achieve success in external markets (Christopher et al., 2008). Relationship marketing has also developed the idea that marketing focuses on multiple markets instead of only the customers. The aim of marketing is still to have profitable customers, however to be able to achieve profitable customers, all markets needs to be targeted as several of them are directly or indirectly involved with the customers (Christopher et al., 2008).
Nowadays customers not only base their businesses on the cheapest supplier, but on the supplier that offers the greatest value (Christopher et al., 2008). Duchessi (2002) suggests that customer value is the key to success in today’s businesses.
Creating value through relationships is called relationship value management (Payne & Holt, 2001).
According to Payne and Holt (2001), a company has six stakeholder markets including customer, internal, supplier/alliance, referral, influence and recruitment markets. The ideas about the number of stakeholder groups are many, for example Gummesson (1999) suggests that 30 stakeholder groups are available however the most commonly used refers to six stakeholders. The six stakeholder model was originally created by Christopher, Payne and Ballantyne (1991). The stakeholders are the same in Christopher et al. (1991) and Payne and Holts (2001) model except that employee markets has been renamed as recruitment markets by Payne and Holt (2001). All markets are explained under heading 2.1.2.
The stakeholder group has then, as can be seen in figure 2, been classified by Payne and Holt (2001) into three larger groups including customers, external and employee stakeholders. These groups are the most important stakeholders and involve all six of the markets in Figure 1. To create value and to improve the performance of the organization all the three stakeholder groups has to be a focus. The wheel of the model is value and to be able to create value for one group the other two also needs to be considered (Payne et al., 2005).
Included in the customer group are the stakeholder groups customers and referral (Payne & Holt, 2001). Christopher et al., (1991) explain that the stakeholder group customers includes both existing and new customers. Referral markets refers to having relationships with the organizations or people that have the power to direct business in the company, for example this could include banks, intermediaries and business networks (Buttle, 1998). Payne and Holt (2001) suggest that offering value to a customer means understanding the beliefs and values as the customer has and offer a consumption event based on that knowledge.
Payne and Holt (2001) explain, that included in the shareholders group are suppliers/alliances and influencer markets. Supplier markets is explained by Siguaw, Simpson and Baker (1998) as trying to establishing a relationship with the supplier where collaboration is necessary for trying to improve the quality and manage the cost.
Christopher et al., (1991) describes influencer markets as relationships with organizations or people whose activities can indirectly or directly influence the company’s success with external customers, such as the media. Payne and Holt (2001) explain that stakeholders are increasing in interest especially for the companies which are owned by the public as shareholders are a part of the stakeholders.
The last group in the relationship value management model is employees. Kotler (2003) suggests that employees are the key to success as these are the assets that create the company. In the model, employees consist of internal markets and recruitment markets (Payne & Holt, 2001). Internal markets means any internal activity with the goal of obtaining external achievements, it can therefore be said that the success on external markets depends on the internal marketing activities (Bansal, Mendelson & Sharma, 2001). Recruiting the employees and introducing them to the company is referred to as the employee markets (Christopher et al., 1991).
Employee value can be seen from two perspectives – from what the companies deliver in terms of value to the customer and also from what value the employee gives back to the company. In the past the focus has been on the value that the employees deliver which is often measured on the basis of performance (Womack & Jones, 2005). What the company can offer back to the employee is starting to receive attention and could for example include training, empowering, development and rewards. If the company gives something beneficial to the employee, a feeling of obligation for the employee is created which often affects the employees work performance (Payne, Holt & Frow, 2000).
The profit service chain: the importance of employees
The relationship between the employees, customers and stakeholders can be seen in the Service-profit chain model which was first created by Heskett, Jones, Loveman, Sasser and Schlesinger (1994).
The internal service quality, meaning the design of the workplace and job, the development of employees and the tools provided for serving the customer can leads to employee satisfaction (Heskett et al., 1994).
For employees that are directly interacting with customers it is important to have a clear job description otherwise their motivation and satisfaction will decrease which will eventually effect the customer satisfaction (Payne et al., 2001). Heskett et al. (1994) continues to explain, that to be able to deliver value employees play an important part. Being able to satisfy the employees will lead to employee productivity and employee retention (Heskett et al., 1991; Werbel & Gilliand, 1999).
Shankar, Smith and Rangaswamy (2003) suggest that customer satisfaction does not always mean loyalty, thus making the relationship between customer and company even more important. The key factor to customer loyalty is customer satisfaction which is namely driven by the design of the service provided to be able to achieve the needs of the customers (Heskett et al, 1994).
Profit and growth are mostly affected by customer loyalty which means retention of customers and repetition of business (Heskett et al., 1994).This means: creating value for employees will lead to a greater customer growth and profitability (Kasekende, Byarugaba & Nakate, 2013).
The idea about that employees are the key to external performance has also been examined by Lawler and Porter in 1967. The idea that if the job dissatisfaction would decrease so would also the low production rates, has started to increase in interest by managers (Lawler & Porter, 1967).
Employer Branding- Future employees
Recruitment markets are one of the groups in Payne and Holts (2001) strategy of relationship value management that will be investigated in detail in this thesis. One side of this study is to examine how companies can attract employees and on the other hand, how to retain employees, which will be explained in section 2.3. Gummesson (1999) explains that employer branding should be used to attract employees and therefore employer branding is one of the drivers in this thesis. Falonius (2010) explain that attracting and retaining employees is one of the biggest challenges for companies, as for many of them the attitudes, personalities and experiences of the employees is crucial for the companies. For many organizations, the problem is being solved, according to Falonius (2010) by developing a plan of how to become an attractive employer.
Definition of employer branding
Employer branding refers to develop a brand strategy for presenting the brand for potential employees, the brand includes psychological, economic and functional benefits provided from the employer to the employee (Thorne, 2004). According to Falonius (2010), employer branding includes answering the following questions “Why should I search for employment within this company? Why should I stay as an employee at this company? And what does the employment give more than just salary?”. The work with employer branding has to be long term and have clear strategies to succeed (Falonius, 2010).
According to Dyhre and Parment (2013), most companies know a great deal of attributes of their dream customers, but not that much about their dream employees. The dream job is explained by Nilsson and Stjerna (2011) as an idealization imagination of the job the person wish to possess someday in their life. An important part to employer branding is not just to attract the right people, but also to be able to give the dream employee their dream job as it will increase the chance of retaining the employees (Dyhre & Parment, 2013). An attractive employer has a strong offering of development for the employees they wish to attract, also individual assessments based on weaknesses, strengths, wishes, attitudes and values (Parment & Dyhre, 2009; Heilmann, Saarenketo & Liikkanen, 2013).
Jack Welch at GE (as citied in Kotler, 2003) says that “The customer is the only one who can fire us all”, an idea about that a well-functioning employer branding will attract more and hopefully better employees and internal marketing will make the employees stay, these together create greater customer values.
Falonius (2010) describes the challenge of employees as including the long-term efforts to retain, motivate the employees and give opportunities to promotion within the company. Later when the employee ends their employment they still have an important part in being an ambassador for the company (Falonius, 2010).
Reasons for using employer branding
Dyhre and Parment (2013) describe three reasons as to why employer branding should be considered:
- The range of qualified workforce does not match the current or future demand for highly educated people. Without the right people a company cannot deliver or grow (Dyhre & Parment, 2013). Knowledge is the key to success for organizations, as knowledge and education can drive thoughts and ideas about development, thus being able to attract and retain the right kind of people is getting increasingly important (Davis & Schroeter, 2003).
- The new generation of workforce has different demands than the previous generations (Dyhre & Parment, 2013). The employees of generation Y want to be seen and heard, and want to know why they should work for the specific company (Dyhre & Parment, 2013). If the company cannot deliver what they want, they will simply get a new job. Previous generations, including baby boomers and generation X, has been much more loyal to their employer (Dyhre & Parment, 2013; Reisenwitz & Iyer, 2009). However the employees of generation Y will stay loyal as long as it is developing, creative and that the job is suitable with their social life (Reisenwitz & Iyer, 2009). In 2025, almost 75 % of the global workforce will consist of Millennials. Knowing what the coming generations are searching for is important to be able to attract them (Evans, 2016). Different generations are attracted to different things, thus advertisements and offerings needs to be different for which employee the company is searching (Eversole, Venneberg & Crowder, 2012).
- With the new ways of communication through social media, comes more transparency and by being attractive to some people the company becomes attractive to others. The current workers are strong influences of what others will think of the company which makes it even more crucial to have a strong employer brand from inside out (Dyhre & Parment, 2013).
Dyhre and Parment (2013) suggests that companies with a successful employer brand strategy increases the chance of getting applicants without even searching, thus increasing costs of evaluating the applications but it decreases costs with recruitments, such as advertisements and time, but it also decreases the probability that the company will need to keep and attract workers with higher and higher salaries and benefits (Dyhre & Parment, 2013; Gultekin, 2011; Evans, 2016).
Kotler (2003) explain that having higher educated people decreases the cost of education within the company as employees have the education from previous studies. Having high salaries attracts people and therefore decreases the employee turnover (Kotler, 2003; Rynes, Gerhart & Minette, 2004). Educated employees often demand a higher salary but since the idea of a lower employee turnover will come with the high salaries, high salaries often makes people stay within the company, it is still saving money (Kotler, 2003).
2.1 Relationship Value Management
2.2 Employer Branding- Future employees
2.3 Current Employees – Internal marketing
2.4. Employee value
2.5 Internal Communication
2.6 Generation Y
2.7 Internal marketing and Employer Branding
3.1 Research philosophy and approach
3.2 Research Approach
3.3 Research design
3.4 Data Collection
3.5 Ethical consideration
3.6 Data analysis
4.1 The interviewed companies
4.2 Highly educated workforce
4.3 Employer Branding
4.4 Internal marketing
4.6 The younger generation
4.8. How is teamplay emphasized?
4.9 How are responsibilities divided?
4.10 Internal marketing and employer branding strategies
5.1 The overall impression
5.2 Relationship value management
5.3 Definition of employer branding
5.4 Employer branding
5.5 Internal marketing strategy
6.2 RQ1: What strategies do companies in the area implement for strengthening the employer brand?
6.3 RQ2: How is internal marketing used for retaining employees?
6.4 RQ3: What can be improved in the field of employer branding and internal marketing?
7.3 Societal impact
7.4 Future research
8. Reference list
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Employer branding -Attracting employees to the area of GGV