The effect of internal branding on organisationnal financial performance and brand loyalty

The effect of internal branding on
organisational financial
performance and brand loyalty:
mediating role of
psychological empowerment
Maryam Soleimani
Department of Management, Economics and Accounting, Payame Noor University,
Tehran, Islamic Republic of Iran
Leo Paul Dana
Dalhousie University, Halifax, Canada
Aidin Salamzadeh
Faculty of Management, University of Tehran, Tehran, Islamic Republic of Iran
Parisa Bouzari
Department of Supply Chain Management, Faculty of Economics and Social Sciences,
Hungarian University of Agriculture and Life Sciences, Godollo, Hungary, and
Pejman Ebrahimi
Doctoral School of Economic and Regional Sciences,
Hungarian University of Agriculture and Life Sciences, Godollo, Hungary
Abstract
Purpose –This study explores the effect of internal branding on organisational financial performance and
brand loyalty with the mediating role of psychological empowerment.
Design/methodology/approach –The data gathered from 200 Pasargad insurance employees in Iran were
analysed. Structural Equation Modelling and Rwere used to evaluate the model. Financial performance was
measured by four Concepts (ROI, ROE, Sales growth, ROA) based on available data from March 2010 to March 2020.
Findings –The results revealed that internal branding and psychological empowerment have no significant
effect on financial performance, but both have a significant positive effect on brand loyalty. Likewise, the
mediating role of psychological empowerment on the subject of the impact of internal branding on brand
loyalty was confirmed. Furthermore, psychological empowerment did not play a mediating role in the impact of
internal branding on financial performance.
Research limitations/implications –The findings of this study could be important for managers of
organisations active in the insurance industry to highlight internal branding and enhance psychological
empowerment and employee brand loyalty. Moreover, managers’perception of the effective role of
psychological empowerment to enhance employee brand loyalty is another practical aspect of this research.
Originality/value –Considering the mediating role of psychological empowerment to the effect of internal
branding on financial performance and brand loyalty is an innovative aspect of the present study. Meanwhile,
the use of Rsoftware for VB-SEM was another point to surge the value of this paper.
Keywords Internal branding, Psychological empowerment, Financial performance, Brand loyalty
Paper type Research paper
The effect of
internal
branding
© Maryam Soleimani, Leo Paul Dana, Aidin Salamzadeh, Parisa Bouzari and Pejman Ebrahimi.
Published in Journal of Asian Business and Economic Studies. Published by Emerald Publishing
Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone
may reproduce, distribute, translate and create derivative works of this article (for both commercial and
non-commercial purposes), subject to full attribution to the original publication and authors. The full
terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/2515-964X.htm
Received 6 August 2021
Revised 1 November 2021
4 December 2021
Accepted 30 December 2021
Journal of Asian Business and
Economic Studies
Emerald Publishing Limited
2515-964X
DOI 10.1108/JABES-08-2021-0122

1. Introduction
Establishing a strong brand and boosting performance are crucial components in
maintaining long-term organisational survival (Lee et al., 2008). Branding can be
considered a major topic for improving brand positioning and organisational performance.
Accordingly, organisations should foster brand supportive behaviour to foster a positive
organisational climate and improve employees’shared understanding of brand values
(Matanda and Ndubisi, 2013). Branding is a multi-dimensional concept, and when used
among employees of an organisation, it is referred to as internal branding (Hasni et al., 2018).
Internal branding can be identified as a means of establishing potent brands for the company.
Internal branding aims to ensure that brand messages are conveyed to employees by the
brand, for customers and other stakeholders (Punjaisri and Wilson, 2017). According to
internal branding literature, employees have the role of “brand ambassadors”who need to
display the brand meaning through their actions and interactions, thereby helping to foster a
consistent brand image among all the stakeholders. Service organisations have found that the
brand message conveyed to employees is as important as the message sent to customers. In
effect, employees of an organisation are internal customers, and the lack of their support of
brand message can undermine brand reputation.
In addition to internal branding, today, psychological empowerment has become very
important because of its impact on the beneficial outcomes associated with individuals and
organisations. For example, the positive effect of psychological empowerment on job
satisfaction (Shah et al., 2019), organisational citizenship behaviour (Chiang and Hsieh, 2012),
organisational commitment, task and contextual performance (Seibert et al., 2011) is known.
Then, identifying the antecedents and consequences of psychological empowerment is vital
for employees to identify effective human resource strategies.
While devoting resources to educating and training employees about mastering the brand
message, many service organisations do not prioritise it unless its effects on financial
performance are recognised. Those activities that do not directly contribute to the company’s
financial profit are often the first activities to be reduced (Tuominen et al., 2016). The same is
true of employee psychological empowerment. Organisations will prioritise attention to the
psychological needs of employees when they realise its relationship to financial performance.
On the other hand, brand loyalty, which is considered an employees’brand –supporting
behaviours and an intangible and valuable asset-is an important factor for brand
performance and can be the focus of managers as a source for achieving competitive
advantage and success of organisations especially service organisations.
A review of previous research shows that some studies have confirmed the positive effect
of internal branding on financial performance, and other studies (Lee et al., 2008;Tuominen
et al., 2016) have reported opposite results. Given the contradictory results in previous
research and researchers’emphasis on the need for similar research in countries and different
industries in domestic branding to generalise the results, the present study is done. Iran has a
different political, cultural, economic and social structure compared to other countries, which
is expected to achieve different results, and this important note is one of the main motivations
for this research.
Research related to the attitudinal implications of internal branding, including brand
loyalty, has also emphasised similar research in different geographical areas. The structure of
Iran’s insurance industry has significant differences with this industry in other countries, and
the existence of significant differences in the study context of this study with other similar
studies can draw researchers’attention to other possible factors influencing the
consequences of internal branding. Therefore, this research is innovative in terms of
examining the consequences of internal branding in a different context. Also, the role of
psychological empowerment as a feature of employees in the consequences of internal
branding has been ignored in previous research, which has been addressed in this study.
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Thus, this study aimed to investigate the effect of internal branding on financial performance
and brand loyalty by considering the mediating role of psychological empowerment in
Pasargad insurance in Iran.
2. The study context
As one of the most important sectors providing long-term financial resources and due to its
risk-distributing role, the insurance sector plays a significant role in the development of the
business environment of each country (Tajpour et al., 2020;Hameed et al., 2021;Pereira et al.,
2021). The performance of insurance companies contributes to improving the market value of
individual firms and affects industrial growth, and ultimately affects the overall growth and
prosperity of the countries’economy (Sharma et al., 2018). Assessing the determinants of
insurers’performance in the corporate finance literature is essential. These companies, as
financial intermediaries, provide the mechanism of risk transfer and channelise the funds
appropriately to support business activities in the economy (Mehari and Aemiro, 2013).
Therefore, analysing the financial and non-financial situation of insurance companies is
important because of their role in improving the country’s economic situation.
3. Literature review
3.1 Internal branding
Recent years have seen increased attention being given to internal branding (Zhang and Xu,
2021). Internal branding is important to operationalise a brand orientation and enables an
employee to deliver the expressed brand promise indispensable to implementing brand-
building activities (Kaur et al., 2020). Internal branding theory stress that organisations
should put their internal employees first because external customer loyalty happens only if
service organisation employees adopt external customer relationship building orientation
(Eid et al., 2019). Previous studies have identified internal brand communication, training, and
leadership as the most critical internal brand activities (Zhang and Xu, 2021). In the present
study, these three activities are considered internal branding activities. A review of the
literature suggests that the effect of internal branding on employee-related outcomes,
including employee engagement (Ahmad et al., 2014,Park et al., 2014;Salamzadeh et al., 2016),
employee intention to stay (Matanda and Ndubisi, 2013), quality commitment, identification,
commitment and loyalty (Punjaisri et al., 2009;Punjaisri and Wilson, 2017), role clarity,
affective and continuous commitment (Garas et al., 2018); brand performance (Tuominen
et al., 2016), perceived person-organisation fit (Matanda and Ndubisi, 2013) and related results
with the customer embracing customer-based brand equity (Hasni et al., 2018), positive
customer image of company and purchase intention and brand experience (Ahmad et al.,
2014) have been investigated. In this study, brand loyalty and financial performance are
considered as the consequences of internal branding.
3.2 Psychological empowerment
Psychological empowerment refers to the internal motivation of employees to perform tasks.
Employees experience psychological empowerment when they realise the importance of their
job duties, which require skills and competencies. Also, they realise their autonomy to decide
how they do their work and believe in their work to make a difference in achieving the
organisation’s goals (Singh and Singh, 2019). Psychological empowerment is a process in
which the sense of self-efficacy of members of the organisation is boosted by identifying and
removing unproductive conditions. This process can be implemented in formal business
practices and informal techniques of presenting helpful information (Mostafa, 2017).
Psychological empowerment includes four dimensions of meaning (value of work for person),
The effect of
internal
branding

competency (ability to do work), self-determination (independence) and impact (ability to
influence outcomes) (Shah et al., 2019). Psychological empowerment has been recognised as
an effective way of maintaining employees at work and a source of competitive advantage in
organisations (Pigeon et al., 2017). Feelings of independence and competence, relevance, and
employee self-efficacy can turn into favourable organisational behaviours (Shah et al., 2019).
3.3 Brand loyalty
Loyalty acts as a biased behaviour expressed over time by an individual with respect to one
or more alternatives and is a function of psychological processes (Kim et al., 2016). Brand
loyalty and employee loyalty are conceptualised by both attitudinal and behavioural
elements. Employee’s attitudes and behaviour have a crucial role in the service brand image
formation process (Kimpakorn and Tocquer, 2010). In the service sector, in particular,
employees deliver the brand experience to customers through their services, which must
effectively create the brand spirit and values in customers’minds and allow customers to
develop an emotional connection to the brand. Therefore, employees in service firms should
understand what the brand stands for, i.e. its identity, but, more importantly, employees must
be committed to supporting their brand and consistently delivering its promises to customers
(Kimpakorn and Tocquer, 2010).
3.4 Organisational financial performance
Organisational performance reflects the extent of goal achievement in the organisation’s
workforce, capital, marketing and fiscal matters (Yesil and Kaya, 2013). Financial
performance plays an ever-increasing role in organisations. Organisations can develop a
more innovative and sustainable performance with pay attention to financial dimensions.
Therefore, in this study, the organisation’s financial performance is considered an important
consequence of internal branding and psychological empowerment.
4. Theoretical framework and hypotheses development
4.1 Internal branding and organisational performance
Internal branding helps employees develop consistent brand behaviours to incorporate a
sense of brand commitment into all of their daily work activities. Organisations, through
internal branding, can foster a positive external perspective for themselves and thus gain the
satisfaction of external customers (
€
Ozçelik, 2015). Organisational communication and training
can influence employees’supportive attitudes and behaviours towards the brand (Punjaisri
et al., 2009). Behavioural branding determines the brand’s contribution to organisational
success. The results of Chernatony and Cottam (2006) research have emphasised that within
the more successful financial services brands, staff with direct influence or involvement with
branding matters were highly brand literate, having a comprehensive understanding of their
brand and its implications for their job. Therefore, it can be inferred that more successful
financial services brands have paid more attention to internal branding and raising employee
knowledge of the brand. In addition, the results of research (Wang et al., 2019) showed that
internal branding in the hotel is effective in talent retention, cost reduction and star rating.
Therefore, internal branding can improve the organisation’s performance, including its
financial performance. Dunes and Pras (2017) has confirmed the positive and significant effect
of brand management system on brand mental performance.
Lee et al. (2008) have reported that using well-rounded brand management systems in an
organisation can boost brand performance, including financial performance. Similarly,
previous research has confirmed the positive effect of brand management systems, including
internal branding on organisational performance (Santos-Vijande et al., 2013).
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Internal branding by training employees helps them to support brand identity properly. In
addition, as a result of establishing unbroken mutual communication between managers and
employees, developing and reinforcing of brand is done well. This way, internal branding
activities can improve customer service and thus positively affect the organisation’s
performance by aligning employee performance with brand commitments. This way, the
following hypothesis can be proposed:
H1. Internal branding has a positive effect on the financial performance
4.2 Internal branding and brand loyalty
Internal branding, with a particular focus on employees, assures them that their organisation
is a good workplace to engage to achieve organisational goals (Dechawatanapaisal, 2018).
Thus, by building a passion for employees and institutionalising organisational values in
their hearts, they engage in varied support for the organisation’s brand. Internal branding
programs can facilitate brand support behaviours by aligning employee behaviour with
brand commitments communicated to customers (Sujchaphong et al., 2015). Profoundly
effective inner branding administration can make a solid brand community inside the
organisation. When a solid brand community exists inside an organisation, workers are more
likely to comply with the set of exercises used by the organisation for brand guarantee
conveyance through inner branding administration. As a result, representative brand
devotion is fortified. Internal branding is positively associated with perceived employee-
organisation fit by employees and their intention to stay in the organisation (Matanda and
Ndubisi, 2013). Previous studies have underlined the favourable effect of internal branding on
employees’brand loyalty (Punjaisri and Wilson, 2011;Punjaisri et al., 2009;Punjaisri and
Wilson, 2017) and organisational loyalty (Hasni et al., 2018). Employees in organisations that
implement employee-centric or “internal service”cultures feel more respect and appreciation
in their work environment (King and Grace, 2008), and this way will be more loyal to the
brand. Given that, the following hypothesis can be proposed:
H2. Internal branding has a positive effect on brand loyalty.
4.3 Internal branding and psychological empowerment
According to the theory of psychological empowerment, it is necessary to foster an active
motivational orientation among employees to empower their performance (Pigeon et al.,
2017). Stronger relationships between employee and supervisor can lead to employees’
psychological empowerment (Aryee and Chen, 2006), obtained in internal branding. Because
through internal branding, employees’awareness, insights and abilities align with company
goals and employees are empowered to fulfil brand commitments to customers (Hasni et al.,
2018), it could be inferred that internal branding can boost the value of employees’tasks in
their minds and have a favourable impact on their ability to do the job. When employees’
perceptions of brand values embedded in brand commitments improve, they affect their
clarity positively (Garas et al., 2018) and allow them to act in keeping with customer
expectations (Punjaisri et al., 2009). This will enhance the competence of employees to fulfil
their duties. Creating a brand-centric culture by delivering good quality internal customer
service can establish brand supportive behaviour and ensure that employee behaviour is as
consistent as possible with brand identity and values. Internal branding by establishing
guiding principles for satisfactory brand behaviours motivates employees to apply these
principles in their routine operations and thus affect organisational performance (Matanda
and Ndubisi, 2013). The following hypothesis can therefore be proposed:
H3. Internal branding has a positive effect on psychological empowerment.
The effect of
internal
branding