USING AN EXAMPLE FROM NOT-FOR-PROFIT SECTORS:
OUTLINE THE NATURE OF THE DIFFERENCES BETWEEN SOCIAL MARKETING AND COMMERCIAL MARKETING
WITH REFERENCE TO YOUR CHOSEN CASE, DISCUSS THE KEY CHALLENGES FACING THE SOCIAL MARKETING MANAGER THAT ARISE FROM THESE DIFFERENCES
INTRODUCTION
Over the years marketing concepts have only been applied to the business processes of business organisations. However, in recent times these concepts have been extended to the non-business sector. The extension of the marketing concepts from the for-profit sector to the not-for-profit sector lends credence to the immense success that the application of concepts such as the marketing mix have had on the business sector. Notwithstanding the resounding success of the marketing concepts in the for-profit sector, applying them to the not-for-profit sector requires a different approach. This recommended difference in approach can be attributed to the differences that exist between the two distinct sectors. These differences between the business and non-business sectors also constitute challenges towards the seamless application of marketing principles and techniques in the non-business sector.
This essay seeks to compare the for-profit and not-for-profit sectors with respect to the way that they apply the different marketing concepts to their operations. The discourse commences with a brief overview of the concept of not-for-profit marketing. Next, a brief history of the not-for-profit organisation under study is discussed. Then, a comparison between both sectors is undertaken based on the nature of differences between them. For the purpose of comparison, the British Red Cross has been chosen as the subject of study. Thereafter, the challenges posed by these differences towards an effective and efficient application of commercial concepts and tools in the not-for-profit sector are examined. Finally, the essay considers some approaches that could be undertaken to minimise the effects of these challenges in order to foster the successful application of the commercial concepts and tools in the non-business sector.
OVERVIEW OF NOT-FOR-PROFIT MARKETING
According to Rees (1998) a not-for-profit organisation can be defined as one which is not primarily concerned with maximising profit. Thus, based on this definition, it can be argued that not-for-profit marketing involves the adoption of the marketing principles and techniques by the not-for-profit sector in order to improve operations. Rees (1998) opines that the introduction of marketing to the non-profit sector can be traced to the Social Exchange school of thought (Sheth et al., 1988) and the development of service marketing (Berry and Parasuraman, I993; Fisk et al., 1993; Edgett and Parkinson, I993). Kotler and Levy (1969) are credited with being the pioneers of the concept of not-for-profit marketing which came under criticism by Luck (1969). Notwithstanding the opposition, the application of marketing in the not-for-profit sector has received the blessing of other academics (Kotler and Andreasen, 1996; Lovelock and Weinberg, 1984; Gaedeke, 1977; Nickels, 1978; Kotler, 1975; Lovelock, 1977). The above statement implies that there was a divided opinion with respect to the adoption of marketing principles and techniques in the not-for-profit sector. The successful application of marketing in the commercial sector would invariably have led to calls for its extension to the non-business sector in order to replicate such success in the not-for-profit sector. These calls for the extension of marketing concepts to the not-for-profit sector would have encountered some opposition from certain academics who questioned the efficacy of the marketing concepts in the sector. However, despite the controversy that trailed the emergence of marketing in the not-for-profit sector, Kotler (1979) argued that the application of marketing principles and techniques to not-for-profit operations was inevitable. This is borne out of the fact that like commercial organisations, not-for-profit organisations also face a myriad of complex issues that are best tackled by marketing (Kotler, 1979).
HISTORY OF THE BRITISH RED CROSS
The British Red Cross is an arm of the International Red Cross and Red Crescent Movement. It was founded as The British National Society for Aid to the Sick and Wounded in War but was reconstituted as the British Red Cross in 1905. The original aim of the British Red Cross at inception was to offer aid to wounded and sick soldiers during periods of war. However, over the years it has extended its services to cover all kinds of humanitarian issues from natural disasters such as earthquakes, hurricanes, floods, and famine to providing support for people who have difficulty getting around due to ill-health (http://www.redcross.org.uk/standard.asp?id=87373).
NOT-FOR-PROFIT VERSUS FOR-PROFIT
Not-for-profit organisations differ markedly from commercial organisations (Andreasen 1995; Bloom and Novelli 1981; Fox and Kotler 1980) for whom the maximisation of profit is ultimate (Weisbrod, 1998). In addition to the profit-maximisation criterion, the not-for-profit sector differs from the commercial sector in other ways. Some of these differences will be examined in detail in this section.
A key difference between the not-for-profit and commercial organisations is in the area of the nature of product offering. The product offering of not-for-profit organisations is referred to as a “service” due to its intangible, social and/or psychological nature (V�squez et al., 2001; Kotler and Andreasen, 1996) although according to Lovelock and Weinberg (1984) it may also manifest as a tangible offering sometimes. In such cases, Kotler and Roberto (1989) state that it is imperative to understand that the material product is not the primary offering but a tool for providing a social service. In other words, it is a means to an end. As has been mentioned earlier, the not-for-profit organisations offer their products for the benefit of society whereas the for-profit organisations offer their products with the sole aim of profit-maximization. For example, the British Red Cross renders selfless humanitarian service to people in crisis regardless of gender, race or creed whereas commercial organisations sell their goods and services to customers who possess the ability and willingness to pay. Thus, it can be argued that the nature of a commercial organisation’s offering is such that the consumer gains access to it based on his/her financial capability.
The challenge this situation presents to the not-for-profit marketer of the British Red Cross is that of designing and implementing programmes that suit the target audience irrespective of race, religion, creed, or financial capability. Another challenge posed by this difference is in the area of fund-raising. In the commercial sector, consumers get goods and/or services for money expended. However, in the not-for-profit sector, donors usually do not receive anything in return for donating to a cause. Hence, some donors may be unwilling to contribute to a cause, since they receive nothing in return for the donation. Thus, it can be argued that the not-for-profit marketing manager faces the challenge of convincing potential donors to contribute to the organisation’s mission, even when there is no reciprocal exchange.
Not-for-profit organisations and commercial organisations also differ in the area of pricing policy. Research (Weisbrod, 1998; Tuckman, 1998; Young, 1998) has shown that not-for-profit organisations are increasingly turning to commercial activities in order to improve their revenue base. Weisbrod (1998) contends that, in addition to income-generation, not-for-profit organisations can also use pricing to achieve organisational goals. Despite the fact that both types of organisations might set out to accrue revenue by charging fees, the pricing policy implemented is distinct. The not-for-profit organisations may decide to use the revenue differently by using it to improve their mission-related operations (Weisbrod, 1998). This submission is consistent with the activities of the British Red Cross which operates a shop and channels all revenues to the provision of unconditional care to people in crisis globally and locally (http://www.redcross.org.uk/standard.asp?id=61996#section5).
The implication of this difference to the British Red Cross marketing manager is captured by Young (1998 p.280) as involving the risk of “crowding out” which occurs when a not-for-profit organisation incurs a loss in donations because donors assume that their donations are less needed due to the organisation’s resort to commercial activities. The not-for-profit marketing manager needs to create the right balance between the organisation’s core mission and other commercial activities in order to avoid sending the wrong message to the organisation’s patrons or donors.
According to Bloom and Novelli (1981) and Rothschild (1979), the not-for-profit sector and the commercial sector differ in the area of market segmentation. Commercial organisations develop products to satisfy one or more specific segments and are at liberty to jettison any unprofitable segments (Rothschild, 1979). However, the idea of concentrating on a select group of people while neglecting other groups runs contrary to the egalitarian and anti-discriminatory credos that govern the not-for-profit organisations (Bloom and Novelli, 1981). This statement is supported by the British Red Cross website which states, “The British Red Cross is a volunteer-led humanitarian organisation that helps people in crisis, whoever and wherever they are” (http://www.redcross.org.uk/standard.asp?id=80142). The above declaration portrays the British Red Cross as an organisation that adopts a strategy of “market unsegmentation” and strives to reach out to as many beneficiaries as possible, in as many locations as possible.
However, the pursuit of an “unsegmented marketing” approach poses a challenge to the not-for-profit marketing manager. Lovelock and Weinberg (1975 cited in Bloom and Novelli, 1981) posit that not-for-profit marketers are increasingly under pressure to avoid market segmentation or strive to cater to an unmanageably large number of segments. This situation would invariably put enormous pressure on the usually scarce resources at the disposal of the British Red Cross marketing manager.
Another area of distinction between the not-for-profit and commercial organisations is that of market orientation. Drucker (1990) considers the greater number of relationships maintained by the non-profit organisations to be an important difference between both sectors. V�squez et al (2001) infers from this statement that non-profit organisations need to reflect on the existing relationships with their clients or beneficiaries as well as donors. Relationships between non-profit organisations and donors differ from the customer-organisation relationships in the commercial sector. The individuals in a commercial customer relationship tend to be the direct consumers of the organisation’s products or services. However, donors, in not-for-profit relationships do not constitute the end-users of the services of a not-for-profit organisation (Rothschild, 1979 cited in Macmillan et al, 2005). The British Red Cross demonstrates this standpoint by the number of corporate relationships it maintains with organisations outside its scope of operations such as Tesco, Barclays, AstraZeneca, Brit Insurance and Canon Europe (http://www.redcross.org.uk/standard.asp?id=80140).
The British Red Cross marketing manager faces the challenge of striking the right balance between building and maintaining relationships with the organisation’s beneficiaries and donors that reinforce organisational values and mission.
Competition is another factor that differentiates the not-for-profit organisations from the commercial organisations. The basis for competition depends on the industry. For example, commercial organisations such as McDonalds and Burger King compete based on fast service and price, amusement parks on the latest and most exciting new rides, discount houses compete based on price and variety of inventory, and convenience stores compete based on location and speed in serving customers (Tuckman, 1998). Competition in the commercial sector is geared towards the acquisition of the highest level of profit possible. However, competition in the non-profit sector is not motivated by the desire for profit-maximisation. Usually, competition is based on service quality and the ability to meet the needs of beneficiaries with funders’ donations (Tuckman, 1998). Hence, it can be argued that whereas commercial organisations compete for the attention of consumers of their products and/or services in order to maximise profit, non-profit organisations compete for the attention of donors of funds in order to provide selfless service to society. In the same vein, the British Red Cross competes with other non-profit organisations in the United Kingdom and elsewhere for funds with which to achieve its mission of bringing succour to people in crisis regardless of race, class or creed.
The challenge that confronts the not-for-profit marketing manager is that of designing and implementing effective and efficient programmes that reinforce the organisation’s competitive advantage in order to attract donors.
CONCLUSION
From the literature review, it can be inferred that the application of marketing principles and techniques to the not-for-profit sector is here to stay. Taking into consideration the success of these principles and techniques in the commercial sector, it was just a matter of time before arguments arose in favour of extending them to the non-profit sector. However, the success of a concept or theory in a sector does not guarantee its success when applied to another sector. Hence, the nature of the differences between the not-for-profit sector and the commercial sector comes to bear when considering the application of commercial principles and techniques to the not-for-profit sector. These differences impinge upon the ability of the not-for-profit marketing manager to effectively and efficiently apply marketing concepts to the non-profit sector. Therefore, it behoves the not-for-profit marketing manager to research approaches that circumvent the negative effects of these differences in order to reap the benefits that abound in the application of marketing principles and techniques in other areas of human endeavour.
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http://www.redcross.org.uk/standard.asp?id=61996#section5
http://www.redcross.org.uk/standard.asp?id=80140 http://www.redcross.org.uk/standard.asp?id=80142
http://www.redcross.org.uk/standard.asp?id=87373