Marketing in the For and Not For Profit Sectors - Essay Example

REPORT ON MARKETING ISSUES MARKETING IN THE FOR AND NOT FOR PROFIT SECTORS CRITICAL ANALYSIS AND RECOMMENDATIONS Table of Contents Page 1 Abstract 3 2 Introduction 4 3 For Profit Companies 4 4 Not For Profit Organizations 7 5 Conclusions 10 6 References 13 1 Abstract The Marketing strategies of both For Profit and Not for Profit Organizations have been discussed extensively. All current theories have been examined and explained with relevant examples. In case of For Profit companies the Buyer Behavior was discussed and its relevance highlighted. The mix of marketing strategies was recommended and example of a successful company Tesco was cited. The case of Not For Profit was also discussed and it was found that while marketing was an essential tool, but it was different from what is practiced in case of For Profit companies. The importance of fundraising was examined and the satisfaction of constituents was highlighted. The Salvation Army serves as a prime example of a successful Not For Profit organization. 2 Introduction The objective of any company or organization is promotion of its ideals or goals. All goals are not profit oriented and therefore not all companies are alike. What is common between them is the method of achieving this objective. There have always been charities around us. They have been individual and group charities for some cause or the other. At all times they needed to be organized and promoted to the people at large and this action was marketing. As man by nature trades what he has for what he does not have, business of trade and commerce has always been around. This is profit oriented as man needs to gain out of any venture and this motivates him to be innovative and inventive. Both these diametrically objectives need the promotional effort to be successful enterprises. The only tool known to man to promote an idea is Marketing. It may have different names, like the call of faith, concept selling, sales promotion, idealism or even a projection, but they have a common thread and that is to promote and propagate and idea, a product or a way of life. 3 For Profit Companies With the companies who aim to make profit the term marketing associates itself to advertising and sales promotions and is more misunderstood than understood. Marketing is much more than that. The need to project the qualities and benefits of a product, the comparison of one product with the competition and the value for money concept are all various angle of the one single objective of making a consumer or buyer aware of its existence and to convince him to buy it. Since marketing is the only tool available for promotion of the idea, service or product, various theories and methods have been adopted in different scenarios for these endeavors. There are many approaches to addressing such an understanding of business customers or consumers, but one proposed by Dibb and Simkin has been widely adopted across consumer, business and service markets. Their Buying Proforma forces managers to put the customer first and identifies exactly what a company must provide or offer. It also reveals the influences the company in turn must strive to influence and offers a framework against which to compare competitors’ moves and marketing programmes. (Dibb, Simkin and Brdley) Four different reasons influence a buyers’ decision. They are also known as 4P. 1 Product. The buyer is greatly influence if the product is perceived as useful for him. Sometimes it may not be of immediate use but its uniqueness is the attraction. Future valuation is also a decision making factor. 2 Price. The price is not usually a stand-alone factor. It has to be comparable with other products or services but with weight given to factors like quality and after sale service. In case of tenders it has been seen that the highest and lowest bidders fail and the middle bidder is often successful. There is a play on the mind of the buyer that middle ground is best for him. 3 Promotion. Image plays a very important role. Whether it is the image of the product which enhances value or status or the image of the buyer when he acquires a product or service, both factors are extremely important for the buyer in arriving at a purchase decision. 4 Place or Time of offer. It is of great value to the buyer if a product or service is offered to him at a place and time that suits him. The importance of this can be gauged from the fact that often a deal is concluded at the most awkward time and place just because of the whim and fancy of the customer. This is more applicable when individual customers are involved for high value items or services. There is an however, an additional fifth factor that influences a buying decision and it is, 5 After sales service. In most cases a satisfied customer is a recurring customer and the best publicity a product or service can wish for. Therefore a good backup and attentive staff ensures sales. The company needs to understand Buyer Behavior by applying this concept. Marketing cannot be taken lightly for profit oriented companies. This effort has been translated into well planned strategies and is no less than planning for a battle or war where lives are at stake. Indeed careers are at stake here too and they are no less important than life itself. The company may have an excellent product or service but marketing can make or break a company But the marketing plan has to be different for both New Products and existing ones. For instance New Product Development (NPD) is fundamentally to try out a new idea. These progresses from one stage to another till it finally evolves. The various stages may be described as idea generation, assessment, concept testing, available choices, prototype development, final version development and finally commercialization of the new product. All this is to be considered by marketing personnel to decide on the strategy and the customer is involved all the way to get his confidence and eventual approval. With existing products the strategy is to be different. Here a SWOT analysis will work rather well. This is a simple but effective marketing tool. A product’s Strength, Weaknesses, Opportunities and Threats (SWOT) are listed and available to marketing for detailed analysis. The team is able to prioritize the various areas and decide on marketing strategy accordingly. The general business environment also plays an important role and at times can influence marketing decisions although these macro factors are not normally taken into account while forming a marketing strategy. However, business is not an isolated venture, hence the environmental factors often come into play at a much higher policy making level. This is necessary in order to either check an event or to circumvent it or sometimes even to leverage it to the advantage of the product. Many a times the first move will thwart a competitor’s effort and produce an additional advantage. These macro efforts are carried out in one of the following two ways. 1 A group is formed consisting of experts in social, economic, legal, regulatory, political, technological fields. Key trends and developments are discussed and debated. Finally, opinions are networked with the marketing managers, and out of this emerges a strategy that suits the product or the company at a particular time. 2 The company organizes workshops at particular intervals to discuss the then important topics relating to social, political, and other fields and brainstorming sessions are held with experts from outside and within the company to decide on policy that finally has an effect on the marketing strategies. (Dibb, Simkin and Bradley) 4 Not For Profit Organizations In comparison to the For Profit companies the Not For Profit organizations too require marketing to survive. The motive of profit is non-existent and is replaced by a desire to fulfill a need for two parties in which they play a central role. There is the Donor who needs to offer help or charity for a cause and there is a recipient who is in need of this assistance. The Not For Profit organization is the catalyst that makes it possible. Unlike their counterparts, the For Profit companies, these organizations are formed for specific services. They have to first identify the sector in which they want to offer assistance and service, and collect data about the recipients. Then they have to look for donors who can be coaxed into giving this help. In Commissioners for Special Purposes of Income Tax v Pemsel (1891), Lord McNaughten identified four heads of charity: (1) relief of poverty (2) the advancement of education, (3) the advancement of religion, and (4) other purposes considered beneficial to the community. Kotler defines marketing as the analysis, planning, implementation, and control of a charitable nonprofits programs, which have been carefully designed to bring about voluntary exchanges of values with target markets for the purpose of achieving organizational objectives (Philip Kotler) Their service may be voluntary or paid for, depending on position and status of people involved. But they too need a marketing division to organize this effort. Kotler describes the marketing process of such organizations in the following manner. “Marketing is the assessment of constituent need and the management of the response process to achieve best utilization of programs and optimal financial support. Board and staff work as a team to achieve this goal. The primary manifestation of that teamwork is the strategic organizational market plan”. (Philip Kotler) A Charity or Non Profit Organization has two requirements. It must justify its existence through the service it offers and it must have the funds and financial resources to do so. As a result it needs to market its activities to get the financial support. Again there are two kinds of financial supports available. They are donations from those who approve of the programme and donations from those who have used the programme and wish to contribute to it as well. A good example of this is a Hospital where people donate to help those in need and patients who have used the facilities and feel inclined to help out others who need this facility. In both cases the marketing requires different skill sets and segmentation. For Non Profit Organizations fund raising is the only source of income, except when they have an income producing asset. Such fundraising requires that the Strategic Plan is presented to donors in a cohesive manner to encourage them to donate. The Plan broadly re-defines the need for a specified term, usually three to five years, and it acts as a proposal. It analyzes the needs of two parties, the donor and the recipient, and details the requirement to match those requests, projects costs and required funds, and provides a specific plan for each program. It also explains sub-plans to recruit human resources, effectively inform the general public about their activities, and continue to evaluate constituents needs and responses to the organizations current work. There are many ways to raise funds and the usual ones are: 1 Annual Campaigns. These are useful where programmes are related to annual events like religious festivals. These are usually event related activities. 2 Foundation Gifts are often based on corporate donations which are also a kind of annual affairs although the use may not match the time of gifts. 3 Special Events. There are cases of specific disaster events like the tsunami or an earthquake. 4 Cause related. Some corporates can be co-opted to contribute a part of the sale of their products assigned to a particular cause. This marketing is useful as it also encourages the consumer to participate in the cause indirectly by purchase a particular product. During the last decade this has become a popular rout as it ropes in both the companies and their customers and it is a very effective marketing tool. 5 Unrelated Incomes. Such possibility occurs when an endowment is used to generate income and this is used entirely by the Non Profit Organization who received this endowment. For example when a hospital receives a property endowment and lets it out and uses the permanent rental for its needs. Recently a New York Hospital received a spaghetti factory as an endowment and let it run as an independent business and was able to harness its income for its constituents. (Seymour, Harold J) In a number of countries, specially the advanced ones, charities are taking over the function that was earlier the domain of the state. Activities like running old age homes, health and unemployment are being gradually finding their place with Non-profit organizations with their own funding which not supported by the state. The traditional and social responsibilities have been taken over by the citizens themselves. 5 Conclusions Marketing is the inevitable method to accomplish a For Profit Company objective. There are various methods to realize these goals but the decision to apply any particular method or a mix of them is largely dependant on the Buyer Behavior pattern. Five different reasons influence a buyers’ decision. They are Product, Price, Promotion, Place or Time of offer and After sales service. To deal with this the 4P concept was developed to satisfy a potential buyer. The company needs to understand Buyer acceptance by applying this concept. It is known that price is not always the deciding factor but coupled with product uniqueness or usability, the image it carries or it will portray for its user and the place and time of offer are factors that determine the buyers’ choice. Any marketing effort that takes this mix into consideration will meet with success. Once the buyer behavior can be ascertained then it is easier to plan a marketing strategy and subject to the product or service that is being offered any of the above methods can be usefully applied. The marketing plans of the Not For Profit organizations will however be different. For them raising of funds through donations needs a radical approach and they have to satify to ends of the market, the donor and the recipient. Both have different needs and the Not For Profit acts as reliable conduit that can satisfy both ends simultaneously. Strategic planning, marketing, and fundraising are three different processes with specific steps. Earlier all these were used separately but now their integration into a single process is explained by the following principles (a) Strategic Planning is required for a satisfactory fundraising. (b) Fund raising is the result of satisfying the needs of the constituents, the donor and the recipient. (c) Strategic planning provides the structure within which market testing and program designing can work and which generates fundraising goals and plans. It is recommended that in both cases the consumer or customer or donor preferences be understood very clearly. Market Segmentation and Targeting will be useful and have been successfully employed by various companies to achieve this. Among the For Profit Companies Tesco is a great example. They are now the largest supermarket chains in UK and have worldwide presence in several countries.They have studied their customers carefully and carried out segmentation and have targeted different groups and serves them with their needs. Tesco Chairman, Sir Terry Leahy remarked in one of his annual reports that his company’s mission statement was to “continue to increase value for customers’ to earn their lifetime loyalty”. (Case Study by Devon Wylie). They have indeed been successful at this and the success of their loyalty programme is ample proof of this fact. Among the Not For Profits, the Salvation Army is an outstanding example. The Salvation Army is at work in 111 countries and has more than 1.1 million members worldwide. The worldwide donations come in due to their committed programmes that are so well known due to their great planning. They are so well connected with their constituents that their fundraising is highly regular all the year around. This is a perfect example of strategic planning that is continually kept updated and provides satisfaction to donors and recipients alike. 6 References Dibb, Simkin and Brdley) The Marketing Planning Workbook (Dibb, Simkin and Bradley), both originally published in 1996 by Thomson, London. (ibid) (ibid) Philip Kotler, 1982, Marketing for Nonprofit Organizations Prentice Hall. (ibid) Seymour, Harold J. (1988). Designs for Fund-Raising, 2nd ed. Rockville, MD: Fund-Raising Institute. Income Tax Special Purpose Commissioners v. Pemsel [1891] AC 531 Available at: http://www.charity-commission.gov.uk/publications/RR1a.asp Case Study by Devon Wylie Available at: http://www.loyalty.vg/pages/CRM/case_study_14_Tesco. Read More