CHAPTER THIRTEEN
MARKETING FOR NONPROFIT ORGANIZATIONS

Brenda Gainer

Marketing has long been defined as the science of exchange (Bagozzi, 1975). In the for-profit sector, marketing is the management discipline that is focused on developing and maintaining exchange relationships with customers. In the nonprofit sector marketing pertains not only to customers or clients but also to exchange relationships with a wide range of donors, funders, supporters, users, suppliers, partners and adherents—as well as taxpayers and public opinion. Although the facilitation of exchanges with many of these groups is called by names other than “marketing” in nonprofit organizations (for example, fundraising, grant writing, volunteer and employee recruitment, program development, communications, or public relations), the marketing paradigm articulates an approach to value creation and exchange as being at the heart of an organization's interaction with and responsiveness to the individuals and institutions in its environment.

The conceptual framework upon which strategic marketing is based asserts that satisfying the needs and wants of key target groups through exchange results in organizational “success” (the achievement of the organization's goals). Research in the private sector has demonstrated that higher levels of organizational orientation toward the market are associated with performance outcomes such as return on investment (Narver and Slater, 1990). Of course, in the nonprofit sector organizational goals comprise many complex ambitions beyond the simple goal of profitability that is paramount in the for-profit sector. Research on nonprofit organizations has shown that market orientation not only predicts success in attracting financial resources but is also associated with other important mission-based outcomes such as higher degrees of client satisfaction (Gainer and Padanyi, 2002). This supports the notion that a focus on value creation with respect to all the different stakeholder groups with which the organization interacts is at the heart of realizing its ambitions.

Because marketing theory was developed in the private sector and focuses directly on profitability derived from customers, controversy has existed for years among marketing scholars about the “boundaries” of marketing and whether its concepts and tools can be applied to the nonprofit sector (Parson, Maclaran, and Tadajewski, 2008). Hutton (2001) has argued that the customer metaphor is fundamentally incompatible with an organization charged with the mission of social value creation. Nevertheless, prominent marketing scholars have argued that the marketing paradigm is extremely relevant to conceptualizing the relationship of the nonprofit organization to its environment (Andreasen and Kotler, 2008; Sargeant and Wymer, 2007).

Despite the acceptance of marketing in nonprofit organizations, there often remains a very limited view of what marketing entails. Marketing is often implemented primarily in terms of a few key sub-fields such as sales, communications or public relations and associated with information, education and persuasion processes. As a result of this narrow conceptualization of marketing, the value that a strategic marketing “mindset” can contribute at the leadership level to overall organization performance and success is often less than it could be.

In the for-profit sector, marketing is associated with both resource attraction and resource allocation—marketing is used to influence customers to buy products and services (resource attraction) and it is also the functional area that ultimately decides which products and services will be developed in order to attract those sales (resource allocation). Perhaps because of this reciprocal relationship between the resource attraction and resource allocation functions of marketing in the private sector, acceptance of marketing as a component of high-level strategic management and leadership in the nonprofit sector has been controversial. There has been an assumption that organizations that respond to “market forces” will drift away from a focus on their mission because they will begin to allocate funds to the development of “market-driven” programs associated with resource attraction in preference to “mission-driven” programs associated with resource allocation.

However, even though conflict may occasionally arise in nonprofits over decisions with respect to the “market” for resources and the “mission” associated with expenditures, these constructs are not dichotomous opposites nor mutually exclusive. The adoption of a strategic marketing mindset in a nonprofit organization does not mean that financial considerations will take precedence over operations or that devoting resources to marketing will erode spending on programs. Instead the implementation of the marketing concept and the development in the nonprofit sector of what has been called a “market orientation” in the private sector will mean that the nonprofit organization becomes more responsive to the wants and needs of the multiplicity of stakeholder groups with which it interacts—as well as to society more generally (Sargeant, Foreman, and Liao, 2002).

Key Concepts in Nonprofit Marketing

In the for-profit sector, marketing is the means through which firms engage in transactions with customers that are based on an exchange of value. Successful firms are those that are able to understand the needs and wants of their customers better than their competitors. In the nonprofit sector, marketing is based on a similar notion, although vastly more complicated in execution.

First, those who provide revenues to the firm are not often “customers” who buy goods or services. Therefore, the value exchange is often nonmonetary—though nonetheless valuable. For example, in exchange for financial contributions, labor (paid and unpaid), political support or behavioral change, a nonprofit organization may provide achievement, inclusion, sociability, status, skills, social networks, advocacy, enactment of public policy and—extremely difficult to measure but nonetheless very “real” in terms of value—better communities and a better world.

Second, in nonprofit marketing, the idea of multiparty as opposed to dyadic, or two-party, exchange is critical. There are many more constituencies with which a nonprofit organization engages in exchange transactions than simply “customers.” Those for whom programs are designed are not always those who support the organization and even if earned revenues are substantial, resources are almost always attracted from a variety of sources (Young, 2006). The key concept here is that in each of the markets in which a nonprofit organization transacts, the notion of value exchange applies—government funders are looking for a means of implementing public policies while volunteers are looking for skill development, social engagement, or a way to contribute meaningful activity to their community. If a nonprofit organization wants to be successful in attracting resources, it will have to deliver sufficient value to the providers of those resources—while providing value to the different constituencies that “consume” those resources.

Of course, in practice, as an organization attempts to devote limited financial and human resources to the creation of value for all of the various constituencies that form the context in which it is embedded, conflict may emerge. A strategic marketing approach will not dictate that resources go to the market as opposed to the mission but it will provide a logical and defensible framework for analysis and planning that can lead to the most efficient and effective use of resources to build organizational success, defined as the organization's ability to achieve its mission over the long term. A marketing approach is based on the recognition that nonprofit organizations must be responsive to many different constituencies, understand the unique needs and wants of each, and take steps to create the tangible and intangible value that will form the basis of stable, sustainable, long-term exchange relationships.

The long-term quality of the relationship between an organization and its exchange partners is coming to be recognized as more important than using marketing techniques and tools to trigger isolated transactions (Conway, 1997). It is becoming increasingly important to consider the lifetime value of a client in the nonprofit sector because long-term relationships are associated with lower costs over time (Brennan and Brady, 1999). It is particularly difficult to continue investing in long-term relationships when organizations have revenues that are unpredictable from year to year and, moreover, are under substantial pressure to spend as much money as possible on programs and services and not on fundraising or recruitment or other kinds of administrative expenses. A marketing analysis based on value exchange would suggest, however, that investments in long-term relationships pay off not only in terms of cutting costs that come from losing clients after one transaction and then having to pay more later to attract new ones, but also from the ability to move long-term relationships to higher levels of value exchange.

A strategic approach to marketing goes beyond a focus on the relationships between an individual organization and the many client groups to which it directly offers services or advocacy or from whom it gathers financial and other resources. Nonprofit organizations are embedded in large market systems that operate the same way that for-profit market systems work. Market systems consist of many producers or programs and services and many potential clients who “consume” the programs and services in different ways—as well as many indirect players and forces such as regulators, suppliers, umbrella groups, credentials, qualifications, reputations, and others. Market systems can be based on a system of production (settlement programs for new immigrants, symphony concerts, opposition to an oil pipeline) or can cut across producers (such as the market for volunteer labor or fundraising). Understanding the totality of the market systems in which an organization participates will determine how well it is able to innovate, adopt new technologies and ideas, obtain financial support and achieve its goals (Giesler, 2015).

In the next section I examine the three direct components of the market systems in which nonprofit organizations are embedded and introduce concepts and theories that underpin a strategic approach to nonprofit markets and marketing. The three elements of this framework are the clients or customers for whom the organization develops programs and services, the “competitors” or rival organizations appealing to clients, and the particular competencies or strengths of the marketing organization in terms of producing its programs or services. In the final section of the chapter, I examine the four main types of decisions that an organization must make in order to develop the “marketing mix” that it will use to participate in a marketing system. In this section some of the key models, tools, and techniques of marketing are presented and adapted for nonprofit organizations and systems.

A Strategic Approach to Marketing

Figure 13.1 outlines a step-by-step hierarchy of decisions that must be made about which groups to serve or to target given the competitive situation, the human and financial resources that are available, and the organization's particular competencies and expertise. Once these strategic choices have been made, an organization can develop a marketing mix of appropriate programs and services, communications, pricing and delivery systems that will maximize its potential to achieve its mission. All of the inputs to the decision processes mapped in this chart should be based on analysis of concrete data.

Overview of the Strategic Marketing Process.

Figure 13.1 The Strategic Marketing Process

It should be noted that the analytical process outlined in Figure 13.1 can be used to develop marketing strategies that will be applied to each “market system” in which a nonprofit organization is embedded—for example, a segmentation strategy, the first decision point at the top of the chart, will be different for the fundraising market than for the client services market.

The Role of Data Analysis in Decision Making

Formal market research in nonprofit enterprises is quite rare and usually limited to the larger fundraising organizations (universities, colleges, hospitals, and some of the large medical research and service organizations). The cost of research is often prohibitive, but there are other reasons that nonprofits are reluctant to undertake research. One is that many nonprofit organizations are convinced that they already understand their markets and what they need, a notion that results from the fact that many nonprofits offer services provided by highly trained and specialized professionals such as social workers, psychologists, educators, artists, scientists, or medical personnel. Market studies may appear unwarranted because the service deliverer seems to be in a better position than the user to specify the appropriate service or program. The service deliverer may see it as a duty to prescribe what services the other party should receive. Other reasons that many nonprofit organizations fail to see value in research is that they often operate on a small scale and know the individuals with whom they interact personally, and they often deal with end-users directly, as opposed to through intermediaries. However, organizations that make an organized effort to collect and analyze data to answer specific questions with regard to resource allocation and attraction will not only be more effective in their markets but also be more accountable to their stakeholders as a result of evidence-based decision making.

“Big data” is a new term that pertains to the growing proliferation of data generated by digital technology in many areas of human endeavor (for example, science and the environment, business and finance, health and hospitals). The nonprofit sector is far behind the business and public sectors in using big data to help manage their operations. There are several reasons for this: data pertaining to social issues are relatively unstructured, can lack variety, and may be unreliable; there is little sharing of data about social issues between agencies or with the public as relevant data are often buried in administrative systems; effective data governance systems are lacking; and finally, the data can often be misinterpreted or even manipulated when it comes to public issues and thus be misleading and/or lead to unintended consequences (Desouza and Smith, 2014). Large intersectoral collaborative networks formed around complex social problems such as poverty, homelessness, or human migration may be the first to use big data, partly because the owners and analysts of the data will come from the public or for-profit sectors. It remains to be seen, however, what contribution big data can make to addressing the “wicked” questions individual organizations face as they grapple with messy and complex social issues.

However, as for-profit business moves toward big data to support marketing decision making, new and small-scale techniques are emerging in the social sector that allow individual and relatively small organizations to collect their own data relatively quickly, cheaply, and effectively. Recently, Acumen, an organization interested in social impact measurement, has developed a direct approach to data collection that they call “lean data.” The lean data approach is based on a shift away from surveys that collect data for reporting to and enabling compliance with outside agencies, funders, investors, and regulators. Instead it is designed to provide value to the organization itself. It is affordable and easily managed by nonexperts because it is based on familiar mobile phone technology and simple customer feedback instruments. As opposed to simply measuring outcomes “after the fact,” the lean data approach can also be used to help marketers decide about program and product development, understand clients' and customers' needs better, and test hypotheses about the behavioral outcomes of various approaches. This approach can be adopted by almost any nonprofit organization, regardless of size or expertise in data analysis (Dichter, Adams, and Ebrahim, 2016).

Regardless of how simple or small the investigation, it is increasingly important that nonprofit organizations undertake some form of data-based analysis before making decisions about their programs. On the management side, the collection and analysis of reliable data can combat organizational myopia that stems from being too close to an issue and, more important, to a particular organizational culture that has defined the external environment in a particular way. Data analysis is a way to engage in “critical thinking” about an issue and the people involved with it; it allows managers and leaders to look at questions from different perspectives and reframe issues. It has been suggested that because clients and funders are separate constituencies in nonprofit organizations, there is no direct feedback loop as exists in the business sector to ensure good service (Connor, 1999). Moreover, when nonprofit clients are ill-served, their remedies may be few and frail. Clients of many social or community service organizations are more likely to be disadvantaged and vulnerable, to have less opportunity to switch to other providers, and to be more afraid of complaining than in for-profit marketing situations. Anonymous, confidential, and simple data collection can give these important stakeholders opportunities to provide information that should be part of every nonprofit organization's decision processes.

Segmentation and Target Marketing

Target marketing is the process whereby decisions are made about which groups an organization will choose to serve within specific market systems. For example, in the market for donations, an organization may divide individual donors into several groups, each of which responds differently to a nonprofit organization's appeals, such as board members, current or former clients (such as students, audience members, patients), people who may be affected personally by the cause in the future, prominent and known philanthropists, and well-to-do members of the community who are aging and perhaps considering legacy gifts. Moreover, because organizational resources are limited and may not allow a nonprofit to target all of these segments at once, decisions need to be made about which market segments best fit the organization's objectives and abilities, and then about how to tailor marketing programs to create the most value for each of the chosen segments. All of these decisions about whether and how to segment a market need to be made for each of the separate constituencies or market systems within which a nonprofit organization acts (Rupp, Karn, and Helmig, 2014).

Choosing to “target” certain groups while ignoring others may seem a questionable, if not unacceptable, approach in the nonprofit sector. Choosing some segments means that an organization will focus on some people and that may mean not serving or communicating with others. In a field in which turning no one away or achieving mass social change is often a cherished norm, neglecting some possible clients as a matter of policy can seem to degrade fundamental organizational values.

However, the case for target marketing is both strong and responsible. In an environment in which human needs are escalating while resources are constrained and shrinking, no organization can reach all possible constituencies. The question then is not whether the enterprise will constrain its domain but how. Market segmentation allows nonprofit organizations to control whom they serve by choosing where they will be most effective, based on their competencies, or where it is most important for them to act, or according to organizational mandate or mission, and then to spend limited resources efficiently, rather than letting the limits of their funding arbitrarily decide which markets they cannot serve when they run out of funds. Segmentation helps an organization focus its resources on the clienteles that best fit its mission, capabilities, and aspirations.

The first step in segmentation is to divide the market into meaningful groups. Segments are considered meaningful when they are “homogeneous within, heterogeneous without.” This means that the people or organizations within a segment are considered to behave the same way in response to particular marketing programs and to behave differently from people in other segments. There are a number of variables that may be used to define segments. The most conventional segmentation criterion is socio-demographic, a term coined to represent a wide variety of easily observable characteristics (for example, geographic residency; “social class” as measured by education, profession, or income; or age). These variables are convenient because available data are most often arrayed along these lines, and they can serve as useful surrogates for deeper psychological and behavioral motivations that marketers cannot always access. For example, fundraisers are becoming more and more interested in segmenting on the basis of age since research indicates that Generation Y donors behave differently than older ones; they are motivated much more by “sharing” as opposed to “giving” and are therefore more likely to respond to appeals based on social network ties and that emphasize pleasure as opposed to duty, which may be more relevant to older segments (Urbain, Gonzalez, and Le Gall-Ely, 2013).

However, despite the convenience of using socio-demographic segmentation, it does not always stand as an effective surrogate for behavior. Other data, although more difficult to collect and interpret, can often provide a more nuanced approach to segmentation. Psychographics, based on information about lifestyles, values, attitudes, and opinions, can be particularly important in segmenting for social marketing efforts designed to change attitudes and behaviors. Personality variables such as empathy and self-esteem have been suggested as useful segmentation variables for recruiting volunteers (Wymer, 1997). Benefit segmentation is efficacious because, being rooted in the fundamental notion of market exchange, it not only identifies homogeneous client clusters but also is suggestive of the most relevant offer for each. Benefit segmentation is useful in volunteer marketing and is also used to good effect in fundraising. Behavioral segmentation (for example, heavy versus light users) is relevant to many causes; heavy users are especially propitious targets. Fundraisers have now begun to segment their markets on the basic of financial value, calculating the worth of a potential target group over the course of a long-term relationship (Rupp, Kern, and Helmig, 2014).

Once potential segmentation criteria have been formulated for a particular market, the marketer must calculate whether the value of using these specific criteria is worthwhile. For example, if some potential donors are moved by sympathy for people who have a given disease while others react to a warning that they may contract it, a segmentation scheme that identifies that these groups respond positively to different messages and develops two different marketing programs to solicit donations may be warranted. In a case such as this, the decision will be made on the basis of whether the expected reward from appeals tailored more specifically to the needs of individual groups will outweigh the costs associated with developing multiple campaigns.

In choosing which segments to target, several criteria come into play. The first, of course, is whether a particular segment fits the mission of the enterprise. Just because a particular segment is easiest to reach, for example, may not mean it will be the most important group to target. A second criterion is whether the segment aligns with the organization's capabilities. In appraising the goodness of fit of a potential target market with an organization's capabilities, organizations must be careful not to overvalue their own capabilities and underestimate the strengths and competencies of competitors.

A third criterion is whether the segment is sufficiently large to justify a special marketing treatment. Arriving at an answer to this question can be complicated in the nonprofit sector. In a commercial firm, the projected value of a superior return from an investment in a unique marketing program is usually the only arbiter of acceptable segment size. In a charitable enterprise, financial considerations may be overridden. This may be acceptable if the organization is able to cross-subsidize special programs through revenues from more “profitable” segments, but not if the loss associated with serving the small segments endangers the survival of the organization.

A final consideration in target selection is whether particular segments can be accessed by special marketing programs. Often targets are difficult to estimate and the members are hard to reach through specialized marketing programs. Ideally, the idea of targeting specific markets is to use a narrow approach in which only the specified clients are reached by specialized media, messages, pricing, and so forth—it is through targeting specific segments that the cost savings are realized that make segmentation so efficient. However, if a segment is not easily reachable, it is often necessary, and more economical, to use a “mass market” approach, which leaves it to members of the target population to choose to “come into the market” through a process of self-selection. Social media now achieve some of the benefits of both strategies; it is a cheap way to distribute messages to many people, but the messages are somewhat restricted to those who participate in particular social networks. It can be suitable for large target markets for whom personal contact is not required and the message can be tailored to appeal to specific groups. For important small target markets where personal contact is paramount, other methods of reaching the target will be necessary.

Competition, Positioning, and Branding

Competition is an idea that is often troubling in the nonprofit sector. Adherents of economic theories of the nonprofit sector who consider these organizations to have developed out of market failure argue that nonprofit organizations respond to need and do not compete. Often there is a philosophical aversion to the idea of competition on the part of those who work in the nonprofit sector, who would prefer to think of the sector as being engaged in cooperative, as opposed to competitive, behavior.

Nevertheless, competition is a reality in the nonprofit sector (Oster, 1995). In many countries the number of nonprofit organizations has exploded, and many of them have been founded specifically because they intend to provide alternative programs or philosophies to the offerings of existing organizations in the same market system. Moreover, many nonprofit organizations are trying to influence attitudes and behavior, and their target markets always have choices about how they think and behave—even if it means continuing with their old habits and patterns. In this sense, even “doing nothing” can be considered “competition.”

Positioning refers to the place that an agency occupies in the minds of the individuals in its target market (Trout and Rivkin, 1997). It is always related to how an organization and its offerings are evaluated in terms of a known set of alternatives (or competition). The first step in developing a positioning strategy involves understanding the dimensions that the target market uses to compare organizations and alternatives, and the second seeks to place the alternatives, relative to each other, in a “space” defined by those dimensions. For example, if potential clients evaluate immigrant-serving organizations along the dimensions of “multiple service offerings” and “effectiveness in service outcomes,” they would place different settlement organizations in different positions on a grid formed with the two dimensions as axes (see Figure 13.2).

Illustration depicting the Positioning Map for Hypothetical Immigrant-Serving Agencies.

Figure 13.2 Positioning Map for Hypothetical Immigrant-Serving Agencies

One of the troubling realities of positioning in the nonprofit sector is that the multiple constituencies with which organizations interact often evaluate both the dimensions that they use to compare agencies and the position of individual agencies along those dimensions differently. For example, wealthy potential donors may compare arts organizations in terms of the service and opportunities for recognition that they provide to their major patrons, while government granting agencies that support artistic work may compare the same organizations on different dimensions, such as originality or creativity. It may also happen that different market constituencies use the same dimensions but evaluate competitors differently. For example, both clients and foundation officials may evaluate and compare social service agencies in terms of their effectiveness. However, clients may evaluate a particular agency as highly effective in personal terms, while a funder may rate the same agency as low on effectiveness because they don't see large-scale change in a community. The key point is that positioning refers to the dimensions and the relative positions along those dimensions that are in the minds of each clientele with which the marketing organization interacts. A nonprofit organization that serves several clienteles (for example, donors, users, government grantors) will develop a unique positioning map for each market system, and this in turn will dictate a unique marketing strategy for each separate clientele.

Of course, the grids cannot be mapped unless the perceptions of the target markets are known, and the best way to collect this information is through some form of concrete data analysis. However, even a dispassionate and objective “back of the envelope” grid can be mapped without expensive data if managers are willing to talk to their potential audiences and listen to what they say about the evaluative dimensions that matter to them and how they see the alternatives before them in terms of these dimensions.

Once an organization has determined its positioning, the next step is to develop a positioning strategy. Positioning is based on the key marketing idea of differentiation—in other words, an organization is positioned on the grid on the basis of how it differs from its competitors on the dimensions of interest. The important thing to notice about Figure 13.2 is that, even if an organization has given no thought to positioning and is not interested in the process, it is still positioned on the grid in the minds of its target market!

An organization may choose to maintain its current position by continuing to emphasize those factors that differentiate it in positive ways, or it may choose to emphasize characteristics that would differentiate it in more positive ways by using elements of the marketing mix to move to a more advantageous position on the grid. In either case, it is important to keep in mind that not all competitors should plan to locate themselves in the same position on the grid (different segments will be located in different places in accordance to their particular preferences). The trick is to find a market group of sufficient size, that wants a particular combination of attributes the organization has the capacity to provide—and is able to provide them better (faster, cheaper, with better outcomes) than other organizations. If an organization can do something better than a competitor, it will not be in the same place as a competitor on the grid—it will be in a better one.

In Figure 13.2 the shaded circles represent the size of market segments and their preferences. We can see Organization A is well positioned and Organization B is not. What should Organization A's strategy be? It should continue to emphasize the fact that it offers “one-stop shopping” (multiple services) and that it is effective in delivering desired outcomes. What should Organization B's strategy be? This organization has two choices: it must definitely improve the public perception of its effectiveness, but instead of adding more programs and services in order to move up and serve the segment located in the upper right quadrant, where it would have to compete directly with Organization A, it would be better off to target the segment in the lower right quadrant interested in, say, effective language training but who are not particularly looking for job training, child counseling, or computer training. It should also be noted that there may be several ways that it could “move” to the right on the grid and target the segment we see there. It may be that this organization is, in fact, highly effective but that is not well known. In that case a communications or advertising strategy would be effective in “moving” the organization to the right. If, on the other hand, the organization has not had a record of high achievement in language training, it will need to change or improve its programs in order to increase the perception of its effectiveness in this area.

Branding in the Nonprofit Sector

An important marketing idea related to positioning is branding. A brand is a shortcut means of identifying an organization, program, or cause in a way that differentiates it from alternatives. It is much more than a logo, a tagline, or a document that outlines a set of desired organizational characteristics. A brand is a psychological construct held in the minds of those aware of it. It embodies a set of characteristics that external communities believe will be delivered consistently. It can convey the organization's position in the market, build trust between the organization and its clienteles, raise an organization's profile and provide insulation from competition (Ritchie, Swami, and Weinberg, 1999).

In the nonprofit sector, branding was considered for many years to be an expensive extra, and it is true that the typical approach to branding in the nonprofit sector could absorb considerable financial resources as new logos and taglines were developed and advertised with little obvious return. Because this work was often instigated and managed by only one department, usually the fundraising department, there was little buy-in across the organization and certainly no sense that all functional areas needed to support the brand and possibly even change service delivery modes and program elements to be consistent with the brand image. It was often seen as a notion that pertained to “market-driven” organizations and had no relevance to organizations dedicated to social change. The branding process in many organizations led to skepticism and even resistance. This was exacerbated by the problems that developed in global or large national organizations with multiple branches with a high degree of local autonomy. It can be very difficult to standardize not only advertising materials, but also organizational cultures and decision making around the values inherent in the brand (Quelch and Laidler-Kylander, 2006).

Despite these difficulties, nonprofit branding is experiencing a renewal in nonprofit organizations as they come to realize that a brand is a psychological construct that is based on trust—and that an organization is likely to be “branded” in the public's mind whether the organization has taken a direct hand in that process or not. Recently it has been argued that a new, explicitly nonprofit, branding paradigm is emerging, which views the development of a nonprofit brand as a strategic effort to create greater social impact through sparking public discourse on issues and to build support for an explicit theory of change, both externally and internally (Kylander and Stone, 2012). Kylander and Stone characterized this new brand paradigm as the “Nonprofit Brand IDEA,” which incorporates four elements relevant to the nonprofit sector, specifically integrity (social mission), democracy (a participatory process), ethics (shared values within an organization and among its stakeholders), and affinity (key partnerships with those who buy into the theory of change).

Managing the Marketing Mix

Having chosen target markets through a thoughtful approach to segmentation and determined a positioning strategy on the basis of dispassionate competitive analysis, the marketing organization is in a position to use the four major tactical elements of the marketing mix to facilitate exchange relationships with its chosen targets by offering them better “value” than alternatives. Value is the ratio of benefits to costs, and in the nonprofit sector this, of course, includes not only material benefits and financial costs but also intangible benefits (for example, experience, status, social networks) and costs (time, inconvenience, hard work). In other words, value is a perceptual construct, not simply an economic one.

Marketers, in an excessive devotion to alliteration, sometimes define the elements of the marketing mix as the “four Ps”: product, place, price, and promotion. None of these is a very exact term. In the nonprofit sector, the product construct is the element of the marketing mix that refers to services, programs, advocacy, or ideas for which the organization wants to find users or supporters. Place refers to choices about distribution channels; price refers to all of the costs, tangible and intangible, that are considered by potential exchange partners; and promotion extends well beyond advertising to include all marketing communications (paid and earned, planned and unplanned).

Product Marketing in the Nonprofit Sector

The marketing of physical products, while it occurs in the nonprofit sector, is relatively uncommon. Instead most nonprofit organizations are engaged in service marketing and/or social marketing (behaviors and ideas). Physical products such as items in a thrift store, baked goods in a sheltered kitchen, or merchandise offered to those who buy membership is relatively easy for potential clients to evaluate. The same is not true of services such as literacy programs or home care for senior citizens, and it is even more difficult for potential supporters to evaluate such intangibles as anti-racism, a political candidate, or recycling.

Programs, Services, Behaviors, and Ideas

Some of the key differences between marketing products and marketing services are documented in the marketing literature. Services, for example, are generally considered to be harder for users to evaluate and harder for producers to control, in terms of standardization of quality, and impossible to inventory. Recently, scholars have also defined some of the key features that distinguish social marketing from product and service marketing: social marketing is often controversial (safe sex, gay and lesbian rights, the banning of “obscene” art), it is often deeply embedded in individuals' lives, cultures, and psyches (racial prejudice, overeating, corporal punishment of children), and it often involves target markets that are entire populations (changing to the metric system) or subsets of populations that are pitted against each other (ownership of handguns, support of political parties) (Andreasen, 2006; Kotler and Lee, 2007).

All of this suggests that the markets in which most nonprofit organizations typically engage are the most complex and challenging in which to succeed. Further challenges to making effective decisions about program marketing are posed by the internal circumstances of most nonprofit organizations. First, because competition is often considered to be weak or nonexistent, it is difficult to make a case for spending resources to collect data about market preferences or about new programs or services. In addition, where a case can be made for upgrading, downgrading, or eliminating a program, internal deliberations can be complicated by the attachment of founders, directors, funders, staff, or volunteers to preserving or protecting certain programs at the expense of other priorities. Underlying all of these obstacles to timely and rational planning of the “product line” is the absence of a market mechanism to arbitrate disagreements as to the proper adding, dropping, or changing of nonprofit programs. This can lead to extreme waste of resources, as sentiment about heritage programs can outweigh a focus on overall organizational effectiveness in terms of goal attainment. Most nonprofit organizations, especially larger ones but even small ones to some extent, are an assemblage of enterprises. Such organizations confront decisions not unlike those of a corporation that must determine which product lines to promote, maintain, or drop.

Portfolio analysis is a formal analytical process that is useful in allocating limited resources for maximum effectiveness in a nonprofit organization. Essentially, portfolio analysis identifies the main programs of an organization, establishes a set of criteria for judging the relative importance of these units, and evaluates each program against those criteria. Matrix models are often used to conceptualize and manage the decision processes inherent in portfolio analysis. Individual criteria can be clustered to produce a summary evaluation of the contribution of each program to the organization's goals on two or three key dimensions. In a nonprofit situation, one of the dimensions used to evaluate a particular program is “contribution to (or centrality of) mission,” and others may be such factors as the size and growth of the market it serves, its quality and reputation, community need, contribution to revenue or the likelihood of breaking even. The summary appraisals are often mapped visually in a grid that yields a convenient visual representation (MacMillan 1983) or fitted into a table in which “scores” are assigned to each program on each dimension and then summed.

The Product Life Cycle

Programs, services, and policies need to be continually reappraised over the course of their lives as the environment in which they are developed changes. Important changes that affect nonprofit sector “products” are the entry of new services or service providers, the emergence of new community needs, and the loss of a major source of funding. A tool that has been useful in terms of understanding and managing the lifecycles of nonprofit causes, organizations, and specific programs and services is the product life cycle, based on the similarity of a marketplace to an ecological environment. The product life cycle (PLC) is visually represented as an “S” shaped curve mapped against two axes: in a nonprofit context the curving line represents the number of “exchanges” (usage occasions, changes in behavior, and so forth) that take place as a program or service or organization engages in market relationships over time. Verbal models divide this evolution into stages of introduction, growth, maturity, and decline, and the curve rises rapidly in the introductory and growth stages but flattens dramatically in the mature stage of the life cycle.

Each phase of the PLC not only describes changes in both clients and competitors at different stages of evolution but also prescribes useful changes in marketing strategies to maximize the number of marketing exchanges at each phase. As shifts in the awareness, demand, and behavior of clients and the pressures of competitors emerge over time, nonprofit organizations need to change the elements of their marketing mix in order to achieve maximum effectiveness in terms of mission achievement. One of the most important insights from the PLC for nonprofits is that an organization that is offering a relatively new program may grow quickly in the early stage with little investment in communications or strategic positioning. However, as its success attracts more clients and competitors into the market system and the market reaches maturity, nonprofits will have to devote more resources to competing for clients and funding, and can expect the ratio of revenues to costs to decline substantially. In the for-profit sector this would lead to a “shake out” in which some firms collapse and leave the market; in the nonprofit sector this may suggest that mergers or partnerships are indicated (Gainer, 1989).

Adoption and Diffusion

In guiding products through their life cycles, particularly the education and advocacy programs characteristic of social marketing, nonprofit organizations can also take advantage of what is known about how innovations are adopted and then diffused throughout populations. Sociologists have discovered that new ways of thinking and behaving are accepted by certain groups of people within a population first, and that subsequent groups join in only after these initial “innovators” have gone ahead. This diffusion process is represented visually by a “bell curve” diagram, with “time” represented on the horizontal axis. Innovators or opinion leaders are represented by the small tail on the left, followed, as time passes, by a larger group of people known as “early adopters.” As the curve rises toward its peak, more and more people adopt the behavior or ideas, eventually constituting the majority of the population. As the curve slopes downward again, the late adopters, and finally the laggards, are converted.

The implications of a model like this for nonprofit organizations are clear. One of the aspects of diffusion is that special interest should be directed toward finding and persuading those who are likely to be active and influential at the outset of the life cycle of a new idea or behavior. Rogers (1995) has suggested that compared to those who “get on board” later, early adopters in a social system tend to be younger, of higher social status, financially better off, more plugged into impersonal and cosmopolitan information sources, and in closer contact with the origins of new ideas. The model not only suggests that it is important to reach these people early in the process of developing new programs or behavior but also that it is a waste of organizational resources to target people who are more likely to be in the majority or late adopter categories—even if these are the people who ultimately are particularly important to reach. Even if the target market most closely aligned with organizational mission is older, more conservative, and of lower socioeconomic status, it is unlikely that a new idea or behavior will be adopted by this group until it has become more widely diffused in the general population. Nonprofit organizations often have a tendency to begin a program by targeting those who need it most. Although this can appeal to funders and board members, it can be a waste of organizational resources if the new ideas or behavior are not widely accepted by society at large.

Pricing in the Nonprofit Sector

Too often in nonprofit organizations, prices (including a decision to deliver goods or services at no fee, as in, say, a food bank or a crisis center) are set in arbitrary and casual ways. Moreover, prices are often set on the basis of attitudes or beliefs such as that services of a nonprofit organizations should always be delivered free or that the target market cannot afford to pay anything, when this is not necessarily the case. Many nonprofit organizations need to revisit their pricing policies on the basis of objective research into the needs and means of the target markets and decide whether they are accepting an unnecessary loss of revenue and, as a result, perhaps accepting a diminution of available benefits to their clients. Moreover, as more and more nonprofits address the revenue crises they face through activities associated with social enterprise, they are going to be setting prices in a competitive marketplace. For these reasons, pricing decisions in the nonprofit sector need to be made in a logical and analytical manner.

Understanding Nonfinancial Costs: A “Value” Approach to Pricing

Before describing useful approaches to setting monetary prices, it is worthwhile considering that the “price” of using a service or accepting an idea or adopting a behavior will include nonfinancial costs. Such nonfinancial costs might include awkwardness or embarrassment, time costs such as missing work or having to travel to remote and difficult locations, ancillary financial costs such as having to pay for parking or childcare, or psychological costs associated with giving up familiar or pleasurable habits.

A marketing perspective would put forward the idea that before putting resources into promoting a service or a behavior, one should search out opportunities to reduce each of these nonfinancial costs. A “value” approach to pricing would suggest that customers compare the benefits they receive for the costs they incur. Lowering the costs to the clientele, including nonfinancial costs, can thus increase the value of the offering substantially. Increasing the value of a product by cutting social, psychological, and time costs may be particularly important in a situation in which the organization is about to start charging for a service that has previously been free.

Pricing Objective

If an organization has made the decision to set a financial price for the first time or to revisit existing pricing policies, one of the first considerations is to get a clear sense of the organization's pricing objectives. There are a number of pricing objectives; for enterprises that are designed to raise money to cross-subsidize mission-based programs (such as museum shops), profit maximization may be the dominant goal. In other cases the goal may be cost recovery—in other words, instead of aiming for profits that can be used to subsidize other programs or services, the goal is to be able to offer services or programs so that their costs are covered by the people who use them. Cost recovery is used in situations in which an organization does not have the capacity or the desire to raise funds for certain programs from grants or donations. Setting prices according to “ability to pay” is also a scheme used by many nonprofits that use sliding scales based on income; objectives here are cost recovery but also social justice. Other considerations that may lead some nonprofits to modify pricing schemes that otherwise would focus solely on the basis of profit maximization or cost recovery are considerations such as not wanting to discourage use; not to be considered elitist or exclusive; not thought insensitive; or incur charges of unfair competition from private sector suppliers of similar services.

Pricing Strategies

Cost-based pricing. One of the easiest pricing strategies to understand and implement is cost-based pricing. The only complication in calculating the costs of services or programs is when an organization has a portfolio of multiple programs and decisions need to be made about the allocation of costs that are incurred jointly to individual programs (such as the rent paid for common facilities or the executive director's salary). As when diverse products come out of a single factory, an organization needs to arrive at a basis for allocating charges that seems rational under the circumstances (see Chapter Twenty-One and associated resources on the Handbook Internet website for information about cost allocation methods). Once a method of cost allocation has been developed, it is a simple matter to calculate the total cost of providing a particular program within an organization.

However, setting the price to charge each client who accesses that program is a more complicated matter. One of the most crucial pieces of information needed for this decision is a break-even analysis. This analysis takes into account how many “units” would have to be “sold” at a given price in order to cover all costs to produce it. One begins by separating expenses that vary with the number of clients (variable costs) from costs that are fixed regardless of how many people access the service or program (fixed costs).

For example, if we think of a language class for new immigrants, it is clear that printing costs for handout materials will vary according to how many people sign up for the class (these are variable costs), whereas the cost for the instructor's salary and the cost for the classroom space and heat and light are the same regardless of how many people are in the class (these are fixed costs).

A second important pricing concept is that of “contribution per unit.” To develop a concrete example, consider that the class described above has variable printing costs of $200 per person for handouts and fixed costs of $1,750 for the teacher and $750 allocated for the room, light, and heat. The contribution per unit will be calculated by comparing the expected revenue per student (say we are considering a price of $250) and the variable cost per student (which is $200 for printing). The difference between these two amounts is how much we get from each student that will go to covering the fixed costs. Here our contribution per student is $50.

When using cost-based pricing, both the break-even volume (how many users we need to cover all of the fixed and variable costs) and the contribution per unit (how much each individual contributes to the fixed costs) must be considered. If it appears that the price that needs to be charged to recover the full costs is out of reach of the majority of users for whom the service is designed, then a decision can be made to reduce the variable costs (use cheaper accommodation, eliminate lunches, and so on) or to charge less than “cost” and subsidize the costs through grants or donations.

Demand-based pricing. Note that whereas the organization began with costs to calculate the break-even price, it then led to considerations about how prospective clients would respond to that price. This example demonstrates that it is critically important to understand the concept of break-even in order to plan fundraising or grant writing efforts, and that it is equally important to understand that cost analysis is linked to demand analysis when actually setting prices. A useful concept in analyzing demand is that of elasticity. Price elasticity is the responsiveness of demand to changes in price. When a large change in price causes little change in demand, demand is said to be “price inelastic.” When a small change in price causes big changes in demand, the demand curve is said to be “elastic” at that point. In general, inelastic demand means that an organization can increase revenues by raising prices, whereas elastic demand means that it is best to avoid price increases and, if the goal is to expand the number of users of a product or service, to lower prices. Clearly, knowledge of the elasticity of demand can be helpful in deciding whether to initiate user fees and at what level to set them.

Elasticity of demand may vary dramatically across market segments. That variability invites different prices for different segments. The differential pricing of seats in a theater, the offering of lower-priced services for students or seniors, and the subsidization of some children in a camp all represent pricing schemes that recognize and respond to differing demand elasticities. Of course, differential pricing involves ethical as well as economic decision making, which nonprofit leaders must recognize, resolve, and defend.

Demand-based pricing requires that the price-setting organization knows or is able to estimate accurately the value of the offer as perceived by the “buyer.” This has important implications for nonprofit leaders. Those who are insulated from their markets may substitute their own beliefs about their clients for facts and thereby invent inaccurate pricing data. This can lead nonprofit organizations to price their services too low based on beliefs about clients considering nonprofit programs to be “second rate” or on beliefs about what clients will want to or be able to pay.

Competitive pricing. Pressed to keep up with the demand for services, nonprofit organizations often react as though they have no competition and dismiss competitive analysis as irrelevant. Yet the intended clienteles of most nonprofit enterprises do have alternatives for their patronage. End-users often define relevant competitors as those that offer similar benefits, rather than just similar-looking products or services delivered by similar-looking nonprofit agencies. Appraising competition can be useful in several ways. First, it will help identify the ceiling—the highest price that can be charged. Studying competitors' prices, both monetary and nonmonetary, can also reveal ways in which service deliverers can offer better products at lower prices. However, nonprofit managers must also consider the ethical implications of competitive pricing. Sometimes competitors, particularly in the private sector, are able to offer low prices through extremely low wage policies or by hiring less qualified service deliverers than nonprofit agencies are comfortable with. Moreover, private-sector firms in high-demand markets may choose to serve only those segments with high-profit potential, whereas nonprofit agencies may feel ethically bound to make their services available to those market segments with more limited means. However, for-profit companies may feel that nonprofits are unfairly undercutting their prices because they are not subject to the same tax demands as for-profit companies. Thus, competitive analysis is a useful and essential input to the pricing process, but it must be employed in conjunction with costs, market demand, and social and ethical considerations.

Designing Marketing Channels

Decisions about how best to distribute an offering to a market can have a major effect on the fortunes of the offering itself. In some respects, the choice of channels can be more critical in the third sector than in the private sector. When the product is a service, it is often consumed at the same time and place that it is produced, thereby putting the nonprofit employee in direct contact with end-users. Religious, psychological, health, and educational services tend to be of that sort. The buyer-seller contact may be inherently sensitive and intrusive, making the quality of the channel offering unusually critical to a satisfactory outcome and requiring that the nonprofit marketer is a client-oriented channel manager. It follows from this that the first step in channel design should be to analyze the requirements of the end-user and a basic building block in building a market channel is the user's specification of acceptable performance.

In designing service facilities, management may find it useful to invoke a categorization common in retailing: that of convenience, shopping, and specialty goods. Convenience products are those that the shopper will not exert much effort to investigate; at the other extreme, specialty goods are those that call forth considerable effort. Shopping goods lie somewhere in between. These definitions, derived from clients, have implications for logistics: convenience products must be readily accessible, while specialty products can be successfully distributed through few and more remote channels. Thus, social marketing messages that advocate changes in behavior will not be sought out by the target market and must be readily accessible and ubiquitous in order to reach the target because people will not seek out this information or put effort into finding it. Yet, an organization that provides specialized home care for a unique market segment can probably expect that their services will be sought out.

When alternative suppliers are absent, as they often are in the nonprofit sector, suppliers are inclined to design distribution systems that suit their convenience more than the end-user's in order to save costs. Nevertheless, the organization has to balance the client's desire for convenience with the service deliverer's need for operating efficiency. There are several ways to manage this trade-off (Lovelock and Weinberg 1989). One is to decentralize the client contact function while centralizing the technical operations—this is the Red Cross model of blood collection in which blood is collected where it is convenient to the donors but processed centrally. This model is also used by international and national charities that centralize direct mail fundraising, for example, but have many local and regional offices that provide “high touch” engagement of volunteers who raise funds through special events and social networks. A third variation of this solution is to offer more limited services at branches than at the main site, and a fourth is to join with other providers of compatible products to offer a larger meaningful assortment at a local site—information agencies or entertainment ticket agencies are examples of this channel strategy.

Related to a channel's accessibility is the question of the kind and quality of the experience it will deliver. In the past, museums and hospitals have attracted critical comment for their forbidding atmosphere. In contrast, an immigrant settlement agency may record its answering message in many different languages in order to communicate a multilingual and multicultural atmosphere for callers contacting the agency for the first time.

Finally, although there are often advantages for the short, controlled distribution channels that are characteristic of most nonprofit organizations, it is sometimes necessary or advisable to use channel intermediaries. These channels may be cheaper, more quickly activated, more expert, or more accessible to end-users. Nonprofit organizations also use channel collaborators in order to achieve their goals. To illustrate, advocacy alone may persuade some smokers that they should quit, but their behavior is more likely to change if it is validated by medical judgments, mandated by laws, and supported by workplace regulations. No organization acting alone can deliver all of these components, but out of such imperatives come marketing partnerships among hospitals, cancer societies, medical associations, school boards, industry associations, and government department.

Where there are interinstitutional relationships, however, there will also be conflict. Even institutions that want to collaborate will bring to the table, in addition to complementary knowledge and skills, potentially competing values, goals, and priorities. Because charitable enterprises are highly value-driven, imprinted with founders' visions, protective of their turf, and in competition for scarce funds, they are just as likely as business firms to experience conflict in the distribution chain. Third-sector organizations need to be assiduous about forming partnerships that work to the advantage of the distribution system as a whole, including the end-user, and recognizing the need for continuous attention to the power relationships and their management that a complex channel requires. In the field of early intervention services for children with disabilities, for example, it has been suggested that neutral brokers may help parents or caregivers access the best services by resolving some of the channel conflict that clients may lack the power to resolve on their own (Fugate, 2000).

Marketing Communications

The marketing communications program must flow logically from, and fit consistently with, the other elements of the overall strategic approach to an organization's multiple markets. Additionally, as we see rapid changes in the fragmentation of media with more specific media usage and a huge growth in online usage, it is increasingly important to integrate marketing communications across all the different media and contact points through which the various clienteles of interest interact with a nonprofit organization.

Marketing communications in contemporary organizations consist of three types of messages. Planned messages are the most obvious—the traditional form of controlled communications comprising advertising, public relations, direct response marketing, licensing, websites and Internet marketing. However, communication does not only consist of messages that organizations send out to their audiences, but also what messages are actually received by target markets of interest. Recently it has come to be understood that unplanned (and uncontrolled) messages play an equally important part in terms of organizational communications. Employee behavior, media stories and investigations, chat groups and social network sites, government investigations, blogs, and Twitter all convey information about an organization, its programs and services, its policies and advocacy, and its brand. And there is a third, “unconsidered” aspect of communications as well—factors such as service, facilities, and the other elements of the marketing mix such as pricing, distribution channels, and programs, and services communicate volumes about an organization and its brand. These unconsidered elements of marketing communications are, in fact, controllable and serve to underline the point that not only do the formal elements of the communications mix (such as advertising and direct mail and public relations) need to be integrated, but that all of the messages through which an organization communicates to its target markets need to be considered, planned, and controlled in so far as possible.

Simply coordinating the look of marketing communications does nothing to integrate the fragmented messages that contemporary clients receive, however. To truly “brand” an organization so that it represents a clear, differentiated, and trusted place in clients' minds, the messages that they receive must be integrated and consistently delivered—and not only across the different media an organization uses to get its messages out but also across all the different aspects of the organization with which clients interact.

The traditional elements of the marketing communications mix used by for-profit organizations are advertising, publicity, public relations, direct response, sales promotions, and personal selling. Increasingly, new media, especially the Internet, and sponsorships and events are coming to be seen as important channels of communication as well. More and more marketing communications take place in the street or online, as opposed to in the home through advertising, mail, telephone, and news media. This shift represents not only the emergence of new communications technology but also the emergence of a new trend in marketing communications, namely participation. As people become less and less inclined to simply “receive” marketing communications and more engaged in participating in the creation of communications through events and social media, nonprofit organizations need to recognize that, although marketing communication still occurs through commercial channels, it is also delivered through cultural and community contexts (Hanna and Middleton, 2008). For example, research indicates that a “social network effect” results in a different set of giving determinants; online donors give for different reasons and to different causes than those who give through traditional media (Saxton and Wang, 2014).

This is both good news and bad news for the third sector. On the one hand, it means that unplanned and uncontrolled communications abound about organizations that have traditionally already been subject to a very high degree of public scrutiny and misinformation. On the other hand, it means that a sector, deprived of the resources necessary to undertake expensive, advertising campaigns and media buys, can, through strategic communications planning, capitalize on one of its greatest assets—the engagement and participation of citizens embedded in the social networks that constitute communities. Social networks coupled with social communications technology appear to be leading to a new resource for nonprofit organizations: that of “social media capital” (Saxton and Chao, 2014).

Summary

Marketing is the management discipline charged with facilitating exchanges with key constituencies. The marketing concept posits that organizational success is achieved through satisfying the needs and wants of exchange partners better than competitors do. In large nonprofits, particularly in those that deliver services in return for payment or create programs that attract large donations, we have seen the adoption of sophisticated marketing systems and thinking across organizational departments and levels, sometimes characterized as a “market orientation.” In many other organizations, particularly those that are most reliant on grant income (transfer payments), the importance of external constituencies is much less evident to leaders, and marketing is still considered to be limited to the fields of communications and public relations. A value-based approach to clients (both providers and users of resources), a strategic approach to competitors, and an analytical approach to organizational programs, services, and competencies is lacking in many nonprofits. Moreover, in some nonprofit organizations, a fear persists that a “marketing approach” to decision making will derail an organization from its mission.

In part this is because marketing theory as applied to the for-profit sector dictates that the marketing department has control over all of the “four Ps,” whereas this notion is rejected almost universally in the nonprofit sector. In fact, in many organizations there is a “dual leadership” function that is designed precisely to separate decision making that pertains to operations and programs from that which pertains to income development. In some arts organizations, this is formalized by having two “equal” leaders at the top of an organizational hierarchy (Reid and Karambayya, 2009), whereas in other nonprofit settings the duality may reside in one senior leader who takes advice on programs from different experts than those who offer marketing advice. For example, in a live performing arts company, the repertoire is largely chosen by the artistic director; in a family service agency, the programs to be mounted are primarily determined by professional social workers or psychologists; in a university, the curriculum is mostly shaped by the faculty; in a public arts gallery, decisions about acquisitions lie primarily with curators; and in a hospital, the type and quality of care are governed largely by physicians, nurses, and other health care workers.

These customary organizational arrangements are highly significant for nonprofit marketing. They testify to the fact that in many parts of the nonprofit sector, key decisions about the most pivotal parts of the “marketing mix” are made by experts who, in their training and their experience, have little exposure to or regard for marketing. Whereas the primary purpose of for-profit organizations is to make money for their owners or shareholders, and thus it is appropriate for marketing managers to have control over much of the production of these organizations, the primary purpose of nonprofit organizations is to serve the public good through the production of goods, services, and ideas that are generated on the basis of expert knowledge and not necessarily on the basis of demand.

However, while marketing experts in the nonprofit sector must understand and accept that “subject matter” expertise is critical to achieving the mission of nonprofit organizations, it is equally important for others to recognize that facilitating mutually advantageous exchanges between the organization and its environments is critical. Nonprofit organizations achieve their mission not merely through producing services and advocacy but also by ensuring that this production is adequately funded and that their services and ideas reach those for whom they are produced.

Marketing is the aspect of management in nonprofit organizations that is most often to be found advocating for responsiveness to external clienteles and environments. For-profit organizations have unambiguous feedback from a conventional market mechanism, but nonprofit organizations must find other ways to ensure that they respond effectively to clients' wants and needs. Marketing facilitates this responsiveness, not by developing programs and ideas that are within the domain of subject-matter experts, but by monitoring the environment, undertaking market research, communicating changing wants and needs of key client groups, participating in portfolio analysis, suggesting suitable segmentation schemes and target markets, creating and maintaining a consistent brand internally and externally, establishing differentiation, and most important, by fostering the relationships that are crucial to the long-term survival of the organization. It is particularly important to recognize that, although many of these relationships may provide financial resources that contribute to sustainability, many others provide equally important “nonfinancial” support—attitudinal and behavioral change, public trust, political pressure, or volunteer commitment and engagement.

Progressive nonprofit organizations realize that in an era of increasing emphasis on notions of transparency, accountability, participation, engagement, equity, and democracy, a more systematic and strategic approach to both understanding and responding to the needs of the multiple constituencies with an interest in the organization is necessary. Organizations need to pay more than lip service to the notion of including the needs of key constituencies, both internal and external, in their decision making and activities and to the need for increasing participation in and engagement with civil society organizations. Marketing is the discipline of management that is charged with “boundary spanning” activities and bringing the perspectives and ideas of external constituencies inside the nonprofit organization. Incorporating the insights and analysis of marketing into decision making at all levels of the nonprofit organization is thus a critical aspect of a new third-sector leadership that is focused not only on increasing the resource base and visibility of the third sector but also on enhancing its role in building connected communities and an active and engaged citizenry.

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