Why Traditional Marketing Isn't Effective for NonProfits

 

 

Not long ago, nonprofit managers and academicians were arguing the merits of applying marketing strategies to charities, schools, quasi-government bodies and other nonprofit organizations. They wondered whether it was appropriate or even “seemly” to use retail marketing principles in social service situations. Many equated marketing with the hardcore tactics of snake oil salesmen, used car dealers and  Ponzi scam artists.  Perhaps they feared the same garish advertising and splashy promotional events seen in the retail sector.

 

In the last forty years that perception of marketing has given way to a more nuanced view, as larger NPOs have adopted marketing principles and achieved double-digit annual growth.   Charity Trends, a global consulting firm, compared donations to the top 500 fundraising charities with that of the next – and much smaller – 500 charities. The results showed that large charities perform significantly better than smaller ones.  While donations increased by 5% among the top 500, it was virtually static among the next 500. Fundraising income grew by 13% among the top 500, but it was just 4% among the next 500. Smaller, newer charities face a huge competitive challenge.  Success will depend on following the lead of larger organizations, which are often more receptive to technology , have the resources, and adopt marketing and fundraising strategies .

 

Heightened Demand for Marketing 

Three factors converged during the first decade of the new millennium to further accelerate the need for smart marketing:

 

·       Intense Competition. Between 1995 – 2005, the number of U.S. charities grew 66% to almost two million organizations. They were the fastest growing segment of the economy.   More than 68,000 new charities were created between 2006 and 2007, each clamoring for attention, striving to be relevant, and dependent upon tapping the largess of private and public funders.

·       Unprecedented Need   The economic downturn of 2008-2010 placed huge pressure on nonprofits to do more with less. In 2009, the federal government reported 49 million Americans didn’t get adequate nutrition, a jump of 13 million over the previous year. Demands on emergency food, shelter and health care organizations stretched resources to the limit. 

·       Financial Squeeze.  Despite higher demand, economic conditions caused tax revenues to fall, resulting in cuts in federal, state and local government grants. Similarly, private foundations reeling from reductions in endowment income have slashed funds to nonprofits.  Only recently has it started to pick up.

In short, growth has flattened, demand for services have soared and costs have sky-rocketted .

 

From raising funds to finding an audience, from getting the message out to promoting events, marketing plays an important role in the future of successful nonprofits. The question is no longer, Should we market our nonprofit? but rather, How do we make our marketing more effective?

 

The first step is to forget whatever you know or have been taught about marketing. Retail and nonprofit marketing tactics are not interchangeable. The conceptual, strategic and practical aspects of the two fields are sufficiently different that using traditional marketing tools and strategies for nonprofits will not work -- and in many cases are destructive. 

 

 Conceptual Differences 

 

Traditional marketing wasn't developed for nonprofits.  Its application is not based on nonprofit concepts. We don’t sell products. We aren’t profit-driven, advertising-dependent, technology-based, nor do we put inquiring customers through automated voice mail hell to preserve quarterly dividends.

 

Traditional marketing is a profit-maximizing tool that doesn't fit in a nonprofit scenario.

 

Think marketing and your thoughts might wander to the Maytag repairman, Ronald McDonald, the GEICO gekko or dozens of other highly visible advertising messages that parade endlessly across TV and computer screens, billboards, newspapers and magazines. For better or worse, Ronald McDonald and Coca-Cola have become the global representatives of American capitalism and culture. That these retail brands have become such powerful symbols of a national culture is a dramatic -- if not frightening -- testament to the power of marketing.  Marketing tactics U.S. retailers routinely use might seem to be the ideal model from which nonprofits can learn and emulate but in reality, they are not.

 

Brand marketing was conceived sixty years ago as a solution to a business problem.   Marketing practices that evolved came from the trial and error experiences of manufacturers and retailers.  Social considerations played no role in their evolution or execution. Nonprofits using the yardsticks, guidelines and practices of brand marketers is like adapting football rules to a baseball diamond: it makes no sense.

Needs transition

The return of GIs and the birth of 77 million Americans in the ten years following WWII triggered explosive economic growth. The largest  population boom in U.S. history fueled unprecedented growth in industries across the spectrum, from home building and home furnishings to automobiles and electronics.

 

As young, growing families clamored for goods and services, manufacturers struggled both to meet consumer demand and compete against each other. Vigorous competition drove down prices. The biggest challenge for manufacturers was to hold firm on prices while customers marched across the street to buy the same product cheaper.  

 

Consumers who don't see product differences are a seller's nightmare because the lowest priced products gain all the sales.  And when vendors match prices to compete, everyone loses -- the manufacturer, distributor and retailer -- because profit margins can be squeezed to non-existence.  The last thing vendors want is commodity pricing, where one potato seems as good as another.

 

Enter marketing, which introduced a new way of looking at the buyer-seller relationship.  Marketing focuses on the radical idea of listening to -- and catering to -- the needs and preferences of the buyer.  This was a 180-degree turnaround from the sell-sell-sell mentality of the previous century.  Systematically studying the buying habits and preferences of consumers represented a major step forward in understanding economic transactions. 

 

Instead of competing for attention for its laundry detergents on a shelf filled with similar products, Procter and Gamble targeted them to specific market segments, i.e., young marrieds, career-focused singles, retirees.  The emphasis switched from promoting product features to giving the products personalities.  One technique for doing that is to create appealing spokespeople-- real or, in the case of Tony the Tiger, fabricated.   

 

Advertising Age named these familiar characters the most powerful advertising icons of the 20th century.  Their iconic stature demonstrates not just the broad acceptance of brand advertising but its success in solving two big challenges: differentiating similar products, and preserving profits.  

  

 

1.    The Marlboro Man - Marlboro cigarettes

2.    Ronald McDonald - McDonald's restaurants

3.    The Green Giant - Green Giant vegetables

4.    Betty Crocker - Betty Crocker food products

5.    The Energizer Bunny - Eveready Energizer batteries

6.    The Pillsbury Doughboy - Assorted Pillsbury foods

7.    Aunt Jemima - Aunt Jemima pancake mixes and syrup

8.    The Michelin Man - Michelin tires

9.    Tony the Tiger - Kellogg's Sugar Frosted Flakes

10. Elsie - Borden dairy products

 

Brand marketing differentiates similar products. But differentiation is not an issue in the nonprofit world where organizations have little trouble distinguishing the services of the American Diabetes Association and the American Heart Association, or the Salvation Army and United Way.

 

And branding marketing is expensive. Branding requires a large advertising commitment that's prohibitive for most nonprofits. Retailers must spend huge amounts conveying and reinforcing the ad message.  McDonald's global ad expenditures in 2008 were $2 billion. Microsoft's were $11 billion.  That may an acceptable cost of conducting business for McDonald's and Microsoft but nonprofits would be vilified for diverting a large percentage of their budget to advertising.

 

Although personality promotion is an effective strategy when competing against similar products, it is not as effective as advertising that highlights clear product advantages.  But most corporate advertisers have no choice but to use brand marketing.   If Coca-Cola or McDonald's sales were simply based on superior taste, they wouldn't need to spend billions on advertising.  But both products are runners-up in taste tests. And unlike banks and drug stores, which fight aggressively for street corner prominence, nonprofit services aren't dependent on geographic convenience.

 

Neither do nonprofits engage in cutthroat competition. Wal-Mart and Target, Sprint and AT&T, United and American Airlines periodically engage in expensive advertising wars to grow or defend market share, but even in the academic world where colleges compete for the same students, mano-a-mano competition doesn't exist.    

 

In retail marketing, door-to-door salesmen and local stores eventually gave way to mass advertising and national campaigns.  But personal connections remain the lifeblood of nonprofit organizations. Personal relationships are the bedrock of fundraising and volunteer activities.  While word of mouth is critical to the successful operation of most nonprofit organizations, it plays no formal role in brand marketing.  On the other hand, branding tools such as event promotion, public relations, social media, and direct mail are fully appreciated in the nonprofit world.

 

Strategic Differences

 

Nonprofit marketing challenges are infinitely more complex than those facing corporate marketers. A few years ago Michael Rothschild captured the complexity of those challenges in a  series of comparisons in a landmark article   

1. Corporations encourage consumers to buy more of a given product; nonprofits often ask for a reversal of behaviors. A typical corporation might strive for a two per cent increase in market share; we often ask consumers to execute a 180 degree turnaround in thinking. Getting smokers to quit, drivers to wear seatbelts, or youngsters to stay in school is infinitely more complicated than boosting potato chip sales.

 

2. Conventional marketers strive to satisfy consumer demand; NGOs often target those who are indifferent. We can’t pass clean air laws or increase funding for education until we first convince an indifferent electorate that reforms are needed.

 

3. Corporate marketers spend fortunes identifying and jumping on consumer trends. Nonprofits eschew trends. We are guided by health and safety, education, spirituality, ecology, morality or ethics. 

 

4. Corporate campaigns can usually be summed up in one brief message: buy this product.  Social marketers tackle big issues that require conveying large amounts of information over long periods of time.  Reductions in breast cancer deaths are attributed in large part to a long-term preventative campaign that successfully convinced women to schedule regular mammograms and perform self-examinations. 

 

5. Retail marketers can measure sales success quarterly.  Social marketers rarely receive immediate positive reinforcement.  They must operate on faith.  School officials may wait years to determine if literacy programs are increasing graduation rates or reducing neighborhood crime. Measuring an improvement in quality of life can be complex.

 

6.  Advertising appeals to the consumer’s self interest; our messages are often altruistic. Ads offering to enhance your appearance, excite your taste buds, boost your sex life or save you money have much stronger appeal than those promising benefits to others.

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Only NonProfits Can Pull Off This Coup

Weeks away from death, 39-year-old Mike Stemrow, a financial analyst with the Chicago Board of Trade, was barely able to walk the two blocks to a neighborhood supermarket without exhaustion. Mike was dying from a lifelong battle with cystic fibrosis, a debilitating lung disease.

On the same spring morning, hundreds of miles away in Algona, Iowa, Pam Westend, a vivacious 17-year-old high school volleyball star awoke with flu-like symptoms. She fell back to sleep, awoke, began talking incoherently and experienced seizures. As an ambulance rushed her to the hospital, she fell into a coma and died from a ruptured blood vessel in her brain. On the day she was to attend her junior prom, Pam’s parents made the decision to donate her organs. Mike received her lungs.

On a Sunday morning two years later, Mike’s engaging smile graced the front page of the Chicago Sunday Sun-Times as he bounded up the stairs of the 94-floor John Hancock Center. Clad in shorts, Nikes and a t-shirt bearing Pam’s photo, he was training for Hustle Up the Hancock, a fundraising climb to the top of the Chicago landmark organized by the American Lung Association of Metropolitan Chicago. In a week he’d lead a team of 27 climbers including members of Pam’s family up 1,632 steps to the Hancock Observatory.

Three pages of text and photos introduced hundreds of thousands of readers to Mike and Pam's amazing story of life and death, courage and triumph. At the climb, TV, radio and print reporters fought to hear Mike’s incredible story. They heard about the devastating effects of cystic fibrosis, the need for research and the sobering fact that one million people in the Chicago area suffer from lung disease.

At the time, I was the marketing director for ALAMC. Hustle Up the Hancock is an Chicago annual spectacle drawing participants from across the country and occasionally across the ocean. It’s also a critical fundraising event for the association, raising $1.3 million in 2007. But the significance of Hustle extends beyond fundraising and the work of one nonprofit.

The event dramatically illustrates the power all nonprofit organizations (NPOs) have to educate, advocate, fundraise and recruit – advance the mission – by leveraging assets that are uniquely nonprofit. These assets are the keys to exceptional nonprofit marketing.

Mike’s climb and its attendant publicity illustrate the power of several assets, but none that resonates more with the media than a personal narrative. Most NPOs have access to volunteers, clients or beneficiaries with similar fascinating, inspiring, and perhaps, courageous stories. It’s just a matter of finding them. Personal stories allow the marketer to weave in the organization’s work and mission. Instead of simply announcing an upcoming event that might generate a two-paragraph item in the local newspaper, introduce reporters to a local resident who is making a difference and you’ll get a feature-length article.

The media love to tell stories. Help them find compelling ones and you’ve found the key to unlimited publicity. Stories of personal struggles are ideal vehicles for publicizing your group’s work, mission and activities.

Every nonprofit event involves people. Switching your primary focus from issuing news releases to pitching personal stories and you’ll increase your news coverage. We increased ours eight-fold.

At ALAMC the spokesperson would receive carefully scripted message points to ensure that every second of airtime or inch of news space was used efficiently. Message points might have included a plea for more volunteers, an announcement of an upcoming event or even a thank you to a sponsor, but they always included contact information such as a web address or phone number. After the interview we tried to expand the coverage by offering photographs, interviews with specialists, interesting sidebars – virtually anything to make the story better and our role bigger.

Story telling never gets to be old news. Each year we used personal stories to publicize bike rides, stair climbs, health conferences or social events and to introduce new programs. We never abandoned traditional news releases, we just ramped up media coverage by capitalizing on a key asset.

In addition to local and national newspaper coverage, Mike's story was broadcast to five million viewers in 35 TV markets nationwide. Viewers learned about the stair climb, cystic fibrosis and the work of the Association. They saw an interview with the CEO, caught glimpses of 4,000 climbers pushing themselves to the limit, watched 343 firefighters memorializing those lost in 9/11 and received live reports from TV news personalities making the climb. It was a heady time – and uniquely nonprofit.

Building a strategic marketing plan around a nonprofit's assets is the premise of this blog. NPOs can never fulfill their potential if we pursue traditional marketing strategies that were developed for the retail environment, dependent on huge advertising outlays for the purpose of maximizing income and defeating competition..

Nonprofits enjoy a powerful set of marketing tools that are unavailable to corporations but priceless to charities. By building a marketing plan around narratives, partnerships, volunteers, credibility and other largely overlooked assets you can dramatically enhance your organization’s performance. Not listed on balance sheets, nor tied to budget size, these exclusive resources are the secret weapon for taking nonprofits to new marketing heights.

Friends of mine who work for nonprofits often complain that a lack of money prevents them from promoting worthwhile events. Whether hawking a fundraiser, seminar or new social service, they long for more money to get their message out. Exposing the organization’s work to more people, they argue, leads to better attendance, greater influence in shaping public policy, more financial security and ultimately, a stronger, more vibrant nonprofit.

Of course, money helps. Deep pockets buy newspaper advertisements and splashy TV campaigns, ad agencies and even Hollywood celebrities. Money is a valuable asset, but the same nonprofit colleagues who wish for large budgets tend to overlook assets that are far more powerful, more potent and more dynamic than those found in the corporate sector. A toe-to-toe comparison of budgets might suggest nonprofit resources are woefully inadequate, but deeper inspection reveals that even the smallest nonprofit has the marketing firepower to make the bluest blue-chip corporation green with envy.

Without exploiting these strengths, it's difficult for nonprofits to fulfill their potential. Without using their inherent advantages, they are relegated to ill-fitting traditional marketing that looks anemic by corporate standards. A cornerstone tenet of traditional marketing says advertising is good and more advertising is better. Swallowing that bromide could send any nonprofit marketer into a serious depression.

I once subscribed to the conventional wisdom that nonprofits were moneyless and therefore relatively powerless. Now I know better. During the last ten years, I’ve come to appreciate the marketing advantages inherent in nonprofits – and discarded the traditional marketing strategies I learned in text books and business school, and practiced for many years as a consultant.

Traditional strategies are conceived using a set of business concepts -- income, competition, market share and consumption – that are jarringly different from a nonprofit environment. As the old adage goes, you can't build a strong house on a weak foundation, in this case, a marketing toolbox constructed for another purpose.

Years ago I was the VP of marketing for a bank with a multi-million dollar communication budget. Later, I ran a marketing consulting firm for twenty years managing both for-profit, not-for-profit and political clients. For seven years, I was marketing director of the American Lung Association of Metropolitan Chicago (later the Respiratory Health Association of Metropolitan Chicago), and for the last four, Executive Director of Marketing for the University of Illinois at Chicago. I can say without hesitation, it’s much easier to market short-pocketed nonprofits than for-profits with million dollar marketing budgets. Success comes from discarding conventional wisdom and adopting the new nonprofit paradigm described in this book.

A friend gently reminded me that her nonprofit is much smaller and its name less recognizable than the American Lung Association, Habitat for Humanity or the Red Cross. While that may be true, the beauty of the new paradigm is that the fuel for smart marketing is not limited to large nonprofits. These assets are present when three people get together with a nonprofit mission. Mike’s face wasn’t splashed across the front page because he was an American Lung Association volunteer or because we twisted the writer’s arm. The Chicago Sun-Times would have reported his story if he were walking five miles to raise money for the local library.