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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