The Routledge Companion to Nonprofit Marketing

Adrian Sargeant, Walter Wymer Jr

• Publisher: Routledge
• Year: 2007
• eBook ISBN: 9781134114900
• Topic: Business
• Subtopic: Business General
• Index: Business

This timely collection of cutting-edge articles offers a complete overview of marketing in the nonprofit sector. Written by a leading team of international experts, it examines the issues faced by public and nonprofit organizations in marketing and raising funds, and provides a comprehensive review of the latest research.An introductory sectio

Part 1
Voluntary sector marketing

1
Operationalizing the marketing concept
Achieving market orientation in the nonprofit context

Paulette Padanyi

Introduction: the relationship between marketing, the marketing concept and market orientation

Marketing is generally acknowledged to be an essential strategic management function. In particular, marketing expertise is critical when an organization has to appeal to outside groups to generate revenue and/or to compete with other organizations for its sources of revenue.

Within the for-profit sector, it is also generally accepted that no organization can claim to have fully adopted marketing as a strategic component of its operations if it is not guided by ‘the marketing concept’. The marketing concept, a business philosophy which maintains that the customer should be at the centre of the firm’s thinking about strategy and operations, was first articulated by Drucker in 1954 (Day 1994). It directs an organization to look outward and to be open to external trends and events that can provide market opportunities (Warnaby and Finney 2005). Outward-looking organizations understand their customers, their competitors and the environment in which they operate, and offer products and services that have a greater chance of being successful because they have been developed and promoted based on this knowledge. By comparison, inward-looking organizations offer products and services based on anecdotal assessments of what they think the market wants or what they want to offer given their existing human and financial resources. In other words, they produce and sell the products they want to, not what the market necessarily wants or needs (Gonzalez et al. 2002).

For-profit marketing practitioners and academics further maintain that, in order to implement the marketing concept, a firm must have a ‘market orientation’. Since a firm with a high level of market orientation stays close to its customers and ahead of its competition, it is better equipped to respond to market requirements and anticipate changing conditions (Day 1994). A market orientation is therefore a prerequisite for organizational success and profitability (Raju et al. 1995).

Although the term ‘market orientation’ came into use shortly after Drucker articulated the marketing concept, it was not well defined. Indeed, as of this writing, there is still no accepted definition for ‘market orientation’. The title of a classic Harvard Business Review article, ‘What the hell is market-oriented?’ (Shapiro 1988), expresses the continued frustration that practitioners and academics have experienced in trying to come to grips with the term.

Nevertheless, academic acknowledgement of market orientation as a construct worthy of investigation in the for-profit sector began in 1989 with a Journal of Marketing article tying it to the organizational culture literature from organizational behaviour (Deshpande and Webster 1989). Empirical research to prove that there is a direct, positive relationship between market orientation and organizational performance in the for-profit sector has been under way since 1990, when Narver and Slater developed the first valid, reliable scale to measure the market orientation construct. Results have been mixed but, for the most part, they indicate that market orientation should increase and improve organizational results (Lovelock and Weinberg 1989; Kotler and Andreasen 1996; Vasquez et al. 2002)

The idea of extending the marketing concept to the nonprofit sector was first advocated publicly by Kotler and Levy (1969), who posited that marketing is a pervasive societal activity performed by all organizations, whether they are profit-seeking or not. They maintained that all organizations are concerned with their ‘products’ in the eyes of certain ‘consumers’ and seek to find ‘tools’ for furthering their acceptance. Thus, Kotler and Levy basically initiated an idea that has since become an article of faith among marketing academics, that the marketing concept has no boundaries.

The discussion generated by Kotler and Levy’s article regarding the applicability of marketing and the marketing concept to the nonprofit sector is reviewed in the next section. The remainder of this chapter focuses on what is currently known about market orientation and the conclusions that can be reached about operationalizing it for academic or managerial purposes.

The applicability of marketing and the marketing concept to the nonprofit sector

The ‘yes’ arguments

Following Kotler and Levy’s 1969 article, Shapiro (1973) declared that ‘marketing is as intrinsic to the nonprofit sector as it is to the business community’. He sought to justify the applicability of marketing and the marketing concept to the nonprofit sector by demonstrating that marketing principles, such as the marketing mix, readily apply to the nonprofit challenges of resource attraction, resource allocation and non-donor persuasion.

Typical of many academics since Shapiro, Lovelock and Weinberg (1989) supported the extension of the concept into the nonprofit arena by framing nonprofit management challenges and actions in marketing strategy terms. For example, they talked about nonprofits becoming more selective in the market segments that they target, as well as being market-oriented in terms of developing and maintaining products and services, determining price policies and building awareness of their offerings.

Other theorists have supported applying the marketing concept to the nonprofit sector by arguing that:

• nonprofits are just as profit-oriented as other businesses because they need an excess of revenues over expenses to survive; therefore, the difference with nonprofits is not that profits cannot be made, but that profits cannot be distributed (Hay 1990);
• nonprofits operate in the same environment and face similar demands with regard to effectiveness and efficiency as for-profits (Anthony and Young 1990); and
• competition is a reality for all organizations, thus nonprofits must deal on an ongoing basis with rivalry for capital, labour, customers and revenues, just like for-profits (Tuckman 1998).

The ‘no’ arguments

The first argument against Kotler and Levy’s treatise appeared shortly after its publication. Luck (1969) felt that the authors were defining marketing in terms that were too broad, and that the marketing concept was developed for a different type of organization. He felt it was developed for businesses that are based on market transactions, i.e. ‘buying and selling’, and thus are focused on tapping customer markets to achieve a profit goal.

Another concern raised was the emphasis that the marketing concept places on competition. Bush (1992) suggested that cooperation among nonprofit organizations should be the basis for organizational and managerial orientation in the nonprofit sector, not competition. He maintained that a competitive mindset provokes an ‘insular mentality’ and a predisposition to see relationships with other organizations as potentially threatening. In his opinion, this insular attitude would make it difficult, if not impossible, for nonprofit agencies with similar goals to share information and resources, which is a desirable and necessary form of collaboration given the ongoing resource limitations faced by nonprofits.

Sheth (1993) also pointed out that application of the marketing concept entails offering users what they want, as opposed to what they need, which is inappropriate in need-driven nonprofit areas like health care and education. He also noted that a market orientation is incongruous with the nonprofit approach since it is openly discriminatory against non-targeted segments and thus unequal in its provision of services.

The ‘compromise’

At this point in time, many nonprofit-sector academics and practitioners have taken the position that the marketing concept is applicable in the nonprofit sector, but that, when it is implemented as a ‘market orientation’, it requires modification due to the unique aspects of the sector (Liao et al. 2001). The unique aspect of the sector that receives most attention is its greater complexity, which is caused by the fact that nonprofit organizations typically:

1. maintain a higher number of relationships that can be considered vitally important, in large part because the attraction and assignment of resources are two separate tasks (Vasquez et al. 2002); and
2. have much more varied organizational objectives, which are mission-based and less tangible than the financially oriented objectives in the for-profit sector (Forbes 1998; Kotler and Andreasen 1996).
   

The greater number of relationships maintained by nonprofit organizations results in the need to view at least some of their stakeholders as separate target markets that warrant separate annual marketing plans. Having multiple target markets further complicates the application of the marketing concept because it requires spreading already strained marketing resources to understand the needs and expectations of the different stakeholder groups, and to plan and undertake multiple, possibly divergent activities.

With regard to performance assessment, the ‘soft’ and often subjective nature of nonprofit organizational objectives makes it difficult to establish whether and how strategies and tactics based on the marketing concept are impacting upon mission achievement (Lovelock and Weinberg 1989). Furthermore, the existence of multiple constituencies complicates matters because different stakeholders have different goals and therefore differ in the criteria they use to evaluate the effectiveness of an organization (Herman and Renz 1997).

Other characteristics of nonprofit organizations which claimed to influence the implementation of the marketing concept in the nonprofit sector include:

• the potential conflict that exists between the organizational mission and consumer satisfaction, because the behaviour of nonprofit organizations is often not determined by the market but by other concerns (Vasquez et al. 2002);
• the fact that competitors for resources may also be collaborators on various projects (Kara et al. 2004); and
• the lack of true markets for nonprofits in the economic sense of the term, and the subsequent inappropriateness of the concept of exchange (Liao et al. 2001).
  

Given the many unique aspects of the nonprofit sector, operationalizing market orientation in the nonprofit context for research or managerial purposes involves considering at least five issues:

1. What is market orientation in the nonprofit context?
2. How should market orientation be measured in the nonprofit context?
3. Is market orientation a single construct or multiple, constituent-specific constructs?
4. Does market orientation impact upon nonprofit organizational performance?
5. Does market orientation impact upon organizational performance in all nonprofit subsectors?
   

The following sections review the academic discourse in these areas.

Issue 1: what is market orientation in the nonprofit context?

Until very recently, thinking about market orientation in the nonprofit sector was entirely based on for-profit conceptualizations. Therefore, a review of the key for-profit literature in this area is a necessary starting point for understanding the nonprofit discourse about market orientation.

As noted earlier, academic acknowledgement of market orientation as a construct worthy of investigation in the for-profit sector began with a 1989 Journal of Marketing article by Deshpande and Webster. They related market orientation to an organization’s culture and climate, with culture being the history, norms and values that members of the organization believe underlie climate, and climate being how organizations operationalize the themes that pervade everyday behaviour. Their landmark article spawned two very different interpretations of market orientation: (a) market orientation as a form of organizational culture; and (b) market orientation as a specific set of activities that implements the marketing concept.

Market orientation as organizational culture

Narver and Slater (1990) championed this interpretation of market orientation. They characterized market orientation as the organizational culture that produces the necessary behaviours to create superior value for customers and attain a sustained competitive advantage. More specifically, they envisioned market orientation as consisting of three behavioural components: customer orientation (the sufficient understanding of one’s target buyers to be able to create superior value for them continuously), competitor orientation (understanding the short-term strengths and weaknesses and the long-term capabilities and strategies of both current and potential competitors) and interfunctional coordination (the coordinated utilization of company resources in creating superior value for target customers).

Slater and Narver (1994) rejected the notion that management should attempt to adjust market orientation according to market conditions. They said that adjustment would be complex, time-consuming and expensive. Furthermore, because all markets will encounter slow growth, hostility and changing buyer preferences over time, it is better for management to develop and maintain a high level of market orientation to deal with conditions as they arise.

Market orientation as organizational activities

Deshpande and Webster (1989) also said that culture could be viewed as a lever or tool to be used by managers to implement strategy and to direct the course of their organizations more effectively. Therefore, Kohli and Jaworski (1990) defined market orientation as ‘specific activ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of Figures and Tables
• List of Contributors
• Introduction: The Growth of a Discipline
• Part 1: Voluntary Sector Marketing
• Part 2: Fundraising
• Part 3: Arts Marketing
• Part 4: Education Marketing
• Part 5: Political Marketing
• Part 6: Social Marketing
• Part 7: Volunteer Recruitment, Management and Retention
• Part 8: Public Sector Marketing