MARKETING FOR NON-PROFIT ORGANISATIONS Zoran Mihanović, zoran.mihanovic@efst.hr Faculty of Economics Split, Croatia

THE GROWTH AND DEVELOPMENT OF NONPROFIT MAKING UNIVERSITY OF SPLIT THE GROWTH AND DEVELOPMENT OF NONPROFIT MAKING

The nonprofit world Non-profit organizations are based on efforts to help all aspects of humanity and goodwill.They usually provide social services, caring for the disabled, solving social issues, environmental protection, sport, culture and community development, etc.. They are not focused on return of investment but in a case that they achieve some profits, they reinvest it into the organization.

The nonprofit world The structural-operational definition identifies five key characteristics which these organizations must share: 1. Organised institutionalised to some degree in terms of their organizational form or system of operation; 2. Private institutionally separate from government; 3. Non-profit-distributing not returning any profits generated to their owners or directors but ploughing them back into the basic mission of the agency; 4. Self-governing equipped with their own internal apparatus for governance; and 5. Voluntary involving some meaningful degree of voluntary participation, either in the operation or management of the organization’s affairs.

Marketing in the nonprofit environment NP managers need to know how to be better at influencing all the different publics whose behaviors determine their success. Government managers need to know about marketing techniques in the nonprofit world because they might be useful in their own environment and because they need to know how NP marketers think and act so that they can work with them. Corporate marketers need to understand NP marketers and the special world in which they operate if they are going to partner with them.

Revenue stream for global civil society organizations: Fees are the dominant source of revenue. 53% of the income is derived from fees/charges for services and commercial income. The second largest source of income is public sector. 35% of revenue derived from grants/contracts or reimbursement payments. 12% of revenue derived from private philanthropy.

The special challenges of NP marketing Nature of the target audience – nonprofits must cultivate a second target audience – those who will give the organization funding through donations or grants and contracts. Nonprofit marketing is very different because of the kinds of behaviors it has to influence. The benefits resulting from the behavior are invisible. Consumers are often asked to undertake behaviors where they are either indifferent about the issue or for which there are no clear personal benefits.

Target audiences are often asked to make 180-degree shift in attitudes and/or behaviors. It is often difficult to portray the offering in media presentations, because many of the changes to be marketed involve intangible social and psychological benefits.

Variations within the sector The National Taxonomy of Tax-Exempt Entities-Core Codes categorizes nonprofits under 10 broad headings: Arts, Culture, and Humanities Education Environment and Animals Health Human Services International, Foreign Affairs Public, Societal Benefit Religion Related Mutual/Membership Benefit Unknown, Unclassified

A typology of behavioral challenges Target audience members are asked to exchange something they value for something beneficial provided by the nonprofit organization. Four types of cost: Economic cost Sacrifices of old ideas, values, or views of the world Sacrifices of old patterns of behavior Sacrifices of time and energy

Analyzing organizational MISSION, objectives and goals purpose of organization formulated and written objectives in future What is our purpose? What they want to see happen. Who are our target audiences? What value can we offer to them? specific, concrete, doable outcomes should be Feasible – avoid a „mission impossible“ Motivating – enriches people‘s lives (worthwhile members) Distinctive – pride, „do it differently“, „do it better“

The Public Environment DONORS NPO with mission to support needy individuals American Cancer Society Individual donors Prospective Donors General Public Mass Media Health Agencies Advisory Committee Members Families of Patients Cancer Patients Administration and Staff Medical and Behavioral Researchers Volunteers Educators Legislators Government Agencies Corporations Physicians and Health Workers DONORS, TARGET AUDIENCES NPO with mission to offer products and services

The Competitive Environment I competition between organizations for resources, target and volunteers not just in private market Organization-Level Competition competition may help not hurt – 2 ways: 2 competitors → increases in the size of the total market Reevaluation of marketing details – hepl the marketer‘s overall performance

The Competitive Environment II Organization-Level Competition Want ads Newsletters Annual reports Advertisements Planning documents Marketing brochures Speeches and public statements Reports to regulatory agencies From Competitors Themselves Suppliers Court records Trade associations Other competitors Newspaper articles Magzine articles Distribution channels Advertising agencies Financial institutions Former employees of competitors Stock market analyses (Moody‘s) From Outside Observes Market research Focus groups Interviews Surveys From Competitor‘s Customers Economic or market researchers Customer contact people Personnel department From One‘s Own Organization

SEGMENTATION Who needs help? Do we know how to influence them? Do we have resources and knowledges to have an ipmact? How to deal with complexity of „TA“? it can have many different shapes and sizes DON‘T IGNORE DIVERSITY – otherwise it will be failure Don‘t treat everyone individually (expensive) but as „markets of one“

TARGETING 4 broad strategic choices what to do with segments: Undifferentiated (mass) marketing - one offer and marketing mix for whole market, trying to attract as many „TA“ members as possible Differentiated marketing - budget permits, developing an effective offer and marketing mix for each selected market segments Concentrated marketing - one market segment – ideal offer and marketing mix for it (prevence of teens pregnancy – teens are targets) Mass customization - customizing the offering to the individual (Dell Computers, Levi Jeans)

POSITIONING I Marketing objectives involve influencing the behavior of TA and TA always have something else they can do including doing nothing Essential idea of POSITIONING is competing of alternatives in the mind of the TA Marketers must position their offerings as a superior value proposition to those of their competition Donors – personal relevance of NPOs mission, cost- effectivness Research frequently tell marketers to reposition themselves and/or their offerings

VALUE PROPOSITIONS: MANAGING THE ORGANIZATION‘S OFFERING Chapter 8 Marketing of Non-Profit Organisations

UNIQUE CHALLENGES I NP marketers – difficult to mount offers for campaigns that address problematic behaviors They often must meet extravagant expectations - reducing the expectations of key oversight publics, challenge – universal adoption of some desirable behavior Often asked to influence nonexistent demand - influence may be new to their TA Often asked to influence negative demand - promote a behavior for which the TA has a distaste (separating garbage) Often T nonliterate A - developing countries – population with limited reading skills (cartoon) - problem HIV/AIDS complex information Often address highly sensitive issues - embarrassing – research is difficult The behaviors to be influenced often have invisible benefits - immunization – prevent disease „in the future“ – NOTHING HAPPEN NOW

UNIQUE CHALLENGES II The behaviors to be influenced often have benefits primarily to third parties - payoffs for third parties – poor and not to the person undertaking the behavior – benefits to others - do it because they feel that it‘s in the society‘s best interests > challenge = make the action more likely (volunteers) The behaviors are often crafted by the TA and frequently require selfrewards - try to encourage behaviors like dieting or exercise The behaviors often involve intangibles that are difficult to portray - difficult to portray in promotional messages (invisible) Influence can take a very long time - changing from negative to positive – communication, changing values… Campaigns frequently face intense public scrutiny - control by government, funding source, general public – press - importance of „politics“ and „public relations“ in the NP marketing mix Influence on social behaviors is often very hard to detect

Product Item Decision I 3 levels of product features in developing a product: 1. Core Product - uncover the essential needs hiding under every product so that product benefits, not just product features 2. Tangible Product - 5 characteristics: Features Styling Quality Packaging Branding 3. Augmented Product - additional services and benefits

THE NATURE AND THE ROLE OF THE COST Contemplation stage – target audience members mentally balance the expected benefits from an action against the expected costs. Costs could be monetary and nonmonetary – time, physical energy, and efforts. In NPOs managing the perceived costs is often much more important than managing the benefits. A perceived cost is nay expected negative consequence of a proposed behavior considered by a target audience member. For example: fears that high blood pressure medicine will affect a man’s potency have caused some men not at carry out needed recommendations.

COST MANAGEMENT The duality of costs - in an exchange, what is a benefit for one side of the exchange is typically a cost for the other. Developing the strategy – the marketer must begin by researching audience perceptions of the costs they think they must pay. Otherwise, marketers may miss crucial but subtle barriers affecting particular audience segments. Many alcoholics avoid treatment because they don’t want to admit to themselves that they are alcoholics.

Marketing and COMMUNICATION philosophy, process, set of concepts and theories for influencing behavior – change or prevent Components of marketing mix – offer, price, facilitation – must be put in place before any program can be successful Influence directly – providing incentives for action (benefits) Reducing disincentives (costs) that we call the value proposition Strategies involves significant amounts of communication: Informing (Precontemplation stage) – TA about alternatives for action and getting them interested Telling (Contemplation stage) – about positive consequences of choosing a particula option Motivation (Preparation/Action stage) – for acting at a particular time and place Rewards for continuing (Maintenance stage) Communication is just part of an integrated marketing strategy, not a substitute!

BALANCING MISSION AND RESOURCES Types of resources serve operating and capacity- building needs: Financial resources – a challenge for NPOs is that the flow of financial support they seek from foundations and donors is not always tied to overall mission performance. Personnel resource – a significant pool of volunteers. Source of support form private sector All three resources interact.

FINANCIAL RESOURCES The phenomenon “mission creep” – excessive pursuit of donors and foundation grants can lead a NP far afield form its motivating ideas and goals. Sources of funds – comprise several subcategories: Donations Major individual cash gifts (e.g. grants, bequests, planned giving) Small gifts Corporate and corporate foundation cash donation (e.g. Google foundation grant) Non-corporate foundation cash grant Product donations

Self-generated revenues Sales of principal products and services (e.g., hospital charges, university tuitions, sales of oral rehydration solutions, museum gift shop revenues) Revenues from unrelated enterprises (e.g., catalog sales, T-shirts) Membership dues Investment income Partnership proceeds Cause-marketing shares Licensing fees Web site advertising fees

INDIVIDUAL GIVERS Individuals are the major source of all charitable giving. They can be classify into three groups based on their life cycle stage and giving patterns: The early years – up to 50: potential donors think how to make a family, career; they have limited income, they give small amounts. The middle years – between 50 and 70 years: donors are relatively settled, they have big children;, they make large for the special needs of a NPO. The later years – over the age of 70: “The Ultimate Gift”.

Czech Non Profit Sector In the Czech Republic activities of non-profit organizations are regulated by the laws that determine the registration process, organizational structure, financial management, economical management and termination. Four types of non-profit organizations (NPO‘s) are distinguished in the CR:

Czech Non Profit Sector Citizen-action associations comply with Act No. 83/1990 coll., on citizens’ associations, as amended.comprise mission and basic objectives Foundation and charities comply with Act No. 227/1997 coll., on foundations and foundation funds, and on alteration and amendment of related acts, as amended. Legal entities estabilished by the church or religious organizations comply with Act No. 3/2002 coll., on the freedom of religious worship and the status of churches and religious organizations, and on alteration of some acts, as amended. Generally beneficial associations comply with Act No. 248/1995 coll., on generally beneficial companies and on alteration and amendment of some acts, as amended.

Development of NP sector in the Czech Republic The Czech Republic has a rich tradition in the interest on national, cultural and politician emancipation. Totalitarian regime locked those posibilities. During socialism there was practicaly no autonomous sphere. All independent companies were blocked or stopped or under the rule of state. Velvet revolution was non-violent revolution that ended on December 29, 1989, that ment fall of the communist regime and subsequent conversion to a parliamentary republic. This revolution brought crucial change in non-profit sector. It started to appear thousands of NPO’s and as is seen in the Table 1 with statistics from the year 1990. The growth in the number of organizations in non-profit sector is a sign that Czech NP sector is well developed and provide a good conditions and support to those who decide to enter this area. The entrance to the European Union in 2004 also opened new options of funding that helps to Czech organizations, also easier contact and cooperation with the NPO‘s from abroad.

Development of NP sector in the Czech Republic As we saw above the number of non-profit organizations is still increasing and there is no barrier that could destroy this trend. But there is one more reason why the number of non-profit organization is increasing. Non-profit organizations doesn’t have logout obligation when they finish their activities, so many of them are formally existing but they don’t make any activity or make almost no activity. The real number of non-profit organizations that are working is actually same or slightly decreasing. One of the reason of it is merging of non- profit organizations that are focused on the same target audiences and problems. Another reason of decreasing number is lack of financial resources. That usually occurs in the small organizations that have no conditions to bring finances from European Union that is nowday the best resource, so they stop their function.

Multicultural Center Prague founded in 1999 focus on issues of coexistence between people from different cultures Awareness, Communication, Learning, Exploration, Projects as support… Czech society is becoming diverse and multicultural – EU integration Enriching, Stimulation X Tensions, Misunderstandings

Mission and goals helping to people to understand and explore multuculture showing possitive side of multiculturality promoting tolerance and values of social integration and cohesion supporter of intercultural dialogue and educating about diversity by organizing: Events, Public debates, Publishing, Research, Collaborations

Activities MCP provides many activities in following areas: Multicultural education (3 programms) Cultural events (6 thematic series) Libraries for all (3 projects) Studies and research (5 topics) Migration (28 projects) Information services (services – Information center) International projects (5 projects)

Marketing mix of MCP PRODUCT is the basic tool of marketing mix that represent the offer of organization, its quality and characteristics on a market. In the MCP the product are provided services. Services and activities of MCP are focused on problems of multiculturality. The main goal is to promote multiculturality and show the positive side of it to the public and make the life easier for minorities Activities consists of multicultural education to prevent xenophobia and racism, cultural events as a public debates wit experts and documentaries, films, literature and exhibitions presenting different cultures and role and position of women in different cultures. Libraries for all is a project that helps to public libraries in the Czech Republic to build multicultural collections of books to offer intercultural education. Another activity is making of studies and researches for different topics as discrimination in media or migration. And also international projects are the part of MCP services. Those projects are not focused on cultural differences only but also on integration of „handicapped

Marketing mix of MCP PRICE is the amount of money that customer has to pay to get the product. In MCP there is a developed system of donation, where they have a higher amounts of sponsors and donators and also use money from the Czech funds and many of funds of European Union. They have really good financial resources so they can provide many services..

Marketing mix of MCP PLACE means a place of selling and ways of distribution. Organization tries to use the ways of distribution so that its services are fast and effectively placed to its target market. The MCP tries to make its services available to its customers so that they could use them in their location and in the given moment with an acceptable expenses. The way from organization to costumer is usually direct. It has an advantage of immediate feedback. PROMOTION play one of the most important roles for non-profit organizations. MCP goal is to spread positive impressions to make a system how to sell products to customers. MCP use for its communication with customers public relations, advertisement, personal communication, promotion materials, web pages and social networks. This element of marketing mix consists of activities that helps to organization to meet their products/services with the target market.

References - Alan R. Andreasen, Philip Kotler: Strategic Marketing For Nonprofit Organizations, – 7th ed., Upper Saddle River, NJ : Pearson/Prentice Hall,  2008 - Alfirević, N.; Pavičić, J.; Najev Čačija, Lj.; Mihanović, Z.; Matković, J.: Osnove marketinga i menadžmenta neprofitnih organizacija, u izdanju Školske knjige, Zagreb, 2013 - Kotler, P, Roberto, E. I.: Social Marketing, Sage Publications, Inc.2002 - Patterson, S.J., Radtke, J.M.: Strategic Communications for Nonprofit Organization: Seven Steps to Creating a Successful Plan, John Wiley and Sons, 2009 www.czech.cz www.neziskovky.cz www.mkc.cz