Marketing in Nonprofit vs. For-Profit Organizations

Introduction

Moving into the organizational era, new marketing trends are emerging around the world. Even nonprofit organizations, which were once considered entirely charity- and trust-based, have adopted techniques and methods very similar to those used by for-profit businesses (Goerke, 2003). This change is partly due to political pressure from governments and other institutions (Vromen, 2005), and partly in response to globalization and shifts in local perceptions.

Considerable importance is now given to the nonprofit sector, and it is increasingly viewed alongside organizations in other industries (Treasury, 2001). Nonprofit organizations face competition for funding, which requires them to properly market their ideas in order to fulfill their missions (Andreasen and Kotler, 2003). Marketing therefore plays a significant role in this sector. However, unlike for-profit businesses, nonprofits cannot be customer-focused in the traditional sense, because their purpose is not to fulfill customer needs or wants (Gonzalez et al., 2002). Instead, they must be organization-focused — selling their story and appealing to people's hearts rather than their rational minds. Although profit is not the primary concern of these organizations, it remains an important operational factor.

Nonprofit organizations now conduct profitability analyses of their various marketing activities. Unlike for-profit marketers, nonprofit marketers do not focus on shifting customer demands but rather on changing public perceptions while staying true to their organizational mission. Desired outcomes are evaluated before marketing activities are implemented. With the emergence of digital technology, social marketers increasingly rely on web-based marketing, particularly through social networking platforms.

Despite significant work in this area, the field still lacks a universally accepted definition of the nonprofit "customer." Scholars have classified these customers into two broad groups: (1) end customers, who may include clients, patrons, patients, donors, volunteer workers, advocates, trustees, committee members, local government inspectors, and the local community; and (2) intermediary customers, who are involved in the process but are not the primary customer group — for example, government agencies that refer patients to nonprofit organizations.

All customers of nonprofit organizations are most commonly referred to as beneficiaries, a term widely used in the scholarly literature (Bruce, 1995). Another challenge facing the sector is the absence of a globally accepted definition of what constitutes a nonprofit organization — different scholars have defined it in very different ways (Gonzalez, 2002). One distinctive characteristic observed in this sector is that nonprofit organizations tend to maintain cooperative relationships with their competitors, since all parties are working toward a shared cause (Gallagher and Weinberg, 1991). This report discusses several marketing differences that directly or indirectly account for the divergence between nonprofit and for-profit marketing practices.

Differences in Marketing Tools

Whether marketing a product or a service, the marketing mix is the cornerstone of any organization's marketing strategy. Without developing the marketing mix — commonly known as the 4Ps — desired marketing objectives cannot be achieved. The 4Ps include Product, Price, Place, and Promotion. From an organizational perspective, these are sometimes described as the 4Cs: Commodity, Cost, Channel, and Communication. Together, the 4Ps help identify the target market for a product or service, defining the broad parameters within which the most likely customers can be found.

Any marketing strategy, whether for a product or a service, is guided by these 4Ps. However, constructing a marketing mix for a nonprofit organization is exceptionally difficult because the offering is based on an idea, a cause, or a story (Rothschild, 1999). Translating that story or cause into a conventional marketing mix is problematic for the following reasons:

The intangibility of nonprofit products: The cause on which a nonprofit organization is founded is entirely intangible and cannot be presented as something that satisfies a consumer's needs or wants.

The non-monetary "price" of purchase: In for-profit marketing, marketers aim to convey that customers receive more value than the price they pay. Customers evaluate the exchange: if perceived value is less than the price paid, they are dissatisfied and unlikely to return; if equal, they are satisfied (Day, 1994); and if greater, they are delighted — likely to return and to recommend the organization to others. In nonprofit organizations, there is no comparable value exchange. Donors do not receive a tangible return. The only "return" is the credibility and trustworthiness of the organization — the assurance that it is doing exactly what it has promised for its cause.

The extremely low frequency of "purchase": Very few people in any population are willing to donate money without receiving something tangible in return. The probability of repeat giving is low, making donor retention difficult. Nonprofits must therefore maximize the impact of each initial interaction, as a second opportunity to engage the same donor may never arise.

The complexity of the nonprofit environment: The nonprofit operating environment presents significant marketing constraints. Marketers cannot offer value in exchange, cannot be customer-focused, and cannot alter the cause in response to shifting customer demands — leaving very limited strategic room. Moreover, the cause itself is inherently complex: the organization must engage people who hold opposing views and may face competitors who actively work to undermine its cause while promoting their own. This level of complexity is rarely encountered in for-profit marketing.

Extreme variation in levels of involvement: Donors and supporters tend to fall at opposite ends of the involvement spectrum. Some are highly engaged, researching the organization thoroughly before donating; others are barely aware of the organization's name and give based solely on an emotional connection to the cause. These extremes create significant challenges for targeting, since a single strategy cannot effectively reach the entire population simultaneously without creating internal contradictions in the marketing approach.

Customer-Focused vs. Organization-Centered Marketing

The most fundamental difference between for-profit and nonprofit marketing is their orientation. Most for-profit organizations are customer-focused, and those that are not are typically transitioning toward a more customer-centric approach. In the early stages of mass industrialization, companies were product-focused due to the logic of mass production, but this strategy did not yield optimal returns. It became clear that no business can survive without addressing customer needs and wants — and customers will only pay if they believe a purchase will satisfy some need or desire.

For-profit organizations regularly adjust their strategies in response to changing customer demands. In nonprofit organizations, however, there is no equivalent concept of satisfying a customer need or want. They are built entirely around a single idea or cause and cannot adapt that cause to changing demands (Flynn and Hodgkinson, 2001). The organization must remain committed to its core story and build credibility by consistently supporting that cause. Although this is a slow process, sustained commitment to a cause will eventually attract the attention and support of the target audience.

Conclusion and Recommendations

It is clear that nonprofit organizations are now approaching marketing with many of the same objectives as for-profit organizations — seeking to generate as much revenue as possible. However, important differences remain: nonprofits are defined by their focus on a cause rather than profit, and they generally give less attention to long-term planning. As the sector continues to evolve, nonprofit organizations are working harder to market their ideas and maximize their reach. Their strategies differ from those of for-profit organizations primarily in complexity, since they have no tangible value to offer in exchange and cannot alter their core mission in response to shifting customer demands.

Nonprofit organizations should embrace modern marketing techniques that reduce costs while extending their message to a large or even global audience. Social media marketing is one such technique. It is now a well-established practice across sectors, and nonprofit marketing is increasingly generating strong responses through social network channels. By combining these digital tools with the distinctive approaches outlined in this report — achievement-based credibility building, leadership-driven campaigns, and cause-focused communication — nonprofits can strengthen their marketing effectiveness in an increasingly competitive environment.

References

Andreasen, A., & Kotler, P. (2003). Strategic marketing for nonprofit organizations. Pearson Prentice Hall.

Bruce, I. (1995). Do not-for-profits value their customers and their needs? International Marketing Review, 12(4), 12–13.

Day, G. (1994). The capabilities of market-driven organizations. Journal of Marketing, 58(4), 37–52.

Flynn, P., & Hodgkinson, V. (2001). Measuring the impact of the nonprofit sector. Kluwer Academic/Plenum Publishers.

Gallagher, K., & Weinberg, C. (1991). Coping with success: New challenges for non-profit marketing. Sloan Management Review, 33(1), 14–15.

Gainer, B., & Padanyi, P. (2002). Applying the marketing concept to cultural organisations: An empirical study of the relationship between market orientation and performance. International Journal of Nonprofit and Voluntary Sector Marketing, 7, 182–193.

Goerke, J. (2003). Taking the quantum leap: Nonprofits are now in business — an Australian perspective. Journal of Nonprofit and Voluntary Sector Marketing, 8(4), 317–327.

Gonzalez, L., Vijande, M., & Casielles, R. (2002). The market orientation concept in the private nonprofit organisation domain. International Journal of Nonprofit and Voluntary Sector Marketing, 7(1), 55–67.

Rothschild, M. (1999). Carrots, sticks, and promises: A conceptual framework for the management of public health and social issue behaviors. Journal of Marketing, 63, 24–37.

Vromen, A. (2005). Political strategies of the Australian third sector. Third Sector Review, 11(2), 95–135.