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Why some of the long held wisdom of the for-profit world simply does not work when placed in context of the nonprofit world?

It has been a long held belief that nonprofit companies should operate as if they are pro-profit companies. People think that some how, if you take strategies and ideas from the for-profit sector and apply them in the nonprofit companies, then nonprofit companies would turn in to lean mean helping machines over night. However in my opinion that line of thinking is deeply mistaken. I would assert that ideas and strategies taken from the for-profit world simply does not work in the non-profit world. Today I will seek to expand on that assertion idea by examining three fundamental characteristics of nonprofits and why for-profit strategies and mindset doesn’t work very well in conjunctions with those characteristics. My explanation will be separated into three parts. In each part I will seek to explain each of the three fundamental characteristic of nonprofits does not lend itself well to for-profit strategies. I will also propose possible strategies that nonprofits can employ that are inline with their characteristics.

In the first part, I’d like to define what a nonprofit is and layout some of the important characteristics of nonprofit organization. In each of the subsequent parts, I will dive deeper into each of these characteristics and provide a detailed analysis on why traditional for-profit ideas are not tailored to work with these characteristics and how nonprofits can cope with the issues raised by these characteristics.

Part I – What is a nonprofit?

Eventhough nonprofit is something that we think we are all familiar with, but nonprofits take many different froms. Some such as Kaiser Permanente operates almost exactly the same as for profit businesses. For the purpose of our discussion we will limite the nonprofit to those that we typically think of as nonprofits. The typical nonprofits have the following characteristics.

1. Nonprofit exists in order to address or solve certain societal problems.

2. The people who contribute money and resources to nonprofits tend to be different from those who receive the majority of the good and services provided by the nonprofits.

3. The effectiveness of nonprofits cannot be measure in monetary terms.

These characteristics are unique to the nonprofit sector and they are also wreck havoc on standard for-profit strategies and ideas. In the following article I will seek to explain how these characteritics impact an organization’s marketing strategy and business strategy and why these characteristics wrek havoc on traditional for-profit ideas and strategies.

Marketing Warfare

In a typical marketing class, marketing is often compared with warfare. If market is the battlefield, market share is similar to terrorities. As a marketer it is your job to device strategies to help increase your company’s market share by convincing customers to buy your product versus competitor’s product. This is usually done in several ways.

1. Promote your brand’s prestige (example: Mercedez:It is a Mercedez; BMW: the ultimate driving machine).

2. Show that your product is superior (example:  Samsung: The next big thing is already here. Microsoft/Pepsi: Bing/Pepsi Challenge)

3. Promoting certain brand personification( example: Apple: Mac versus PC)

In other words in the for-profit world, marketers are taught to think like generals and think of all other company as enemies. While this mind set works great in the for-profit world whose goal is to maximize profit, the same mentality cannot be carried into the nonprofit world.

Warfare is unbefitting of Nonprofits

Unlike most for-profits , the goal of a nonprofit is toward solving social issues. This seemingly simple difference has huge implications in terms of marketing strategy. In the for-profit world, taking market share away from competitors fit perfectly in line with its goal of growing in size and increasing in profit. In the nonprofit world however, taking market share away from fellow nonprofits is not in align with its goal of addressing social issues. In the nonprofit world, nonprofits are merely channels for resources to flow to address specific social issues. Regardless of which channels these resources flows through, they all end up going toward the same cause. Simply convincing donnors to donate to one profit versus another does nothing to help advance the cause. It simply shifts the path in which resource flows through. For example, if we have two homeless shelters in the same area, the homeless population does not benefit from the two homeless shelters competiting against each other for market share. Now some of you would ask, what if the nonprofits are serving different causes, then would it be meaningful for the to compete against each other? The question would still be no. The nonprofit sector as a whole exists to make the world a better place. It would be extremely difficult for one to make the arguement that some how it is better to spend money on homelessness rather than at risk youth or vise versa.

Marketing Diplomacy

The traditional mantra of waging marketing warfare to take market share from your competitor simply does not apply in the nonprofit sector. Instead of working against each other, the nonprofit sector must work together. Intead of thinking like a general in the for-profit world, marketers in the nonprofit world need to think more like diplomats. Given the limited resources available in the nonprofit world for marketing activities it is even more important that marketers need to be able to work with fellow marketers from other nonprofit organization. It is essential that they pool their resources together and create a coherent and meaningful message. In other words instead of simply marketing a particular nonprofit and why people should donate to that one nonprofit, nonprofits serving the same cause need to rally together to market the cause itself. By pooling their resources together, nonprofits that serves the similar cause can ensure that additional resources will flow to serving the cause and by making the overall pie bigger, the individual nonprofits can ensure their each of their corresponding slices are bigger also.

Looking at pictures of my son today has got me thinking what it means to grow up and the heavy price we must pay as part of growing up. Looking at my son, he doesn’t care if his cloth is of a particular brand, he is happy as long they keep him warm. When we get in the car to take him some where, he doesn’t care if that car is a BMW or an old cab. As long as he gets to look out the window and see the trees pass by, he is happy. He doesn’t care whether he has the most expensive toys in the world, he is perfectly happy playing with a piece of paper. He doesn’t really care where he goes or what he does, he is happy as long as he is spending time with people who loves him and cares about him. He is not picky about the food that he eats, he is happy as long as he is well fed. He doesn’t care if you are a millionair or a cleaning maid, as long as you are willing to show him a smile he will smile back at you. At a young age, he loves music, and it makes very little difference whether that music comes from an old hand held radio or a set of five figure stereo system. As a parent I am a bit saddened to think that some where along the way of growing up, he would lose all of that. He would start putting a value judgement on certain symbols and items. He would start putting people in categories and treat them differently. He would start being picky about his food. Worse of all he would start letting the outside world dictate what he should enjoy and how much to enjoy it. He would join this rat race that we call a life and start selling his soul and his innocence one small piece at a time to keep up with the Jones. As a parent watching him grow up, I feel so conflicted, part of me honesty wishes that he can stay a baby forever. But then again, I don’t know much, please share with me what you think, as you watch your child grow up.

Hi everyone!!Welcome to my blog!!Blogging seems to be the latest craze these days and everyone seems to have one so I figure I’ll join the party. The main purpose of this blog is just like a mental journal that I can use to write down my ideas and thoughts. I have a wide array of interests from economics to politics, to marketing to  business strategy but as I state in the domain, I don’t know much. So I would like to invite everyone who are kind enough to spend their precious time on reading my blog to share with me their views and their ideas. In my opinion the best way to learn new things is to simply have everyone get together and share their knowledge.  So please leave your comments and your thoughts!! Thanks!!!