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Australia and New Zealand Third Sector Research

Eighth Biennial Conference

Navigating New Waters

26-28 November 2006


Adelaide

MARKET ORIENTATION IN VICTORIAN NONPROFIT ORGANISATIONS

Dr. Jan Brace-Govan


Department of Marketing, Faculty of Business and Economics
Monash University
PO Box 197, Caulfield East, 3145
jan.brace-govan@buseco.monash.edu.au
(03) 9903 2491

KEYWORDS: Market Orientation, Nonprofit Marketing, Charity Marketing, Societal

Orientation

ABSTRACT

The third sector is currently the focus of much government and business attention. Increasing

research activity has focussed on its management both here and overseas. A consistent theme

has been the difficulty of directly transferring the commercial experience onto the third sector

context. However, there is little Australian-specific information about marketing in nonprofit

organisations.

Market orientation refers to the operationalisation of the marketing concept within an

organisation. This paper reports on a sample of 401 Victorian nonprofits ranging across each

of the 11 defined INCPO classifications: Culture and Recreation; Education and Research;

Health; social Services; Environment; Development and Housing; Law, Advocacy and

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Politics; Philanthropic Intermediaries and Volunteerism Promotion; International Activities;

Religion; and Business, Professional Associations and Unions. Whether or not a market

orientation is relevant to nonprofit organisations is a question raised in the context of these

results.

INTRODUCTION

Over the last two decades the third sector has undergone some significant changes, some of

these under political pressure from governments (Vromen 2005) and some in response to

international and domestic influences (Lyons 2001, 2002). There is increasing attention being

paid to the nonprofit sector (ABS 2000; Treasury 2001; DVC 2004; Salomon et al. 2004)

including some considerations of measuring its impact (HBR 1999; Flynn and Hodgkinson

2001; Conroy, D. K. 2005). Marketing however, has not been especially visible in these

commentaries and so an overall aim of the larger project from which this report is drawn was

to explore the presence of marketing in the Third Sector in one state of Australia. At the same

time marketing communications has a long history of being partnered with nonprofit

organizations. In 1952 Wiebe famously asked ‘Why can’t you sell brotherhood and rational

thinking like you sell soap?’ (p679). Essentially he made a case for using television to

communicate ‘social objectives’ with prospective audiences in the same manner as radio,

which is a somewhat quaint notion now, but for its time this explored the use of cutting edge

technology in the service of good causes. His answer was that you could so long as the

‘essential conditions for effective merchandising exist’ and that there was a ‘reasonable

amount of receptivity among audience members’ (1952: 679). The aim of this particular

paper is to re-examine what this kind of approach might mean for nonprofit organisations

today and, to assess the current role of marketing. After a review of marketing’s place in

nonprofits, the particular concept of ‘market orientation’ is presented. There are well-

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established and widely discussed scales used to measure market orientation and the rationale

for the selection of one of these scales is given. Finally, an exploration of some initial results

calls into question the concept of market orientation in nonprofit organisations and, in line

with some contemporary views of marketing, suggests further investigations.

MARKETING

Despite the apparent early beginning, marketing has often had an awkward partnership in the

third sector. This has been attributed partly to the operational differences between the

nonprofit and for profit organizations (Rothschild 1979) and also in part to the different

culture of nonprofit organizations (Andreasen and Kotler 2003). Recent developments to one

side (AMA 2004), marketing in the business sector has long been underpinned by the 4Ps.

This formulation of Product, Price, Place and Promotion is premised on a concept of

exchange between at least two (rational) parties. The difficulty of applying the 4Ps directly

onto many of the third sector’s activities has led to six distinctions of nonprofit operations

being identified:

• The intangibility of non-business products

• The non-monetary “price” of purchase

• The extreme lack of frequency of purchase

• The lack of behavioural reinforcers

• The extreme level of involvement varying from very low to very high and

• The complexity of the nonprofit environment (Rothschild 1999)

Indeed, discussion in marketing has raised questions about the relevance of marketing

concepts to sections of the nonprofit sector (Butler 2000; Butler and Collins 1995). Others

have commented on the push from the public sector for ‘new managerialism’ resulting in a

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demand for customer focus and evaluation (Walsh 1994; Laing 2003; Vromen 2005), with

this being more evident in some sections of the third sector than others i.e. health and

education (Day, Reynolds and Lancaster 1998; Ewing and Caruana 1999). Moreover, even

though more recent definitions of marketing focus on value (AMA 2004), there continue to be

assertions that there are cultural issues in a nonprofit setting around the notion of pursuing a

customer orientation (Andreasen and Kotler 2003; Sargeant 2005: Wymer, Knowles and

Gomes 2006).

Marketing can be seen as a philosophy, a process, a culture, a set of tools or a management

process (Sargeant 2005) and herein lies one of the problems as each of these views of

marketing has a different impact operationally. The erroneous or limited view of associating

marketing with either advertising or selling leads to some in nonprofits to hold quite negative

attitudes towards marketing deeming it unnecessary, or invasive, or immoral, or stifling

(Sargeant 2005: 31). At the same time there are some important differences between

nonprofits and the business sector: nonprofits have multiple constituencies; non-financial

objectives and; a focus on service. Nonprofits are also susceptible to non-market pressures,

such as government policy, often face intense public scrutiny, for example through quality

reviews, and can have irresolvable tensions between their mission and the concept of

customer satisfaction (Sargeant 2005). In sum, it might appear that marketing has either no

role or only a limited role in nonprofit organizations. However, it is clear that most of the

large, corporate sized nonprofit organizations are making very good use of marketing so there

must be some resolution of these issues available and potentially the resistance to marketing is

exaggerated.

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Separating the managerial or ‘philosophy’ and culture perspectives on marketing from the

practical tools and processes of marketing allows a view of a market orientation to be defined

differently to a marketing orientation. A marketing orientation is the utilisation of marketing

as a business function. A market orientation is an integrated focus from the whole

organisation on the needs and wants of the organisation’s market, or customer groups. This

later stance has far reaching consequences in terms of, not only the activities of the

organisation, but also in terms of its performance, which market orientation proponents

suggest would be far superior (Bennett 1998: 32). Market orientation has been shown to lead

to increased profitability for business sector and to be especially successful in service

orientated and nonprofit organizations (Cano, Carillat and Jaramillo 2004). Although the

effectiveness of a market orientation has been asserted for the nonprofit sector (Andreasen

and Kotler 2003; Wymer et al. 2006), there is quite limited information available about

marketing in Australian nonprofits generally. Studies tend to focus on single sectors such as

education (Caruana, Ramaseshan, and Ewing 1998) or libraries (Harrison and Shaw 2004).

This study challenges the notion that marketing is absent from nonprofits and redresses the

lack of a general picture of the uptake of marketing in Australian nonprofits. The next section

will examine the concept of market orientation in more detail which will be followed by a

description of the study and the presentation of some initial results. However, the discussion

closes using a more critical perspective to suggest future directions.

MARKET ORIENTATION

Market orientation holds a prominent place in the marketing literature and is central to

marketing relying as it does on detailed, shared knowledge of the people that are the

beneficiaries of an organisation, either as customers, clients, participants, patrons or patients.

While there are at least five views on market orientation in the literature (Lafferty and Hult

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2001:94), this paper will focus on the first two streams because they are the most widely

utilised and discussed: the behavioural perspective (Kohli and Jaworski 1990) and the cultural

perspective (Narver and Slater 1990). Although behaviour is inferred in the Narver and Slater

(1990) model, they assert that organisational culture is the key to having a market orientation.

Without the culture the behaviour will not be present due to lack of reinforcement (Narver and

Slater 1990; Lafferty and Hult 2001; Matsuno, Mentzer and Rentz 2005). For Narver and

Slater (1990) market orientation comprised an orientation to the customer, an orientation to

competitors and inter-functional co-ordination. A detailed, deep understanding of customers

ensured an organisations’ ability to tailor its offerings to the customers. While a sound

knowledge of their competitors ensured that the organisation could compete successfully long

term. Cross functional co-ordination meant that every aspect of the business could focus on

providing customer value. Essentially these three elements expressed a cultural commitment

to a deep focus on superior customer value.

However, customer value is the basis of profitability and hence the purpose of market

orientation, and so, this is also the intended outcome of the Kohli and Jaworski (1990) model.

The difference here, that is also the reason for much heated debate (Matsuno et al. 2005), is

Kohli and Jaworski’s focus on behaviour, or business process. The difference is best drawn

out by Lafferty and Hult when they call this model the ‘market intelligence perspective’

(2001: 97). By market intelligence they mean information from monitoring competitors, the

wider environment and gathering information about customers both formally and informally.

The second and very important step is to ensure that this market intelligence is shared

throughout the organisation and finally that it is used as a basis for action (Kohli and Jaworski

1990; Lafferty and Hult 2001; Matsuno et al. 2005).

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Setting aside the question of which is the antecedent, behaviour or culture, there seems to be

little to choose from across these two models and, although the separation is generally

acknowledged, many discuss the two in tandem in order to describe market orientation as a

concept (Bennet 1998; Siu and Wilson 1998; Homberg and Pflesser 2000; Gonzalez, Vijande

and Casielles 2002; Vazquez, Alvarez and Santos 2002; Matsuno et al. 2005; Mavondo,

Chimhanzi and Stewart 2005). Some synthesise the two to devise a further model (Ruekert

1992; Lafferty and Hult 2001) and others defend the use of a combined model for their

research (Gonzalez et al. 2002; Vazquez et al. 2002). While both models offer a scale by

which to measure market orientation MARKOR and MKTOR (Farrell and Oczkowski 1997),

it was the MARKOR scale developed by Kohli and Jaworski that was used by researchers in

the U.K. to survey the nonprofit sector (Balabanis, Stables and Phillips 1997; Bennett 1998).

Balabanis et al. (1997: 586) defend the use of Kohli and Jaworski’s MARKOR scale to

measure market orientation by arguing that it focuses on the organisation’s market and

“emphasizes specific inter-functional co-ordination operations based on the collected

intelligence and focuses on activities related to intelligence rather than its effects”. Both

Bennett (1998) and Balabanis et al (1997) note the anti-marketing stance adopted by some

charities and the intensely competitive environment for nonprofits that has emerged over the

1990s. This suggests an ambivalent state for some nonprofits whereby a market orientation

might not be supported by the organisation’s workers but concurrently might be the best

response to challenging times. For his study Bennett re-words the MARKOR scale to be

appropriate for fundraising in nonprofits. The 21 statements that comprise the altered

MARKOR scale are reproduced in appendix 1. Bennett (1998: 33) selects small and medium

sized charities as his focus arguing that “a handful of large charities which – through skillful

marketing – have attracted donations possibly to the detriment of smaller charitable

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organisations”. Smaller organisations, he suggests, are less likely to have formal procedures,

likely to have fewer marketing staff and fewer resources but in these competitive times be in

high need of a market orientation (Bennett 1998: 35). Balabanis et al (1997: 588-589)

examined the top 200 charities in the UK citing “compassion fatigue”, declining incomes and

high profile disaster- rescue projects, in addition to the nonprofit environment itself, as factors

that could undermine a market orientation. Both studies found the existence of market

orientation with some limitations and provisos.

In sum then, marketing seems to be in an ambivalent position in nonprofit organisations but a

case has been made in other parts of the world to review the marketing orientation of

nonprofits using a scale that focusses on business process rather than organisational culture.

In Australia, in spite of the progress made in managerial research in nonprofits, (Lyons 2001;

Giving Australia 2005), there is a remarkable paucity of information about marketing. The

wider aim of this study was to address that lack by taking an exploratory look at market

orientation in the nonprofit environment in Victoria. The intention was to identify further

useful avenues to investigate with the view that the Australian experience cannot be directly

interpreted from the experience of Europe or America. Therefore a broad, information

gathering study was designed and is described next. This leads to some questions about

marketing and the measurement of market orientation and these are raised in the discussion.

METHOD

One underlying assumption that could be extrapolated from the literature was that in order for

the business processes to be market orientated it would not be absolutely necessary to use the

word “marketing”. In other words, an organisation that was focussed on knowing a great deal

about its operational environment and its clients or stakeholders and shared this information

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widely, could use an alternative vocabulary. The MARKOR scale becomes germane under

these conditions because of its focus on activities and processes as opposed to overt culture,

although both Balabanis et al and Bennett re-word the MARKOR (Kohli and Jaworski 1990;

Jaworski and Kohli 1993) scale to make this more appropriate to the charities they

investigated. Bennett (1998) published the tested and re-worded MARKOR scale that he

utilised (see appendix 1).

As noted earlier, the nonprofit environment is particularly complex with multiple stakeholders

and customer groups for the marketing function to consider. In order that this study had some

comparison point it was decided to continue the overseas focus on the donor market

(Balabanis et al. 1997; Bennett 1998). This singular focus has the disadvantage of being quite

narrow but has the advantages of streamlining the survey and not fatiguing respondents

(Burns and Bush 2006). This latter point was an important consideration because the survey

was to be conducted by CATI (computer assisted telephone interviews) and it was crucial that

the data gathering process was short, focussed but still valuable (Malhorta, Hall, Shaw,

Oppenheim 2006). A further limitation was the reliance on information recall by the

respondent, but the balancing factor was the response rate of the CATI process which is both

higher and faster than mail or email (Burns and Bush 2006; Malhorta et al. 2006). One

advantage of a telephone survey is that the participants can respond immediately, or set a

convenient time for a call back, which increases response rates quite significantly (Burns and

Bush 2006; Malhorta et al. 2006). In short, the design required a balance between the amount

of information gathered and the number of respondents.

The survey administered incorporated a re-worded version of Bennett’s (1998) adaptation of

the MARKOR survey. Essentially this changed the wording “charity” to “nonprofit”. The

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survey also included questions about the size of the organisation by asking about staffing

numbers, both paid and volunteer, and about annual turnover. The extent of the marketing

function was explored by asking how many marketing staff there were and the allocated

budget, as well as the organisation’s principle sources of revenue. Finally, in order to ensure

reasonable coverage of most types of nonprofit organisations, a quota sampling method was

used (Bush and Burns 2006). All 11 defined sectors of the ICNPO (International

Classification of Non-Profit Organisations), which is replicated in ANZSIC (Australian and

New Zealand Standardized Industrial Classification) (ABS 2000: Appendix 4, p.39), would be

represented: Culture and Recreation; Education and Research; Health; Social Services;

Environment; Development and Housing; Law, Advocacy and Politics; Philanthropic

Intermediaries and Volunteerism Promotion; International Activities; Religion; and Business,

Professional Associations and Unions. The twelfth category, ‘Miscellaneous’, was omitted.

Also omitted were organisations with fewer than five staff. The aim was to gather at least 30

respondents from each sector using a combination of industry lists and the telephone

directory. Using these criteria it was anticipated that no one sector would dominate the

sample and that a range of sizes of organisations would be included. The geographical area

covered was Victoria, Australia. While many organisations have operations in multiple

Australian states, the decision was taken to concentrate the data gathering on a single state to

increase the depth of the picture that this exploratory study could reveal. The survey was

conducted over a two week period in October 2004. The telephone interviewer was instructed

to ask for the fund raising manager or the person who was responsible for fund raising for the

organisation. The results described below begin with a descriptive overview of the sample

which is followed by a discussion of some early findings and the avenues this opens for

further research.

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RESULTS

In all 401 Victorian nonprofit organisations generously responded to the survey and all 11

sectors are represented. However, as table 1 shows, organizations from the sectors of Health

and Social Services are most numerous with Culture and Recreation, Education and Research

and Development and Housing next. Every effort was made to gather data from the

remaining groups but some sectors simply have a lower presence than others. For example in

the International category there were no more organizations that were willing to participate

that could be included and this is likely to be an effect of using a single state, Victoria.

Nonetheless, a range of services, organisational size, staffing arrangements and revenue

sources are present in the database.

Table 1 Victorian Not for Profit Organisations


11 Sectors from ANZSIC/ABS definitions
Victorian Not for Profit Organisations No. % of
Sample
Culture and Recreation 47 11.7
Education and Research 46 11.5
Health 52 13
Social Services 58 14.5
Environment 33 8.2
Development and Housing 40 10
Law Advocacy and Politics 27 6.7
Philanthropic Intermediaries 31 7.7
International (dev/human rights) 9 2.4
Religion 24 6
Business/Professional 34 8.5
Total n 401 100

Type of Services Provided

Organisations were also asked what kind of service they provided and the four most

frequently provided by nonprofit sectors were welfare services and help for disadvantaged

(30%), educational services and programs (25%), general services related to health and well-

being (15%) and support for people with a particular health problem. The organizations

varied across turnover and staff profile.

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Annual Turnover

The sample varied across six categories of annual turnover, although some respondents (n =

65) did not provide the organisation’s annual turnover. As might be expected, around half of

the organizations representing most sectors reported an annual turnover of under $500,000.

The remainder varied from $500,000 to over $10,000,000 (see table 2).

Table 2 Annual turnover


Not for Profit Annual Turnover in Victoria Total
Sector
Up to $100,001 - $500,001 - $1,000,001 - $5,000,001 - Over
$100,000 $500,000 $1,000,000 $5,000,000 $10,000,000 $10,000,000
Culture and 17 15 3 4 1 40
Recreation
Education and 9 21 5 5 1 1 42
Research
Health 7 7 6 8 9 7 44
Social Services 22 8 2 4 6 9 51
Environment 8 12 2 5 1 28
Development and 5 6 2 17 3 2 35
Housing
Law Advocacy 5 7 1 6 2 2 23
and Politics
Philanthropic 8 4 1 5 2 2 22
Intermediaries
International 1 3 1 3 8
Religion 4 9 2 1 3 19
Business a& Prof. 6 9 1 5 2 1 24
Assoc./Unions
Total 92 101 26 63 26 28 336

Number of Staff in Victoria

The staffing arrangements of nonprofit organizations varied; around one third had 5-20 staff

in Victoria, with over a quarter having more than 100 staff (see table 3), however more than

half the sample had under 50 staff.

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Table 3 Number of Victorian staff used by not for profit sectors
Number of Staff in n %
Victoria (Total N =
401)
5-20 134 33.4%
21-50 100 24.9%
51-100 56 14.0%
> 100 111 27.7%

Although all variations of numbers of staff were represented in all sectors, there were some

clear differences. For example, three sectors, Health, Social Services, and Environment most

often had over 100 staff while some sectors, International, and Business and Professional,

rarely had over 100 staff (see table 4).

Table 4 Number of staff in eleven not for profit organizations in Victoria


Not For Profit Sector n orgs for Number of Staff in Victoria
Sector 5-20 21-50 51-100 > 100
Culture and Recreation 47 22 12 5 8
Education and Research 46 18 14 5 9
Health 52 13 7 5 27
Social Services 58 14 12 11 21
Environment 33 13 5 3 12
Development and Housing 40 10 13 9 8
Law Advocacy and Politics 27 10 7 1 9
Philanthropic Intermediaries 31 4 12 8 7
International 9 1 6 1 1
Religion 24 10 3 4 7
Business and Prof. 34 19 9 4 2
Assoc/Unions
Total 401 134 100 56 111

Paid and Volunteer Staff

The number of volunteer staff in Victoria significantly exceed the number of paid staff. The

actual number of paid staff significantly differed across nonprofit sectors with the Health

sector having the greatest number of paid staff in Victoria and the International sector having

the least (see table 5).

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Table 5 Mean number of paid employees
Not for Profit Sector n M number of paid
(Total = 394) staff
International 9 11.67
Culture and Recreation 47 16.70
Education and Research 44 32.66
Philanthropic Intermediaries 31 38.65
Law Advocacy and Politics 27 46.74
Environment 33 53.06
Development and Housing 40 75.93
Business and Prof. 34 103.94
Assoc./Unions
Religion 23 157.35
Social Services 56 157.45
Health 50 421.38
χ2 (df = 10) = 38.81, p < .000

The number of volunteer staff significantly differed across nonprofit sectors (see table 6) with

the Religious sector having the greatest number of volunteer staff in Victoria and the Business

and Professional Associations/Unions sector having the least volunteers.

Table 6 Mean number of volunteers


Not for Profit Sector n M number of
(Total = 382) volunteer staff
Business and Prof. Assoc./Unions 33 25.09
International 9 47.00
Development and Housing 38 49.79
Education and Research 43 63.21
Law Advocacy and Politics 27 74.63
Social Services 55 144.96
Culture and Recreation 45 194.93
Religion 21 201.86
Health 49 332.71
Environment 32 387.88
Philanthropic Intermediaries 30 390.93
χ (df = 10) = 30.90, p < .001
2

The actual values were reflected in the categorical data where, compared to the volunteers,

there are more volunteers in the highest two categories (see table 7).

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Table 7 Number of paid and volunteer staff
Number of Staff Paid Volunteer
in Victoria n % N %
(Total = 394) (Total = 382)
None 40 10.2 38 9.9
1 or 2 51 12.9 9 2.4
3 or 4 31 7.9 10 2.6
5 to 9 56 14.2 38 9.9
10 to 19 53 13.5 81 21.2
20 to 49 64 16.2 94 24.6
50 to 99 37 9.4 36 9.4
100 to 499 46 11.7 51 13.4
500 or more 16 4.1 25 6.5

Although most organizations reported having two or fewer paid fund raising or marketing

staff (see table 8), there was no significant difference in the number of paid marketing and

fund raising staff across nonprofit sectors.

Table 8 Number of paid marketing or fund raising staff


Number of Paid n %
Marketing or Fund (Total = 394)
Raising Staff
0 175 44
1-2 123 31
3-4 48 12
5-9 30 8
10-19 10 3
20-49 7 2
50-99 1 .3

Annual Marketing Budget in Victoria

Almost a quarter of managers did not provide information about their Victorian annual

marketing budget (n = 95). Of those who indicated their budget, about half had under $5,000

allocated to marketing while the rest had more generous amounts ranging from $10,000 to

over $100,000 and the Health sector was the clear leader.

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Sources of Revenue in Victoria

Lastly, the main source of revenue for the organizations in this study varied across a broad

range, including donation, fund raising and fees. However, the principle source of funding at

the time of the survey for just over half the organisations (n = 206) was government derived,

either State or Federal (see table 9).

Table 9 Organisation's first source of revenue


First Source of Revenue Frequency Percent
State Govt 89 22.2
Government / grants 46 11.5
Memberships/ membership fees 43 10.7
Donations 43 10.7
Fed Govt 28 7.0
Dept of Human Services/ DHS 27 6.7
Fundraising 19 4.7
Fees/ charges / Service fees 18 4.5
Local Govt/ Council 12 3.0
Corporate Donations/ sponsors 11 2.7
Student fees/ fees for courses 9 2.2
Property rental/ venue hire 7 1.7
Trusts/ Foundations/ Philanthropic 5 1.2
Trusts
Retail Store/ Op shops 5 1.2
Events/ Activities 5 1.2
Other Particular Govt Dept 4 1.0
From Other Particular Services 4 1.0
Offered
Publications/ merchandise 3 .7
Community help/ volunteers 3 .7
Community Groups/ Organisations 3 .7
Other 2 .5
Investment returns 2 .5
Grants/ Project Grants 2 .5
Churches/ Religious Groups 2 .5
Bequests 2 .5
Business and Trade revenue 1 .2
No answer given 6 1.5
Total 401 100.0
Government 206 51.4

Overall then, the sample contains a diversity of Victorian nonprofit organizations with

variations across all eleven sectors by type of service, size by annual turnover, size by paid

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staff and numbers of volunteers. As well, there were variations around the number of staff in

marketing activities, the amount of budget allocated to marketing and the organisation’s main

source of revenue.

Market Orientation in Victorian Nonprofit Organisations

The aim of this study was to explore the market orientation in nonprofits by asking

fundraising managers to rate the 21 statements of a re-worded MARKOR scale (Bennett,

1998) on a five point Likert scale 1. The survey included six statements related to donor

orientation, five related to competitor orientation and three question statements related to

customer orientation. The Market Orientation scale had strong reliability (α = .83).

Reliability of the Donor Orientation subscale (α = .70) and Influence of Marketing Personnel

(α = .60) were moderate and the Competitor Orientation subscale was poor (α = .42). The

highest overall Market Orientation score was obtained by the Religion Sector but statistical

analyses revealed no significant difference across sectors for the four Market Orientation

scales (see tables 10 and table 11).

Table 10 Market Orientation of eleven not for profit sectors (N = 401)


Marketing Orientation Scale N of items Range M Score Reliability (α)
Donor Orientation 6 6 – 30 17.00 .70
Competitor Orientation 5 5 - 25 14.60 .42
Influence of Marketing Personnel 3 3 – 15 8.39 .60
Overall Market Orientation 21 21 - 105 60.72 .83
* Responses ranged from 1 – 5 (1 = strongly agree, 2 = agree, 3= neutral, 4 = disagree, 5 =
strongly disagree).

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Table 11 Market Orientation of eleven not for profit sectors
Not for Profit Sector N M M M M
Donor Competitor Influence Overall
Orientation Orientation of Market
(6 items) (5 items) Marketing Orientation
Personnel (21 items)
(3 items)
Culture and 47 16.87 14.19 8.45 60.34
Recreation
Education and 46 17.57 14.28 7.80 60.85
Research
Health 52 17.35 14.46 8.62 61.10
Social Services 58 17.38 14.21 8.76 61.67
Environment 33 17.24 14.91 8.61 61.85
Development and 40 16.95 14.48 8.57 60.70
Housing
Law Advocacy and 27 17.67 15.19 8.48 61.78
Politics
Philanthropic 31 15.19 14.58 8.32 57.00
Intermediaries
International (develop/ 9 15.56 15.78 7.00 57.00
human rights)
Religion 24 16.67 16.17 8.96 63.54
Business/Professional 34 16.74 14.50 7.62 58.82
Total 401 17.00 14.60 8.39 60.72
χ (df = 10)
2
9.36 12.50 12.27 6.79
(p > .05) (p > .05) (p > .05) (p > .05)
* Responses ranged from 1 – 5 (1 = strongly agree, 2 = agree, 3= neutral, 4 = disagree, 5 =
strongly disagree).

There was a significant difference in the degree to which marketing and fund managers

perceived that information was shared (Question 15, “Information gathered by our marketing

people is shared with all other people, sections and departments within the organization”) (see

table 12). The International nonprofit sector managers perceived that they shared information

most and Social Services and Philanthropic Intermediaries shared information the least.

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Table 12 Mean ratings of marketing and fund managers across eleven not for profit
sectors about sharing of information*
Not For Profit Sector n M
(401) ratings*
*
International 9 2.00
Business and Prof. Assoc./Unions 34 2.12
Education and Research 46 2.20
Culture and Recreation 47 2.38
Law Advocacy and Politics 27 2.44
Environment 33 2.61
Health 52 2.69
Religion 24 2.75
Development and Housing 40 2.78
Social Services 58 2.83
Philanthropic Intermediaries 31 2.84
χ (df = 10) = 26.46, p < .003
2

* Questionnaire item asked whether or not “Information gathered by our marketing people is
shared with all other people, sections and departments within the organization”
** Responses ranged from 1 – 5 (1 = strongly agree, 2 = agree, 3= neutral, 4 = disagree, 5 =
strongly disagree).

DISCUSSION

The starting point of the wider study was to explore marketing in the Victorian third sector by

conducting a market orientation survey . The organisations included in this study (n = 401)

came from all 11 defined sectors of nonprofits and they ranged in size, staffing and turnover

and he indications around market orientation are ambivalent. For the purposes of this paper

there are five interesting and important points to consider: (1) about half of the organisations

had under 50 staff, (2) an annual turnover of below $500,000, and (3) just over half relied on

one of the three levels of government for revenue. Around half of the organisations had (4)

no paid marketing staff and about half had (5) less than $5,000 as a marketing budget. Even

if we remember that a quarter of all respondents did not answer the question on marketing

budget, this is a significant lack of staff and financial investment for a market orientated

organisation. It could be inferred that marketing as a business function is not well supported

in Victorian nonprofit organisations. However, there are some factors that are not well

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interrogated by the MARKOR scale that leave this open to doubt. Given the extent to which

Victorian nonprofits seek revenue from government sources, the donor/fund raising

orientation, which the MARKOR scale investigates, is arguably not the best focus for a

nonprofit to maintain. A more relevant focus could be on grant writing and the relationships

maintained and nurtured with each government level. To deal with this a new direction in

“market orientation” would be required, or perhaps a new “orientation” needs to be defined.

At this stage though, it is not certain which size of nonprofit is most affected. While it is

likely that the smaller nonprofits maintain almost no marketing presence, conversely, one of

the reported barriers to market orientation in both the for profit and nonprofit sectors is the

size of the organisation (Balabanis et al. 1997; Jaworski and Kohli 1993). It is asserted that

the higher number of departments in larger organisations has a negative impact on market

orientation because it is more difficult to keep information circulating in a timely fashion.

This would infer that the market orientated organisations would be less likely to be the larger

ones, but these are the organisations with the well-resourced marketing departments.

Furthermore, there are differences around divisions into separate sectors in terms of probable

size, as well as in terms of business activities. Some sections are more likely to have larger

organisations, such as health or education, while other sections more usually have smaller

organisations as is the case for community services. Alongside the differences in size are

clear differences in relationships to what marketing nearly always calls ‘customers’, for

example the patient in hospital, the patron of the Arts or the volunteer at the community art

group. At the same time, in nonprofits overall there was some evidence of a market

orientation. The next step will be to examine the various sectors in the database in more

detail and to compare the descriptive data to ABS and other sources.

20
Nevertheless, further examination will not necessarily resolve the issue that perhaps a

different question needs to be addressed. That is the extent to which the commercial

experience can be transferred to the third sector, or to put this another way, the extent to

which adjustment is required and whether that varies according to which section of the third

sector is being examined. For example, Gainer and Padyani (2002) manipulate the market

orientation concept in order to include artistic reputation in their model. But, market

orientation is intended to be measured against performance and this is a notoriously difficult

task with the third sector (Balabanis et al. 1997: 590). A better starting point might be to

follow Sargeant and question the fundamental assumption that a ‘market orientation’ is viable

for nonprofit organisations and mount a strong argument for a concept of ‘societal orientation’

(Liao, Foreman, Sargeant, 2001; Sargeant et al. 2002). There are many pertinent differences

between nonprofits and for-profits, such as, the underlying implication that an exchange is

taking place, which is not always clear in nonprofits. Secondly, not only is demand often

insatiable in the third sector, which therefore alters the nature of the fundamental, for-profit

concept of competition, but thirdly, there is also often the need for extremely rapid response

times, for example following natural disasters. Moreover, there are often different definitions

and expectations of marketing held by the staff of nonprofits, as presented earlier, which

could explain some of this study’s ambivalent findings. An orientation that could take

account of the intended mission of nonprofits and that could recognise the related outcomes as

often intangible and less amenable to measurement, would help approach issues from the

nonprofit perspective. This could potentially re-define success with external communications,

internal exchange of information and relationships with all manner of stakeholders in more

pertinent terms.

21
A consideration of the value (worth) and the values (ethics, norms) could be a useful starting

point for such an orientation. The leading international marketing association, the AMA, has

defined marketing as:

An organizational function and a set of processes for creating, communicating and

delivering value to customers and for managing customer relationships in ways that

benefit the organization and its stakeholders (AMA definition of marketing August

2004)

What follows from this is that marketers suggest that for organisations, including nonprofits

… value can be created at every contact the customer has with an organization. If one

understands what creates this value, it is possible to enhance the design of all an

organization’s systems with the simple goal of delivering the maximum possible value

to the customer (Sargeant 2005: 23).

However, the term ‘customer’, particularly in connection with the concept of ‘value’ in the

third sector remains a sticking point for nonprofits because it continues to assume an

underlying exchange process and underplays the role of altruism. There is a need to re-define

terms and with that, also re-define the implied relationships and all the shared meanings and

interaction effects that this encompasses. Once ‘customer’ is re-defined to relevant public,

either donor or recipient, then marketing can be concerned with ‘facilitating an exchange

process between an organization and its public, so that a societal need can be fulfilled’

(Sargeant 2005: 25). A model with potential, albeit requires changes in some terminology,

the Value Exchange Model proposed by Gabbott (2004) outlines an approach to marketing

that reduces the effect of commercial competition and instead focusses first on customer

desired benefits and outcomes in tandem with provider designed benefits and outcomes.

22
A strong focus upon customer value will form the foundation of an organisation’s

sustainable competitive advantage. …. In contrast focusing on competitors may mean

that you focus on things which your customers many not consider to be important.

Once you have developed a strategy designed to deliver value for (your) customers,

then you can focus on your competitors’ activities.

(Gabbott 2004:61)

By utilising this intense focus on the customer, it is argued that distracting energy onto

competition can be avoided which is a response that resonates with much third sector culture.

Using this framework could support defining distinctive competencies and highlight the

organization’s mission, as well as incorporating all types of stakeholders. However, a deeper

discussion of the links between values and the stakeholders of a nonprofit organisation

remains under-developed and unanswered. This would be a key component of a research

agenda with potential to lead to a new scale that measures success differently.

CONCLUSION

The overarching aim was to explore the presence of marketing in Australian nonprofit

organisations. A contribution is made by offering some descriptive information about

marketing in Victorian nonprofit organisations. The initial results brought attention to the

lack of investment in marketing as a business activity or process, but left unresolved the

existence of some market orientation in nonprofit organisations. However, the ambivalent

nature of this leads to the question of whether there is a need to create new measurement

scales specific to the third sector. It was suggested that a new question, raised first by

Sargeant et al (2002), of societal orientation with a focus on mission values and a re-

examination of the relationship with stakeholders would be a good start point. Moreover, a

23
model exists from which to launch this investigation. This could facilitate the identification

of nonprofit activities as different to, and separate from, for-profit business activities. It has

the potential to measure success for nonprofits from within their own orientation and values.

ACKNOWLEDGEMENTS

The research on which this paper is based was supported by a grant from the Faculty of

Business and Economics, Monash University. Thanks to Evelyn Scannell and Jayne Russell

for research assistance.

Note 1 Items are reverse coded.

24
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Appendix 1
Table 13 Section of SMC MARKOR survey derived from Bennett (1998)
1) We set precise targets for our fund raising programs.
2) We regularly compare our fund raising performance against the fund raising
performances of comparable charities.
3) We often experiment and innovate in our use of promotional materials,
advertisements, public relations techniques, etc.
4) We have a good knowledge of the characteristics of the types of people who
donate to this charity (e.g. their backgrounds, locations, how much they earn, their
lifestyles, etc.).
5) We have systems to determine the value and frequency of donations of various
individuals and/or category of donor.
6) Our fund raising strategies are based on understanding the motives, characteristics
and behaviour of donors.
7) We quickly detect changes in patterns of donations.
8) We survey a sample of donors at least once a year to assess the factors that cause
people to donate to this charity.
9) If other charities similar to our own implement a new fund-raising idea we
quickly adopt it ourselves.
10) Top managers within our charity regularly discuss other charities' marketing
programmes.
11) The effectiveness of our fund raising programmes is frequently evaluated.
12) In this charity, people and departments periodically get together to plan responses
to changes in the overall fund raising environment.
13) In this charity, information on donor behaviour and on the activities of other
comparable charities is generated independently by several departments.
14) We regularly check out the marketing and advertising activities of other charities.
15) Information gathered by our marketing people is shared with all other people,
sections and departments within the organisation.
16) Marketing people in our charity interact frequently with other sections and
departments in order to discuss current and intended fund raising programmes.
17) In this charity, marketing people make a strong input into how the charity is
organised and managed.
18) Donors to this charity are liable to switch their donations to other charities (at our
expense) at any time.
19) Competition for donations in the field in which this charity operates is very
intense.
20) Our fund raising performance has been better than that of charities similar to this
one.
21) How would you assess the fund raising performance of this charity over the last 5
years?
Source: [Bennett, 1998: 37]

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