Strategic Marketing Analysis of the Red Cross - Case Study Example

Strategic Marketing Analysis of the Red Cross The marketing of a charitable or other non-profit organisation presents an apparent challenge. Marketing ordinarily supports the sale of a product or service according to the simple formula of exchanging money for a product or service of tangible value to the customer. But many non-profits do not offer a product, and their services often provide value for someone other than the people who pay for them. Non-profit organisations could not survive without these charitable ‘customers’, yet not only do many non-profits exist, many are quite successful. One such example is the Red Cross, one of the oldest and largest charitable relief organisations in the world. This paper will examine aspects of strategic marketing in the non-profit sector, and explore how these are utilised successfully by the Red Cross. Recommendations and alternatives for increasing the effectiveness of the Red Cross marketing strategy will then be offered. Strategic Marketing in the Non-Profit Sector Non-profit marketing takes a slightly different form than marketing in for-profit organisations. Although non-profit marketing employs many of the same functions, such as brand development, advertising, and public relations, non-profit marketing is best described not as a component of management, but as a management orientation. (Wyler, Knowles, & Gomes, 2006, 4) The alignment of management throughout the whole structure of the organisation is important, because the non-profit is not self-sustaining. A constant flow of donated funds is necessary, and while the people in the organisation may feel its true objective is whatever charitable purpose it serves, without the money, and without a top-to-bottom recognisance of that fact within the organisation, no charitable work can be performed. In many non-profit organisations this reality is difficult to accept, and many suffer from an ‘anti-marketing bias’ where the commercial nature of marketing activities is seen to be at odds with the values-based nature of the organisation’s work. (Bennett & Savani, 2004) In order to examine the theoretical aspects of non-profit marketing, it is necessary to clarify the parameters of the non-profit ‘business’ and the key tasks any non-profit marketing strategy must employ. There are five common conditions under which most non-profits must operate, and these place certain restrictions on the nature and the scope of their activities (Vázquez, Álvarez, & Santos, 2002): Resource gathering: Non-profits must primarily rely on external funding to sustain and expand operations. This is also an important dimension to the non-profit marketing strategy. (Wyler, Knowles, & Gomes, 2006, see below) Multiple public targets: Unlike a for-profit business that can focus solely on its customers, a non-profit has at least two relevant target markets – the donors who support its activities, and the recipients of its services. These are completely different, and the non-profit’s objectives for each must be approached in completely different ways. Inter-organisational conflict: As briefly described above (Bennett & Savani, 2004), there is a strong potential for conflict between the organisation’s philosophical, social, or operational objectives and the satisfaction of its multiple consumers. External pressure: Non-profits are likely to be exposed to external non-market pressures such as government regulation to a comparatively higher degree than profit-generating businesses. Multiple management stakeholders: Non-profit organisations frequently have several groups or interests involved in the organisation’s management. Operating within some or all of these parameters, the marketing strategy for the non-profit organisation must adequately address four dimensions. (Wyler, Knowles, & Gomes, 2006, 5-7) Resource attraction is not only a management parameter, it is an important component of the marketing strategy; in practical terms, perhaps the most important one. Planning is of course critical to all parts of the marketing strategy, particularly in view of the need to closely align marketing and operational objectives. Positioning, the three-stage process of gaining public awareness, building a positive image, and differentiating the organisation from similar and competing ones is the third dimension of the marketing strategy. Finally, there is communication, which is the implementation of the strategy as well as the effective management of it within the organisation. There are a number of marketing paradigms that non-profit organisations can use to manage their marketing strategies. One of these, cause-related marketing, is the concept preferred by the Red Cross and will be discussed in detail in the following section. It is worthwhile, however, to also examine a number of other common strategies, with an eye toward finding ways in which the Red Cross might enhance its marketing programs. The Red Cross, as is the case of many non-profits, can be said to be practising social marketing: applying marketing principles to social issues, where the activities and objectives supported by social marketing involve dimensions of community, values, and economic relationships. (Domegan, 2008) The same marketing mix – the 4 P’s of product, place, promotion, and price – applies to non-profit organisations as it does to profit-generating businesses, but the offer, the combination of benefits that satisfies the needs and desires of the organisation’s target market, is harder to define for a non-profit engaged in social marketing. (Wyler, Knowles, & Gomes, 2006, 122-123) In the case of the Red Cross, the offers of tangible products and services in the form of blood supplies for the sick or injured or assistance to those affected by natural disasters are easy enough to define for one of their target markets, those who receive aid. For the arguably more critical market of those who provide the funds which permits the Red Cross to provide its services, the offer could perhaps be best described as a form of goodwill, or ‘effective facilitation of the donors’ social objectives’. Donors have social reasons for donating money, or blood, or relief goods. Most of the time these reasons are based on moral feelings, a desire to help others; at other times the reasons might be more selfish, such as being able to claim a tax reduction because of charitable donations. The unifying concept in the marketing to these two disparate segments of recipients and providers is relationship marketing. The what of a non-profit organisation, the service it provides, makes up the transactional marketing component of the marketing strategy – the 4 P’s – but only covers half of the market at best; it is the who that accounts for the entire target market of the non-profit, and that can only be managed through relationship marketing. (Voss & Voss, 1997, Domegan, 2008, Waters, 2008) With regard to donors, relationship marketing has traditionally been directed at a “donor public”, but there is growing evidence to suggest that more contemporary, individualised methods of relationship management are more effective. (Waters, 2008) The reasons for this are rooted in the parameters discussed earlier under which non-profits must operate. Conflicts between marketing and service objectives in the organisation mirrors the potential conflict between donors’ intentions that their donations be entirely put to use for charitable work, and the reality that the organisation needs to fund all its operations from those funds. (Bennett & Savani, 2004) Competition among non-profits also can amount to a form of conflict, because some perceive that an advantage gained by one is at the expense of another, equally-deserving organisation; this point of view is not only shared by some potential donors, but is also another source of inter-organisational conflict. (Bennett, 2003) Differences in the perceptions of the organisation’s objectives and strengths generally vary among internal and external stakeholders according to their own positions and perspectives. (Fletcher, Guthrie, Steane, Roos, & Pike, 2003) For example, the Board of Trustees of the British Red Cross consists of former officials of the Home Office, Foreign Office, and NHS, two former financial industry executives, a medical doctor, a solicitor, and a couple career Red Cross workers. (British Red Cross, 2009) While these people undoubtedly have the best interests of the organisation at heart, their diverse backgrounds and experience necessarily gives them differing points of view. Since the Red Cross does not have a single objective but rather many different services and purposes, the relative importance of these different functions will naturally differ as well depending on the individual perspectives of the Red Cross’ markets. (Fletcher, Guthrie, Steane, Roos, & Pike, 2003) Thus, relationship management can be applied both internally and externally; when it is applied externally, it becomes relationship marketing. Cause-Related Marketing: The Red Cross Solution Cause-related marketing is defined as a ‘horizontal co-operative promotion’, which is a sales promotion combining a product brand and the non-profit organisation generally by way of contributing a part of the profit earned from the sale of the product to the organisation. (Lanying, Jundong, & Yupeng, 2008) The primary benefit to the non-profit organisation is, of course, the money donated through the process, while the primary benefit to the sponsoring product brand is, presumably, increased sales due to the positive association with the organisation. Both the non-profit organisation and the company producing the sponsoring product can benefit from an increase in positive brand perception; the non-profit organisation achieves greater public exposure, and the commercial partner gains an attribute of social responsibility. Throughout the entire worldwide Red Cross organisation, cause-related marketing is a key initiative. The website of the International Committee of the Red Cross (ICRC) suggests ‘royalties’ as one of the ways companies can support the organisation; an Internet search of the topic returns web pages from several hundred local chapters – most in the US – all of which carry a virtually identical message about the value of cause-related marketing; similarly, the British Red Cross maintains a web page on the topic, and refers readers to a recent successful campaign involving products sold at Tesco stores. (British Red Cross, 2009) Another more unusual example is the sponsorship of a NASCAR race car in the US by the American Red Cross, an effort designed to tap the huge fan base of the popular motor sport. (Olson, 2008) The efforts have been, by all accounts, quite successful; the Tesco campaign, for example, raised three-quarters of a million pounds in two weeks for the British Red Cross. (British Red Cross, 2007) This ironically seems to contradict the value of contemporary relationship marketing; cause-related marketing is in no way individualised, but is instead directed at a large donor public market. Yet one could equally argue that the priority in the cause-related marketing effort is not to attract the attention of the public at large, but rather to establish the corporate relationships that make the cause-related sponsorships possible. The British Red Cross website, as do all the other worldwide Red Cross websites that address the topic, in fact does reveal the relationship priority by highlighting the benefits to the corporate partner almost to the exclusion of mentioning any other benefits. Alternatives and Recommendations The best recommendations that can be made to the British Red Cross regarding its strategic marketing program are ones that offer support to its cause-related marketing initiatives that have already proven successful. Competition for charity contributions, particularly in an economic climate that most find unfavourable, obliges the Red Cross to maximise the return on its marketing investments; the one criticism that can be made of the current cause-related marketing scheme is that it is relatively untargeted even though it is still successful. In a study of competitor analysis practises of British charities published in 2003, Roger Bennett of the London Metropolitan University found that an overwhelming majority – about 80% – conducted some form of regular competitor analysis, with about 60% of those doing so on a continuous basis. Yet it was concluded that the analyses were not effectively used, which could be ascribed primarily to the intra- and inter-organisational unwillingness to view other charities, even those with very similar or identical objectives, as true competition. (Bennett, 2003) Given that charitable resources are limited – most respondents in the Bennett survey felt the ‘resource pool’ in Britain had not significantly increased in the previous five years, despite the growth in the number of charitable organisations – as distasteful as the notion might be to the values-oriented component of the Red Cross, a comprehensive, continuous competitor analysis program and an effective response is a necessity. The effective response would be a correct market orientation for the Red Cross, or put another way, correctly identifying customer needs and thereby gaining a competitive advantage. (Vázquez, Álvarez, & Santos, 2002) Customer segmentation, which is a variant of relationship marketing, is a sound principle with which to find the best orientation in diverse markets. For example, blood donors commonly share the same reason for donating blood – personal satisfaction in doing a good deed – but the reasons for not donating blood vary according to age, gender, education, and social background. (Leigh, Bist, & Alexe, 2007) Customising the marketing approach to specifically address the concerns in these much smaller market groups can be effective in increasing donations overall. The American Red Cross has already explored this alternative by developing very different marketing programs for NASCAR fans on the one hand and urban university students on the other, with promising results. (Olson, 2008) The British Red Cross’ Tesco initiative in 2007 is an example of a perfect realm in which to practise market orientation, based on the common grocery items that target markets purchase. As it is currently presented, the cause-related marketing initiative of the Red Cross is very generally targeted; the benefits to sponsoring companies are detailed, but it is left to the companies to take the first step and express an interest in becoming a partner. By extending customer segmentation beyond the particular services the Red Cross provides into market research on those target customer groups – what do they buy, and where do they buy it? – the Red Cross can then apply relationship marketing to the producers and sellers of those particular goods and maximise the success they realised with the Tesco initiative among critical market segments, the ones who might not have been buying all the Marmite and Heinz Baked Beans covered by the original program. (British Red Cross, 2007) The downside, of course, is that the effort will require time and money, and the risk is that donors will fall back on the old complaint of not having all their contributions used in the provision of charitable services. This is where relationship marketing is so critical, but may be easier than it first appears. Blood donors, for example, respond most positively and are most likely to donate again if they are given specific information about the uses of their donation. (Leigh, Bist, & Alexe, 2007) In a similar fashion, the American Red Cross has seen its donor performance improve by focusing on more detailed, transparent communication – most significantly by hiring its first brand manager and a new CEO with an extensive corporate marketing background early in 2008. Thus, despite the fact that the ARC is spending upwards of $2 million just to have a race car painted with the Red Cross logo, properly communicating the benefits of the initiative has gained positive attention and attracted new donor support. (Olson, 2008) In conclusion, the best recommendation is that the tools of the strategic marketing program always be chosen with their relevance to the four dimensions of non-profit marketing in mind. Sound planning leads to effective positioning which is then communicated through effective means to permit the gathering of resources. The British Red Cross and indeed the entire worldwide Red Cross organisation has done a reasonably good job of it for a long time, but the number of people to help will only continue to grow, along with the competition for charitable donations; to keep up, the Red Cross’ marketing strategy must grow as well. References Bennett, R. (2003). Competitor analysis practices of British charities. 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