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    Novatorov: A Critical Appraisal of the Concept of Non-profit Services Marketing Service Science 2(3), pp. 136-143, ;2010 SSG

    A Critical Appraisal of the Concept of Non-profit

    Services Marketing

    Edouard V. Novatorov

    Department of marketing,

    St. Petersburg State University of Service and Economics

    196066, St. Petersburg, Russian Federation, Moscowsky pr. 207-226

    enova@mail.ru

     he author deconstructs the prevailing conceptualization of non-profit marketing and concludes it rests

     on three principles: voluntary exchange, an open system organization, and self-interest motivation. A T

    review of the genesis of these principles revealed that alternative principles were ignored in the social

    science literature. Based on a qualitative analysis a revised conceptualization of non-profit marketing was

    suggested which incorporated the principles of reciprocity, the features of a contingency-choice

    organization, and altruistic interest motivation. A revised definition of non-profit marketing is offered

    based on these principles.

    Key words: Non-profit sector marketing; reciprocity; generalized exchange; substantivist economic

    anthropology; contingency-choice model of formal organization; benevolence motivation

    History: Received June 15, 2009; Received in revised form Apr. 20, 2010; Accepted May 3, 2010; Online

    first publication Jul. 21, 2010

1. Introduction

    Although the concept of non-profit sector marketing (Kotler, 1972; 1975; Kotler and Andreasen, 2008; Lovelock and Weinberg, 1978; Nickels, 1974) has been widely embraced by marketing academics, many scholars and managers in the non-profit field remain skeptical. Their skepticism was recognized by the commentator who observed that “marketing in the public sector has a love-hate evaluation” (Roberto, 1991, p. 81). Similar

    ambivalence has been expressed in the non-profit marketing literature (Havitz, 1988; Schultz, et al., 1988) and in related fields (Buchanan et al., 1994; O’Fairchellaigh et al., 1991, Vanden Heede & Pelican, 1995; Walsh, 1994). Skeptics of the appropriateness of the marketing concept in the non-profit field argued that its application distorted a non-profit organization’s objectives, antithetical to its social service ethic, and invited inappropriate commercialization of non-profit services (Dustin and Goodale, 1997; Goodale, 1985; Godbey, 1991; Schultz, et al., 1988).

    The intent of this paper is to deconstruct the prevailing conceptualization of non-profit marketing into a set of underlying principles; contrast these principles with alternative principles, and use the alternative principles as a basis for developing a superior conceptualization of non-profit marketing. To pursue these objectives the study employed a critical hermeneutic approach which focused on deconstruction, understanding, and interpretation (Bleicher, 1980).

2. Genesis of the Prevailing Conceptualization of Non-profit Marketing

    The earliest conceptualizations of non-profit marketing literature emerged in articles and text books written by Shapiro (1973) and Kotler (1975). Inspired by the general idea of exchange emanating from the provocative theory of social exchange (Homans, 1969), Kotler and his associates modified existing political communication and public advertising theories to formulate the marketing approach comprised of the "4 Ps" model, voluntary exchange, and the marketing philosophy of meeting customers needs (Bonoma and Zaltman, 1978; Kotler and Zaltman, 1971; Zaltman, Kotler, and Kaufman, 1972; Zaltman and Sternthal,1975). This explanation of the notion of marketing resulted in the term "social marketing" which was defined as:

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    “The design, implementation, and control of programs calculated to influence the acceptability of

    social ideas and involving considerations of product planning, pricing, communication,

    distribution, and marketing research. (Kotler and Zaltman, 1971, p. 5)”.

    With the emergence of services marketing theory in the late 1980s, the focus of studies in the non-profit field shifted toward the conceptualization and measurement of non-profit service quality and idea of relationship marketing (Berry, 1983; Crompton & Love, 1995; Gronroos,1991; Toy, Rager, & Guadagnolo, 1989). As a result of these developments, professionals and students in the non-profit field now have access to minimal number of good quality texts which specifically address non-profit marketing problems (Howard & Crompton, 1980; Kotler and Andreasen, 2008, Leadley, 1992; Sargeant, 2009; Torkildsen, 1991, O’Sullivan, 1991, 1998).

    For example, Crompton (1983a, p. 7) defined non-profit marketing as:” a set of activities aimed at facilitating

    and expediting exchanges with target markets”. O’Sullivan (1991, p. 1) borrowed Kotler’s (1975a) broader

    definition of marketing as “human activity directed towards satisfying needs and wants through exchange processes.” However closer hermeneutic analysis of similar non-profit marketing definitions revealed that all of

    them stem Kotler’s suggestion of “generic marketing”.

    In 1972, Kotler formulated his broadened, generic, and axiomatic concept of marketing that was conceptualized as being universal for any type of product or organization including non-profit organizations (Kotler, 1972). The generic marketing paradigm stated that there were three levels of marketing "consciousness." Consciousness 1 was business marketing concerned with market transactions. This was the traditional notion of marketing from its beginning until the early 1970s. Consciousness 2 was a broadened notion of marketing concerned with nonmarket transactions that do not require explicit payments. Consciousness 3 was those marketing activities that were directed to publics other than customers’ markets in an organization's environment. All three levels of marketing

    consciousness shared the same core concept, the notion of exchange. Kotler (1972) asserted:

    “The core concept of marketing is the transaction. A transaction is the exchange of values between

    two parties. The things-of-value need not be limited to goods, services, and money; they include

    other resources such as time, energy, and feelings. Transactions occur not only between buyers

    and sellers, and organizations, and clients, but also between any two parties. ... Marketing is

    specifically concerned with how transactions are created, stimulated, facilitated, and valued. (p.

    49, emphasis original)”.

    Sheth et al., (1988) classified this approach to marketing as the social exchange school of marketing which:

    (1) advocated a broadened conceptualization of marketing beyond the traditional notion that its utility is

    limited to contexts involving the commercial sale of products;

    (2) Recognized only minimal differences between private, public and non-profit sectors management: and

    (3) Argued for the universality of marketing applications (Bagozzi, 1975; Kotler, 1972; Kotler and Levy,

    1969; Kotler and Zaltman, 1971).

    After 1970s following text-books on non-profit sector marketing have consciously or unconsciously derived their principles from this school’s conceptualization of non-profit sector marketing (Howard and Crompton, 1980;

    Leadley, 1992; National Park Service, 1983; Torkildsen, 1991; O”Sullivan, 1991, 1998).

    The impact of Kotler and his associates and their broadening proposition on the marketing field was impressive. In 1975 alone, Kotler and his colleagues from Northwestern University broadened the theory of consumer behavior (Zaltman and Sternthal, 1975), introduced concepts of political candidate marketing (Kotler, 1975b); developed the concept of nonprofit marketing (Kotler, 1975a); reinforced the generic concept of marketing by introducing concepts from sociological and anthropological studies (Bagozzi, 1975); identified similarities between public and profit sector management (Murray, 1975); and introduced nonprofit marketing into the public administration literature (Kotler and Murray, 1975; Kotler and Roberto 1989). Literature review and content-analysis of texts suggests that the academic traditions of this social exchange school stemmed from the conservative traditions of the Chicago school of economics which advocates the laissez-faire, libertarian paradigm.

3. Principles of the Prevailing Conceptualization of Non-profit Marketing

    Representatives of the social exchange school believe that non-profit sector managers should be interested in “understanding what the [non-profit] organization exchanges with each public; i.e., what each party gives and gets...

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    [and what are]...the motivations underlying their transactions and satisfactions received” (Kotler, 1975, p. 17). Three major principles underling the school’s conceptualization of non profit marketing:

    (1) An open-system model of formal organizations, borrowed from organizational theory (Katz and Kahn,

    1966);

    (2) The concept of social exchange, adapted from individualistic sociology (Homans, 1961); and

    (3) Self-interest motivation, advocated by formalist’s economic anthropologists (Belshaw, 1965).

    These principles and their origins are discussed in the follow sub-sections.

3.1 An Open-system Model of Non-profit Organizations

    The social exchange school assumes that an organization is “a purposeful coalescence of people, materials, and facilities seeking to accomplish some purpose in the outside world” (Kotler, 1975, p. 5). The primary functions of

    such an organization are:

    (1) Input- -attraction of sufficient resources;

    (2) Throughput- - conversion of these resources into various products; and

    (3) Output - - distribution of these throughputs to the public.

    This conceptualization of a formal organization as a resource conversion machine is consistent with the precepts of an open-system model of organizations, designed to respond to external and internal pressures.

    The open-system model of formal organizations views a non-profit organization as being at the center of a system that responds directly and quickly to the needs of an array of different publics. It assumes that the non-profit organization has sufficient independence to enable it to respond quickly to changes in the environment in which it operates. The open-system model encourages decentralized decision-making, because success is perceived to depend on being able to respond quickly and adapt to dynamic external and internal pressures. Managers are not pre-occupied with following pre-established goals. Emphasis is placed on attracting additional resources from the external environment beyond those regularly provided by the agency’s governing body; to convert these resources

    into social programs and services; and to efficiently distribute these services. The non-profit organization is assumed to be the primary decision-maker, free of a requirement to constantly refer actions for authorization to a higher authority.

3.2 Self-interest Motivation

    The social exchange school of marketing contends that pursuit of personal self-interest is the essential motivation for exchange between non-profit organizations and their publics. Although Kotler (1975) avoided the term “self-

    interest,” Bagozzi (1975, p. 34), who acknowledged Kotler’s influence and advice, openly recognized the central role of self-interest motivation in the context of public sector marketing:

    “...many individuals, groups, and firms pursue their own self-interest. This is what Adam Smith

    meant by his reference to an “invisible hand...the pursuit of self-interest can be the foundation for

    the web of kinship, economic, and social institutions.”

    Adam Smith (1850, p. 7) described the quid pro quo principle that underlies his philosophy of the invisible hand

    in the following terms: “whoever offers to another a bargain of any kind, proposes to do this: give me that what I want and you shall have this which you want.” Shapiro (1973, p. 124) similarly believed that this central role of

    self-interest in the context of nonprofit marketing was sufficiently self-evident that there was no need to discuss it: “I shall not bother discussing the concept of self-interest; it can be taken for granted.”

3.3 Voluntary Exchange and Non-profit Organizations

    A central tenet of the social exchange school is that all organizations seek to attain their goals through the voluntary exchange mechanism. They perceive voluntary exchange to be the only viable mechanism through which formal organizations can attract, convert, and distribute resources (Kotler, 1975).

    Kotler argues that voluntary exchanges are not limited to such conventional resources as: goods, services, and money [but] include other resources such as time, energy, and feelings” (Kotler, 1972, p. 49). He believes that

    voluntary exchange in all of its resource forms should be conceptualized as a transaction, and that it is the central tenet underpinning the notion that marketing is generic. Such exchanges require the existence of at least two conditions:

    (1) The availability of two parties, and

    (2) That each party possesses some resource that is valued by another party (Kotler, 1975, p. 23).

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3.4 Overview of alternative principles

    A major limitation of the theoretical position of both the social exchange school of marketing and the Chicago school of economics is that they use a reductionist methodology (Etzioni, 1988; Moniesson, 1988). Moniesson (1988) characterized this approach as intellectualization, which he defined as “reductio ad absurdum” approach in which the ranges of possible concepts are reduced so they reflect a particular way of thinking. In order to reflect the postulates of the Chicago school, it appears that the social exchange school of marketing reduced the diversity of models relating to formal organizations, types of motivation, and kinds of social arrangements to the narrow set of principles discussed in the previous section. A review of the social exchange school’s original sources revealed a set of alternative principles that appeared to have substantial potential to better conceptualize the marketing of non-profit services. These are discussed in the following sub-sections.

3.5 A Closed-system and Contingency-choice Model of Formal Organizations

    Organizational theory literature suggests that formal organizations can be conceptualized as being closed-systems as well as open-systems. Hall (1972, p. 49) summarized the major differences between these two approaches:

    “The closed-system model views organizations as instruments designed for the pursuit of clearly

    specified goals, and thus directing organizational arrangements and decisions toward goal

    achievement and toward making the organization more and more rational in the pursuit of its goal.

    The open-system model views organizations as not only concerned with goals, but also responding

    to external and internal pressures. In some cases the open perspective virtually ignores the issue

    of goals.”

    The closed-system perspective is older stemming from Weber’s classical analysis of bureaucracy. Weber (1946,

    p. 151) defined an organization as “a system of continuous purposive activity of a specified kind,” suggesting that an organization has a clear and explicit goal which determines its internal structure and the tasks which need to be undertaken to achieve this goal. Tasks are divided among members of the organization so that each member has responsibility for an area of activity that matches his/her competence.

    Decision-making in a closed-system organization is based on an established normative order and is manifested by clearly specified rules and a chain of command. Selection of members is based on their skills and technical competence. Their duties and levels of remuneration are documented in a written contract (Weber, 1946).

    The open-ended or “natural-system” perspective of organizations emanated from criticisms of the closed-ended

    system (Katz and Kahn, 1966, p. 26). It is based on the conventional microeconomic paradigm. Lesser emphasis is placed on an organization’s concern with goals, and greater emphasis on its responsiveness to external pressures:

    “The major misconception [of the closed-system model] is the failure to recognize fully that the

    organization is continually dependent upon inputs from the environment and that the inflow of

    materials and human energy is not constant”.

    This view is based on an assumption that energy and resources are scarce and that other organizations also compete for them.

    Finally, there has been an attempt in the organizational literature to develop a balanced model of formal organizations that encompasses elements of the both the open-system and closed-system perspectives. The major assumption of this perspective is that organizations have multiple conflicting goals and thus have to make strategic choices in response to internal and external threats. This perspective tries to control three major factors: individuals within an organization; the environment of the organization; and form of the organization. Individuals within the organization are seen as the mechanism through which environmental and organizational characteristics are shaped. The environment is considered as being unstable and varying from predictable to non-predictable. By choosing the best strategic choice-response to a changed environment, the organization attempts to fit itself to the changed environment and accordingly changes its form. That is why contingency and choice are major elements of this perspective (Hall, 1972).

3.6 “Coercion Mutually Agreed Upon” and Non-profit Management

    The limitation of self-interest motivation in the context of commonly held resources was formulated by Hardin (1968) in his essay The Tragedy of the Commons. Hardin (1968) illustrated the tragedy of the commons by using

    the parable of a pasture which was fixed in size, but accessible to all residents of a village. Motivated by self-interest, all the villagers sought to maximize their own use of the pasture by grazing as many cattle on it as possible

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    and expanding the size of their own herds. Since each villager followed the same logic the tragedy occurred. Villagers failed to recognize that the costs of the increased grazing were shared by all villagers, so in the long term the cumulative effect of pursuing their short term independent self-interest goal harmed their collective interest. Without adequate and timely collective measures the pasture was destroyed.

    The parable demonstrated that increased demand on limited resources and a philosophy of unlimited access to commonly held resources, eventually may lead to destruction of a resource. Hardin (1968) argued that education efforts to prevent the tragedy of commons are not enough since there are likely to be “free riders”, who will not confirm and will take advantage of other’s voluntary self-restrained actions. His suggested solution was “mutually

    agreed upon coercion”; a coercion agreed upon through democratic voting procedures by a majority of the people affected. It may take the form of a law, rule, regulation, fine, or a graduated tax. Such an approach, however, requires appointing people and agencies to be responsible for enforcing the agreed procedures: that is, bureaucrats and departments, and independence of non-profit organizations.

    Self-interest motivation has limited usefulness in context of non-profit organizations. In many contexts it is antithetical to the philosophy of non-profit services and, hence, is inconsistent with a legitimate conceptualization of non-profit marketing. The application of self-interest motivation is integral to the social exchange school of marketing, but in the context of non-profit agencies it is inappropriate.

3.7 Reciprocity, Redistribution and Non-profit Organizations

    The relationship of formal organizations with their environments can be explained not only from an exchange perspective as suggested by the social exchange school, but also from reciprocity and redistribution perspectives

    (Dalton, 1971; Polanyi, et al., 1957; Polanyi, 1944; Sahlins, 1965). These scholars call themselves “substantivists”.

    This perspective attempts to analyze economic life in primitive and modern societies from three different approaches: reciprocal arrangements based on the symmetry principle; redistributive arrangements based on the centricity principle; and marketing exchange arrangements based on price-making markets.

    Reciprocity implies a symmetrical sequence (AB/ BA) among just two partners or (AB/BC/CA/AC) among more than two fixed partners. Redistribution is centripetal movement of resources among many actors within a group upon one central figure followed by the action of that central figure upon the actors within the group in unison and repartition (BA/CA/DA/ and then A/BCD). Finally, marketing exchange is chaotic movements (A/BCD, B/ACD, and C/ABD) (Polanyi, et al., 1957, pp. vii-viii). This “sunbstantivist” perspective is different from the

    “formalist” perspective which recognizes only marketing exchange arrangements (Belshaw, 1965).

3.8 A Revised Conceptualization of Non-profit Marketing

    The revised conceptualization suggested in this article is an attempt to view a non-profit organization as based on the contingency-choice model of formal organization characterized by altruistic motivation of personnel and a reciprocal arrangement mode with external environment. This type of organization has a flat hierarchy, decentralized decision-making, and independent from government funding. These organizations make efforts to attract additional resources from external sources (fundraising and small user fees) and to quickly respond to needs of interest groups. Even though during operations they may have profit they recognize that they have clearly specified goals and mission that is tightly defined by law or grant giver and which cannot be changed. The organization tries to balance two conflicting goals: not to change its clearly specified mission, and to attract scarce additional resources by responding quickly to interest groups.

    The reciprocity perspective believes that the collective need for health and civic society in a community is served best when the managers and employees and interest groups rely on altruism and benevolence attitudes. According to this philosophy, managers and employees, and community members, sacrifice their own self-interests for the collective interests and also offer for generous help and assistance.

    Interaction of this type of organization with its environment is based on reciprocity principle which is characterized by there being at least three parties involved which do not benefit each other directly, only indirectly. From this perspective, a non-profit organization’s interaction with its interest groups diagrammatically can be represented as A ; B ; C ; A, where “; signifies “gives to” and where “A” is a grant-giver, “B” is a non-profit

    organization with specified mission, and “C” is a group of disadvantaged citizens grateful to grant-giver A.

3.9 A Revised Definition of Non-profit Marketing

    Based on the previous analysis, the following definition of non-profit marketing is offered:

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    Non-profit marketing is the analysis, planning, implementation and evaluation of non-profit

    services, designed to facilitate reciprocative arrangements within a community or target publics

    that were established by a grant-givers, and expedited by qualified personnel who are committed

    to pursuing them in the mission interest.

This definition suggests that the task of non-profit manager is to accept the mission and objectives set by grant-giver

    and operate within the parameters and priorities.

    To characterize marketing in the non-profit sector and to distinguish it from the traditional “exchange based marketing” which accurately conceptualizes marketing in the for-profit sector, it may be appropriate to adopt the term “grant-giver marketing” or “grant away marketing”.

Acknowledgments

    The author is grateful to two anonymous reviewers for useful comments during review process of the paper.

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    Warnick, R., D. Howard. 1985. Market Share Analysis of Selected Leisure Services from 1979-1982. Journal of

    Parks and Recreation Administration 3(4) 64-76.

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    Oxford University Press.

     Edouard Novatorov has PhD in Marketing from Texas A&M University. He served

    as Director of Presidential Initiative Program of Training Managers for Russian

    Enterprises, at Graduate School of Management; St. Petersburg State University 2002-

    2003 and currently is an associate professor at Department of marketing with the St.

    Petersburg State University of Service and Economics, Russia. His research interests

    are primarily concerned with services marketing, non-profit services, and service

    quality. He authored 49 articles in Russian and English languages and currently is a

    member of editorial board of the journal ?Маркетинг Услуг? (Services Marketing).

    He passed service management retraining program at Haas School of Business,

    University of California, Berkeley, (2006) and completed “Achieving breakthrough

    service program” at Harvard Business School (2007). He is recipient of several

    research grants and invited speaker at a number of international conferences. His latest

    book is dedicated to recreation services marketing.

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