Role of Marketing in the Non-Business Environment

October 2012 -Role of Marketing in the non-business environment since article “Broadening the Concept of Marketing” by Philip Kotler and Sidney J. Levy was published in 1969 -- Written by Anthony Chi Yuen CHAN 1 Abstract Social economic development over the past 40 years has been drastic over the world. From 1970 to 2010, global GDP has grown over 20 times from 3,288 billion USD to 63,064 billion USDi. Government consumption expenditure per capita increased from 140 USD to 1,640 USD on global bases. In well developed countries and economic zone (like UKii and EU), ocial protection, general public services, health care, education, and national and public order and safety account for over 70% of government total spending. cause the increase of spending in the public sector? What had been changed to While large amount of money had been spent, what has changed in the public sector to ensure the effectiveness of spending? Private sector managerial techniques, practices and orientations, marketing strategies and dimensions helped shaping the evolution of public management to be more efficiently and effectively.

The purpose of this paper is to state specific examples of the adaptation of marketing management strategies and tactics at the selected areas of public services. Particular case will illustrate how STP, 4P’s, and 3P’s adopted in the decision making process. Understanding the background of social evolution, we will examine how demographic and economic improvement has driven these marketing strategies in these civil services in Hong Kong over the past 40 years. Introduction

Every organization, private sector or public services alike, depend greatly on marketing strategies and communication to promote their goods and services. Hong Kong Government has evolved its public communication from minimum interaction to highly involvement in planning, researching, consulting, implementing of the new regulations and policies. The objectives are obvious, better execution, greater acceptance, less rebellious toward administrative power. After Second World War, Hong Kong was governed by British system.

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One will not be surprised to learn Hong Kong transformation from a small fishing village to a modern business and manufacturing city was greatly benefited by immigrating many British public services and social management policies and experiences. At the beginning of the colonial rule, many of the establishment and policies were implemented through a direct top down approach. British Government at the U. K. assigned Governor to Hong Kong to decide and implemented all policies across the society. Minimum communication was noted from the Government for promotion of new policies. ommunication. External limitation also put barriers to effective At the 1950’s social communication media was very limited. The lack of basic formal communication tools like newspaper and radio broadcasting was one of the challenges at the beginning. General population literacy was low also accounted for limitation of communication. As society improved, education level has risen, government new policies were demanded to be explained and rationalized before implementation. Modern government communications have to utilizing all available tradition and modern media. Advertising through multi-lingual newspaper, prime time television advertising at television, radio broadcasting with advertisement and commentary shows; public transportation exterior/interior advertising; mobile phone messaging; smart phone application; internet media (blogs; facebook; twitters; government web sites etc) are fully utilized to let government communication reaching complicated social segments. Likewise, the internet age of marketing communication channels also encouraged faster and direct general public feedback be reverted to the concerned government bodies.

Privatization of some public services, like parks and garden management, public area hygiene, and airport security management of non-critical zone etc. , influenced the image of quality services. Service privatization also has a reverse influence back to Government to review marketing strategies. As a result, Hong Kong civil service activities are managed through a more business-like management structure, and commercial marketing strategy and tactics becoming more evidence. We will examine various examples of Government policies and activities where marketing management philosophies are adopted.

Mandatory Provident Fund (MPF) – Marketing as strategy (STP) While social and economic development enriched, modern social needs becoming complicated, deeper to details, and towards long term stability. Majority of population has their basic humanity needs satisfied, the Government started to consider long term social protection. Mandatory Provident Fund (MPF) is designed for workforce to plan for retirement life. Before the implication of the MPF System, only about one-third of the Hong Kong workforce had some form retirement protection.

From a marketing strategy point of view, MPF program identified the need for retirement saving for all workforces. Therefore, any employee, no matter full time or causal, at the age between 18 to 65 is included in the segment. The main target groups within this segment are those employee who has no experience nor has knowledge to establish his/her own retirement saving program with financial institutes. Therefore, it is required by law to join compulsory retirement saving plan for a minimum saving level per month. For employee who are not in the main target (i. e. apable and willing to contribute more than the minimum saving level), the MPF program has the flexibility to allow non-target group contributors to put extra money to the mandatory saving level. MPF is a financial saving services that position itself as mass population at a monthly affordable contribution rat e. There are similar retirement saving options offered by other financial institutions, but most of them are not targeting mass market. A series of TV commercial were made and aired (for example http://www. youtube. com/watch? v=-DcC1pccSTM) for the promotion of MPF.

In the video, it is clearly illustrated the segment, target, and position of this program. Intangible (services) vs Tangible (physical) – 4P’s : Products Public management is traditionally considered to be a service oriented sector, and therefore offering intangible products. Public security, national health, emergency assistance, education, 3 and legal justice, just to name a few, are critical services provided by public administrators. Public administration also provides tangible products such as subsided housing, government publication, municipal water supply, and land sale etc.

Public Housing Strategy – 4P’s : Price Hong Kong Housing Society and Hong Kong Housing Authority offer government subsidized housing for particular population segment. Because of the complexity of housing demand and affordability, Government designed four major types of subsidized housing programs. All of these public and subsidized housing program are targeted to different user groups, and are positioned very differently. Each of the program also has different level of discount rate, either for sale or for rent, when compare with open market value. ange of restrictions and eligibility criteria. Users are generally subjected to a Each of the pricing structure is evaluated based on target group income and affordability. Market researches are done, and public hearing is held before program reveal to public. Public housing prices are designed to balance user affordability and at the same time protect open market housing prices stability. Below are the iii four main housing schemet :. ? Home Ownership Scheme estates are subsidized sale-to-public housing estates for low-income residents.

They are usually built adjacent to or within Public Rental Housing and nearly identical in construction. They are managed by the Hong Kong Housing Authority and are earmarked for sale to low-income qualifiers at prices which are heavily discounted from market value, and the land value is similarly subsidized. The mortgage and resale of these units in the second-hand market are likewise restricted to eligible low-income residents. Within a public housing estate development, some blocks may be designated by the Authority exclusively for rental while others may be earmarked for sale. ?

Tenants Purchase Scheme allows existing tenants in the rented public housing program to purchase their flats. The sale prices are set around 50% to 60% lower than the market prices of private flats due to subsidies and restriction on selling. ? Flat-for-Sale Scheme allows flats under the scheme for sale at concessionary price. ? Sandwich Class Housing Scheme estates were built for sale to lower-middle and middle-income residents, known as the sandwich class, who did not qualify for low-income public housing in the Home Ownership Scheme but still had trouble affording private housing.

The quality and market positioning of Sandwich Class Housing were significantly higher than public housing estates and comparable to some middle-class private developments. These units were sold at levels that were slightly below market value and came with a five-year resale restriction. Land development as new source – 4P’s : Place Hong Kong has land size at 1,100 square kilometers, and population grown from four million in 4 1970 to 7. 2 million in 2010. That makes Hong Kong one of the most densely populated city in the world. Hong Kong Land Department holds one of the most scared resources, land.

Urban development and local economic highly depend on availability of land sales. Therefore, promotion and marketing communication of land planning become increasingly important over years. Private sectors as well as general citizen concern about future new land supply as well as timeworn redevelopment zone. Land development as well as land source of land affects property prices, and the urbanization development planiv. One good recent example is the Geotechnical Engineering Department confirms the technical capability of underground land and cavern for new source of land.

This marks a new era for the possible new “place” for future property market and industrial zone development. The GED makes use of short video to promote new land supply idea (see endnote’s hyper link)v. Crime prevention – 4P’s : Promotion Police force goals and objective have dramatically changed for the last four decades from mainly law enforcement operation to equally emphasizing the importance of crime prevention. Study have shown in different country that increase of police force does not necessary reverse proportion to the number of crime. i Therefore, a lot of marketing and promotion effort have been dedicated to home security design, drug abuse prevention, internet crime awareness, and police force recruitmentvii, proper automobile driving technique etc. As social and communication media develops and widened, communication channels broadened from traditional newspaper advertising to internet social platform such as police force websiteviii, facebook, youtube, tweeter, discussion forum, to personal contact like public relationship division within the police force.

Public sector personal and organizational marketing – 3P’s : People After the transfer of sovereignty to People Republic of China, Hong Kong government organization and management became increasing transparent. Hong Kong resident has increasing interest of government departmental leadership, and government operation efficiency. Compare to forty years ago, when Hong Kong was still under British colonial rule, the Governor, Executive Council, Legislative Council, as well as most public politician were all appointed by the Government.

Democratic election slowly started in the 1980’s for local district representatives and a portion of Legislative Council. Personal marketing in the public services became more and more importantix. Two examples are the recent Legislative Council (LECO) Election, and Hong Kong Special Administration Region Chief Executive Election. LECO election is an open democratic election for all qualified citizen. Competitions are big between candidates, and are compared based on their experiences, past contribution to the society, and related political party’s reputation. Education system reform progress – 3P’s : Process While every spot light falls onto the people, in the public sector, the ultimate goal for a government is to implement set policies and procedures. Taking for example, the Education Department just recently introduced a new secondary and territorial school system in Hong Kong. The new system revised the seven years secondary schooling to six years, but extending the normal three years under graduate programmes to four years. New Product (Education System) Development Strategy was use. The education ureau made use of product development concept of idea generation, preliminary analysis, detail investigation and research, planning and development, communication, testing, implementation, and auditing cycle. x xi The result was a smoother implementation, better acceptance by education institutions, students, parents, and prevented political instability in case of adverse situation. Conclusion Social, economic, political, and education development evolves over time. Citizens are demanding more frequent, closer, deeper, and highly transparent participation in public administration.

Therefore, non-business organization like public administration and political management spend more resources (time, man power, and money) at the early stage of new social policy development. Citizens are defined as customers or end user in the public administration model. Because of the rising demand by the customers for better involvement during the course of public administration, and, at the same time, administrators wants to have higher chance of success and sustainability of new policy, customers involvement of the early part of Stage-gate Processing becoming evident, which is in contrast with public policy development four decades ago.

American Marketing Association (AMA) who defines “Marketing” for its members, have also renew the definition to suit with the ever changing environment. In the letter from Mike Lotti and Don Lehmann, Chairperson of the Board and Committee Chair of AMA, subjected New Definition of Marketing dated December 2007, Lotti and Lehmann said “(the new definition of) Marketing is regarded as an ‘activity’ instead of a ‘function’ and positions marketing as a broader activity in a company/organization, and not just a department.

The new definition also positions marketing as providing long term value rather than narrowly as an exchange of money (short-term) for the benefit of the shareholder/organization. ”xii European marketing community also published similar notion a few years earlier than its US counterpart, defining that “long-term customer relationships are considered as the cornerstone of marketing”xiii. This is in line with modern public administrators’ objective, that is to satisfy the needs of different segments and targets of citizens.

It is worth to note that this paper is not to argue marketing management strategies, tactics, and concepts in public sector did not exist in Hong Kong at the early years. As a matter of the facts, in the 60s and 70s, Government have organized activities to understand customer (local residents) 6 needs related to long term social development plan and pre-execution hearing sessions with local leaders and legislators, but only at a lot less formal and structured as the society currently established. In response to Levy and Kotler’s article, DavidJ.

Luck had argued that marketing strategies and activities had been in used in various government activities before Kotler and Levy’s article was publishedxiv. When social, economic, and political reforms continue, society should expect to see marketing activities in non-business organization, particularly for public administration sector, to continue evolves alongside with modern marketing management methologies. i Ivan Kushnir’s Research Center, kushnirs. org rd ii UK Public Spending since 1963, Simon Rogers, 3 June 2012, guardian. o. uk iii Milestones: Hong Kong Housing Society Housing Price, Land Supply and Revenue from Land Sales, Raymond Y. C. Tse, 2012 v Enhanced use of underground space in Hong Kong, Geotechnical Engineering Department, http://www. youtube. com/watch? v=jZ_IX0KocNk&list=UUi4fX-nEJseYhlAuY4DJ0wQ&index=7&feature=pl cp vi Law Enforcement Marketing: Perceptions of a police force, Peter Bohan, 1987. vii Hong Kong Police: http://www. youtube. com/watch? v=ckDWtaWNHo0 viii Hong Kong Police: http://www. police. gov. hk/ppp_en/index. tml ix After ten years of transfer of sovereignty: political stability and reform in Hong Kong, Jermain T. M. Lam, 2008 x Stage-gate systems: a new tool for managing new products, Robert G. Cooper, 1990 xi Marketing in the public sector: Inappropriate or merely difficult? : Peter Graham, 2010 xii th AMA Definition of Marketing: Mike Lotti and Don Lehmann, December 17 , 2007 xiii Defining Marketing: A market-Oriented Approach: Christian Gronroos, 1989 xiv Broadening the Concept of Marketing. Too Far: David J. Luck, 1969 iv 7

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