Last Updated 22 Mar 2023

The Application of Marketing Principles in Firms and the Importance of the Marketing Field

Category Finance
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The study of marketing has traditionally focused on the exchange between a commercial firm and the public as consumer of the firm's product. In recent years, the applications of marketing theory have been extended to include firms in the nonprofit sector as well as those companies that produce a service rather than a tangible product. The expansion of marketing theory has created a theoretical base upon which marketing principles can be applied to non profit firms.

The research of the marketing field makes two points clear with respect to firms that provide a service: the perception of consumer risk inherent in choosing among providers of services is significantly greater than perception of risk associated with goods consumption; and the level of consumer satisfaction plays a vital role in successful service market transactions. The amount and quality of market information that service providers learn about their consumers can address both of the above challenges. Accurate market information can help a provider design and communicate a service program that reduces perceived risk to the greatest extent possible, and it can also measure a consumer's satisfaction with the service also measure a consumer's satisfaction with the service transaction.

The importance of online branding may be less relevant for nonprofit organizations with religious-oriented objectives. Religion plays a unique role in the type, level, and depth of support for secular nonprofits. For example, most donations to religious organizations, including churches and other houses of worship, are made offline through direct contributions during services (The Center on Philanthropy, 2007). This may be because many of the donors are active participants in the organization and attend regular services, which provides a convenient mechanism for giving. Additionally, people who are active in a religious organization tend to give more overall, and focus their giving on religious organizations (Wang & Graddy, 2008). Religious organizations, therefore, appear to have a special bond with their participants, regardless of their marketing and branding strategies.

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Nonprofit organizations are a strong force in the United States, influencing the economy as well as social services, the arts, education, healthcare, and a host of other public services. The formation of nonprofit organization is on the rise, with about one million registered with the IRS in 2010, and sixty- three percent of those being founded within the last 20 years (Roger et al., 2012).

The importance of these organizations is also increasing, as economic struggles and lack of government resources are causing many Americans to seek services from the nonprofit sector. Nonprofit organizations are not exempt from the economic downturn, however, and according to Kahnweiler (2010) Nonprofits now must provide more services with fewer resources. Despite the difficult situations that many nonprofits are in, staff and volunteers strive to provide irreplaceable services to the communities in which they work. "The nonprofit sector is large and diverse and made up of small and large organizations. These organizations encourage civic participation; allow for expression of religious, social, and artistic values; provide basic social services; and strengthen communities" (Roger et al., 2012, p. 8).

Finding adequate and sustainable funding is the greatest problem facing nonprofits (Weerawardena & Mort, 2012). Nonprofits receive funding through a variety of sources; excluding hospitals and higher education institutions, private donations and government grants account for thirty- nine percent of nonprofits budgets, fees for services make up fifty-five percent of their total budgets, and the rest includes other sources such as fundraisers and foundations (Roger et al., 2012).

In 2010 private donations were still well below the pre-recession norms, and foundation assets dropped seventeen percent in 2007-2008, leaving less grant money for organizations (Roger et al., 2012). Besides a decrease of available funds, nonprofits often struggle with fund raising because they lack resources to devote to it, depend on a single funding source, lack leadership experience, and rely overly on large fund raising events (Miller, 1998). With the growth of the nonprofit sector, and the decline of available funds, nonprofits are finding themselves competing with each other for resources. The lack of sustainable funding is an issue that plays a part in all aspects of nonprofit management.

Because sustainable funding is an increasingly relevant issue, nonprofits are faced with the dilemma of following the organization's mission or following the market (Sanders, 2012). The mission of a nonprofit is its identity and should guide its strategy and planning (Brinkerhoff, 2010).

Marketization is the use of marketing strategies, within a nonprofit, which can create a tension between working within a market and upholding the social mission of the organization (Sanders, 2012). Some believe that nonprofits lose their purpose if they engage in marketing practices, essentially selling out their values to meet the demands of the market (Sanders, 2012). According to Eikenberry and Kluver (2004), nonprofits should be focused on morality and working for the greater good of society, rather than for money. Others (Brinkerhoff, 2012) have asserted that for nonprofits, mission and marketing practices need to be balanced.

Organizations must operate within a market, and the market cannot be ignored. Sanders (2012) used the term “organizing tension" to describe the struggle between mission and market, stating that organizing tension is a basic facet of all nonprofits and should be understood and managed rather than ignored. According to Brinkerhoff (2012), it is crucial for nonprofits to keep their mission as their guide and identity, but the mission does not necessarily exclude marketization. An nonprofits mission can fit into the market in many ways, and these areas must be identified and capitalized upon. In addition, evidence shows that using marketing practices in nonprofits is vital to the organization's success. Weerawardena and Mort (2006) found in a survey of nonprofits that "the role of social mission goes hand in hand with the sustainability of the organization" (p. 30).


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