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Operationalizing the Marketing Concept in the

Nonprofit SectorAdrian Sargeant

a, Susan Foreman

a& Mei-Na Liao

b

aHenley Management College, Greenlands, Henley-On-Thames, Oxon, UK, RG9 1PD E-mai

bSchool of Business and Economics, University of Exeter, Streatham Court, Rennes Drive,

Exeter, Devon, UK, EX4 4PU E-mail:

Available online: 21 Oct 2008

To cite this article:Adrian Sargeant, Susan Foreman & Mei-Na Liao (2002): Operationalizing the Marketing Concept in theNonprofit Sector, Journal of Nonprofit & Public Sector Marketing, 10:2, 41-65

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Operationalizing the Marketing Conceptin the Nonprofit Sector

Adrian Sargeant

Susan Foreman

Mei-Na Liao

ABSTRACT. This paper questions the validity of applying the market orien-

tation construct, which wasdeveloped ostensiblyfor and in large multinationalorganizations, to a sector whose characteristics differ greatly. Instead, this pa-per argues for a new approach to the operationalization of the marketing con-

cept in the nonprofit sector. The components of this societal orientation aredelineated, as are the organizational imperatives, antecedents and the po-

tential consequences and benefits associated therewith.[Article copiesavailable for a fee from The Haworth Document Delivery Service:1-800-HAWORTH. E-mail address: Website: 2002 by The Haworth Press, Inc. All rights re-served.]

KEYWORDS. Nonprofit marketing, marketing concept, nonprofit sector

INTRODUCTION

The rediscovery of market orientation (Webster, 1994) which is largely at-

tributed to the work by Narver and Slater (1990), and Kohli and Jaworski (1990),

Adrian Sargeant is Professor of Nonprofit Marketing, Henley Management College,Greenlands, Henley-On-Thames, Oxon, UK RG9 1PD (E-mail: adrians@henleymc. ac.uk).

Susan Foreman is Marketing Faculty Group Leader, Henley Management College,Greenlands, Henley-On-Thames, Oxon, UK. RG9 1PD (E-mail: [email protected]).

Mei-Na Liao is Marketing Tutor, School of Business and Economics, University ofExeter, Streatham Court, Rennes Drive, Exeter, Devon, UK EX4 4PU (E-mail: [email protected]).

Journal of Nonprofit & Public Sector Marketing, Vol. 10(2) 2002http://www.haworthpressinc.com/store/product.asp?sku=J0542002 by The Haworth Press, Inc. All rights reserved. 41
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has provided much needed clarity for managers looking for ways of implement-

ing what they understand to be the concept, philosophy or substance of mar-keting (Ames, 1970).

In this paper we challenge whether the market orientation construct is appro-

priate for all organizations and in particular, those operating in the nonprofit sec-tor. While researchers have begun to explore the relevance of market orientation

to this context (Siu and Wilson 1998; Caruana et al 1998), many nonprofits still

struggle with some of thecore assumptions and concepts, such as market, compe-tition, exchange, and performance (Bruce 1998). Since these are an integral part

of a for-profit representation of the marketing concept questions are raised

about the prevailing view of market orientation. Indeed is it sufficient to copewith the distinctive characteristics and complexities that exist in the nonprofit

sector.The aim of this paper is therefore to posit an alternative framework to facilitate

the operationalization of marketing in this context. A discovery oriented ap-

proach as used by Kohli and Jaworski (1990), Deshpande (1983) and Mahrer(1988) is adopted. The first step in this process is to explore the copious literature

on market orientation and the extant work in the nonprofit sector. In order to un-

derstand the theoretical foundations we examine the key models of market orien-tation, the unique features of nonprofit organizations and the specific contextual

conditions they encounter. Since there is only a limited amount of extant research

focusing on market orientation and nonprofits the second step is to balance thiswith findings from in-depth interviews conducted with executives in a range of

nonprofit organizations. The third step is to synthesize the prevailing views from

the literature with the findings from the interviews. From this a framework that

reflects the particular needs of nonprofit organizations is developed. Finally theimplications for future research are considered.

THE MARKETING ORIENTATION CONSTRUCT

The first attempts in the literature to operationalize the marketing concept

were developed largely by consultants and practitioners (See for example,

Alderson 1955; Borch 1957; Felton 1959; McKay 1954; Keith 1960). While in-structive, these early works were largely reports of personal experience and were

highly philosophical and normative in nature (Webster 1988). Early works con-

sidered the philosophy of marketing and developed descriptive accounts of howto achieve a market orientation (Barksdale and Darden 1971; Hise 1965; Lusch et

al 1976; McNamara 1972), delineated the benefits of achieving it (Viebranz1967), defined the boundaries of the concept (Houston 1986; Levitt 1969; Tauber1974), or focused primarily on implementation issues (Felton 1959; Lear 1963).

42 JOURNAL OF NONPROFIT & PUBLIC SECTOR MARKETING


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Despite the considerable interest in the topic, there has been considerable con-

fusion over the years, both in terms of the components of the market orientation

construct, and the nature of the terminology that should be employed (Shapiro

1988; Swartz 1990). To illustrate these difficulties, Trustrum (1989), for exam-

ple, equates market orientation and orientation to marketing, Chang and Chen

(1993) regard marketing orientation and orientation to the client as synonymous

(see also Webster 1994). Deshpande et al. (1993) see the terms market orienta-

tion and customer orientation as interchangeable, but Sharp (1991) is careful to

distinguish between market and marketing orientation. Indeed, in respect of this

latter point there is now a consensus in the literature that the term market orienta-

tion is to be preferred to denote the implementation of the marketing concept or

philosophy. In adopting this label, the construct is effectively identified as some-

thing in which the whole organization can participate. (See also Kohli andJaworski 1990; Narver and Slater 1990; Shapiro 1988.)

Given these differences, it is perhaps not surprising that a variety of meanings

have been attributed to the construct (Kohli et al. 1993). These have included; in-

volving marketing executives in strategic decisions (Felton 1959; McNamara

1972), emphasizing customer concerns over those of the production function

(Konopa and Calabro 1971), integrating activities within the marketing function

(Felton 1959; McNamara 1972) and the extent to which marketing might be af-

forded a leadership role (Viebranz 1967).

Of these, the literature has particularly emphasized the necessity of organiza-

tions adopting a focus on their customers, if they are to survive into the longer

term (Levitt 1960; McCarthy and Perreault 1987; Piercy 1997). A variation on

this theme, emphasizing the importance of the interaction with the customer hasalso emerged from the service marketing literature (Cowell 1984; Gronroos 1981;

Gummesson 1991). It has been argued that, particularly in service contexts, the

contribution made by employees is paramount. In cases where production and

consumption occur simultaneously the employee is the service and the develop-

ment amongst staff of a customer consciousness is therefore essential

(Gronroos 1981; Sasser and Arbeit 1976).In addition to the dimension of customer orientation, Kohli et al. (1993) note

that other relatively consistent themes have emerged from the literature. These

include co-ordinated marketing and a focus on profitability. Indeed, these critical

dimensions have been reflected in more recent definitions of the market orienta-

tion construct. Narver and Slater (1990, p. 21), for example define it as the orga-

nization culture that most effectively and efficiently creates the necessary

behaviors for the creation of superior value for buyers and, thus, continuous su-perior performance for the business. Kohli and Jaworski (1990), however, pre-

fer to emphasize the generation and dissemination of market intelligence about

Sargeant, Foreman, and Liao 43


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existing and future customer needs, their preferences, expectations and behavior

and ultimately the organizations response to it.There are, therefore, common themes in these constructs despite the differ-

ences existing between the approaches to measurement. Kohli and Jaworski

(1990) tended to concentrate on what they perceived as the activities and behav-iors driving the generation and dissemination of market intelligence. On the other

hand Narver and Slater (1990), considered a number of behavioral dimensions,

but also chose to highlight the cultural dimensions (see also Deshpande et al1993). They prefer the view that specific activities (such as intelligence genera-

tion) are the consequence of developing a market orientation, rather than a com-

ponent of market orientation per se.

NONPROFIT MARKET ORIENTATION

A variety of studies have now examined the extent to which the market orien-

tation construct might have a relevance for the nonprofit sector. The overwhelm-ing body of evidence from such studies is that the construct does have relevance,

but that some adaptation may be required. Siu and Wilson (1998), for example,

argue that to apply market orientation to the setting of Further Education Col-leges it is necessary to drop the concepts of profit and competition and to replace

them with what the authors refer to as employee orientation and a long term

survival requirement. Indeed the education sector appears to have received themost attention in the literature. Employing rather fewer modifications Stewart

(1991) examines the market orientation of higher education institutions in the

U.K. The author argues that in this context a market orientation allows institu-tions to attract and retain students (see also Berry and Allen 1977; Blackburn1980; Kotler 1976; Wolfe 1973 and Kotler and Fox 1985).

Caruana et al. (1998) apply the abridged market orientation instrument,MARKOR to the public and university sectors. In both cases they identify a

positive relationship between the level of market orientation and a variety of the

measures of performance they adopted. Adopting a similar methodology Bennett(1998) also identifies a link between market orientation and fundraising perfor-

mance in small/medium sized UK charities. In a study of market orientation in

healthcare Hayden (1993) distinguishes between customers and consumers andexamines the organizations orientation toward both. George and Compton

(1985) also working in the healthcare arena, emphasize the role of personnel in

this type of context and embrace this dimension in their definition of the con-

struct.It should be noted, however, that all these studies begin from the fundamental

assumption that it is appropriate both to seek to measure market orientation in a



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nonprofit context and to subsequently seek to relate this measurement to various

aspects of performance.

A CRITIQUE

As we have seen the construct of market orientation has traditionally been re-

garded as the embodiment of the marketing concept for all sectors. However

there are a number of reasons why one might question our ability to simply trans-plant the construct from one sector to another. As very different definitions of

marketing have been applied to the for-profit and to nonprofit sectors, it would

seem rather more appropriate to operationalize the marketing concept in this lat-

ter context, by starting from an appropriately-tailored definition. One could, forexample, employ the definition first posited by Kotler and Levy (1969 p. 7),

namely sensitively serving and satisfying human need, and work from that toan appropriate measure of the extent to which this philosophy was embodied by a

given organizationsocietal orientation. To take another approach and to simply

transfer a construct from onesetting to another would seem wholly inappropriate.Some of the terminology used in marketing in the for-profit sector does not

transfer unequivocally to the nonprofit arena. For example the term market orien-tation implies an orientation towards markets. Even though one could argue that

nonprofits have a market for resource acquisition and a market for resource allo-

cation, these are often not true markets in the economic sense of the term. In fact,

as Hansmann (1980), notes, nonprofits can often be a response to a very particu-lar form of market failure. Nonprofits, it has been argued, are the most appropri-

ate category of organization to supply goods and services under (certain)circumstances where the market mechanism fails.

The economics literature tells us that profit seeking firms will supply goods

and services at the quantity and price that represent maximum social efficiencywhen consumers can (a) compare reasonably accurately between competing

products and service, (b) reach a clear agreement with the chosen firm in respect

of the goods to be provided and the price to be paid and (c) determine whether thesupplier ultimately complied with the terms of the agreement (Hansmann 1980).

Nonprofits, however, because they are barred from distributing net earnings,

have no such incentive and in such circumstances are a more appropriate organi-zational form. It therefore seems clear that if nonprofits are a reasonable response

to the breakdownof the discipline of the market that the term market orientation

is a misnomer.

The second key argument for revising the terminology in this context is thatthe notion of market implies that some form of exchange will take place be-tween the supplier and the recipient of goods and services. There are a plethora of



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occasions when nonprofit organizations do exchange value with the recipients of

their goods or services, (or even a warm feeling in exchange for donations),

however there are also many occasions when the notion of exchange has littlemeaning. Even when one considers the different nature of restricted, generalized

and complex exchange (Bagozzi, 1975) it is clear, for example, that recipients of

international aid, exchange nothing except their need with their supplying orga-

nization. In recognition of this, Foxall (1989, p14) advocates a move from ex-change to matching to make the concept more embracing and certainly more

appropriate to a nonprofit context.The components of market orientation are also problematic in the nonprofit

context. The consensus now emerging from the literature in respect of the impor-

tance of a customer focus was highlighted earlier. In the nonprofit context, or-

ganisations are often less concerned with customer satisfaction, per se, than theyare with the notion of longer term benefit to society. As Blois (1987) noted, be-

lief-based organizations, for example, can be particularly antipathetic to cus-

tomer needs. Such organizations are actively engaged in the furtherance of their

mission, often to the detriment of short-term customer satisfaction. Indeed, artsorganizations may also forgo customer satisfaction and elect to show particular

forms of art, which they know will not appeal to the majority of their existing cus-

tomers. They do so, however, because they believe that the promotion of such art

forms would be good for society and worthwhile, even if a loss should result(Diggle 1998). Even though customer satisfaction is important, it is essential to

note that it is not the only consideration in a nonprofit context.

Competition is also different in the nonprofit arena. Nonprofits typically servetwo primary customer groupsthose that supply the funding for activities and

those that consume it. Demand for nonprofit goods and services is often so insa-tiable that to regard other organizations as direct competitors would be wholly in-appropriate (Bruce 1995). Naturally, there are occasions when competition is of

significance, when, for example, organizations compete for funds, as in the case

of charities wishing to secure government funding to supply goods and services,

but whether this dimension warrants the same emphasis as in the for-profit con-text is far from clear.

An additional difficulty with the dimensions of market orientation is the

somewhat narrow perspective taken of stakeholders. Indeed, in the for-profitcontext, it is not unusual to find operationalizations that focus on customers and

employees as the two primary stakeholder groups. In the nonprofit context, this

can be overly simplistic since organizations can potentially have a much larger

group of stakeholders (Lovelock and Weinberg 1984).In conclusion we therefore posit that a nonprofit operationalization of the mar-

keting concept should properly be termed societal rather than market orienta-tion. We further suggest that a nonprofit operationalization of the marketing



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concept will comprise behavioral components at variance with those previouslyascribed in the for-profit context. In the primary study that follows we delineatethese components, together with the antecedents and consequences of achievinga societal orientation.

METHOD

Since the goal was to understand the meaning that leading organisations might

ascribe to a nonprofit operationalization of the marketing concept a qualitative

methodology was adopted (Braybrooke 1965). Authors such as Dexter (1970),

Fielding and Fielding (1986) and Miles and Huberman (1994) suggest that a

field-based interview approach is well suited to circumstances where the research

objective is to understand complex interactions, beliefs and processes. (See alsoDrumwright 1996.)

The technique of elite interviewing was employed. Dexter (1970) employs the

term elite interviewing to refer to interviews of decision makers and distin-

guishes it from highly structured approaches to empirical enquiry. While highly

structured approaches are helpful in predicting behaviors, elite interviewing al-

lows the researchers to focus instead on the decision makers understanding of

key issues. As Drumwright (1996 p. 74) notes, the technique stresses the infor-

mants definition of the situation and allows the informant to reveal his or her no-

tions of what is relevant. (See also Dexter 1970; King 1994.)The interview protocol was developed in consultation with five senior non-

profit practitioners and five marketing academics with experience of qualita-

tive methodology. Questions were deliberately broad and allowed each of the

informants the scope to define the components, consequences and antecedents

of a market orientation construct in the nonprofits sector. Participants were

encouraged to engage in guided introspection (Wallendorf and Brucks 1993,

p. 341) considering each of the facets of their perception in turn. The interview

protocol is presented below. It should be noted that this protocol was pre-tested

with three nonprofit executives prior to the commencement of the field study.

The results of these initial interviews were not included in the subsequent anal-

ysis.

1. What do you understand by the philosophy of marketing? How does thisrelate to the nonprofit context? How might a nonprofit organizationoperationalize this philosophy? What attitudes/behaviors do you think a

nonprofit operationalizing this philosophy might exhibit?2. What are the necessary organizational antecedents that facilitate theoperationalization of the marketing concept? What kind of factors foster ordiscourage this from happening?



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3. What are the practical implications of achieving this operationalization?What are the positive consequences? What are the negative consequences?

4. What are appropriate measures of performance for a nonprofit? Whatwould be the likely impact on these measures of successfullyoperationalizing the marketing concept?

A purposive or theoretical sampling plan was developed (Glaser and Strauss

1967). Forty informants were interviewed for at least one hour; fifteen from the

US and twenty five from Europe. Of these five were senior personnel from mar-

keting agencies currently serving the sector, five were nonprofit marketing con-

sultants, and five senior executives were selected from each of the following

categories of nonprofit cause; education, health, social welfare, culture/heritage,

international aid and religion. This latter category of respondent (i.e., senior ex-ecutive) was further stratified to reflect a balance of individuals from marketing,

fundraising and operational functions. All those solicited to take part in the re-

search agreed to participate and the interviews were conducted over a period of

four months. The resultant data were subjected to a content analysis employing

the software programme AQUAD (Analysis of Qualitative Data). Standard pro-

cedures for the analysis of such data were utilized (Spiggle 1994; Strauss 1990).

An analysis of the resultant dataset suggested the framework depicted in Fig-

ure 1. We present the figure here as a framework to guide our discussion. The ra-

tionale for each of the components we posit and the relationships between them

are developed in detail below.

DELINEATING THE SOCIETAL ORIENTATION CONSTRUCT

Stakeholder Focus

The presence of multiple constituencies is seen to be a defining characteristic

of the nonprofit sector (Shapiro, 1973; Lovelock and Weinberg, 1974; Capon and

Cooper-Martin, 1988). Marketing, they argue, should address the needs of a wide

variety of different stakeholders, with the needs of one group significantly less

likely to dominate than would be the case in the for-profit sector. This was also a

consistent theme to emerge from our primary research. One respondent ex-

plained that

Whatever strategy we develop we need to be sensitive to the needs of ourdonors, volunteers, beneficiaries, trustees and the wider society we serve. I

find my hands tied more than I ever did working in the business world. I



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now have to serve a variety of different masters, often with very conflict-ing needs.

Indeed, to properly assess the extent to which marketing has been

operationalized within a nonprofit context, the interviews suggested it would benecessary to examine the organizations orientation towards such groups as indi-

vidual donors, corporates, trusts/foundations, trustees, employees, volunteers,recipients, government, umbrella bodies and society in general. We thereforeposit:

H1: The greater the degree of stakeholder orientation, the greater will be thedegree of societal orientation obtained.

Competitor Focus

The competitor focus proposed in the original work of Narver and Slater(1990 p. XX) states that, to create value for buyers that is greater than that cre-

ated by its competitors, a seller must understand the short term strengths andweaknesses and the long term capabilities and strategies of both the key current

competitors and the key potential competitors. Informants suggested that thisnotion was more applicable to the market for resource acquisition. Competition

for funds with other organizations was becoming a key issue for our interview-ees.


Inter-functional

Organisation

Mission

Values

beliefs

Stakeholdergoal congruence

Systems andStructures

StakeholderFocus

CompetitorFocus

Collaboration

Coordination

Responsiveness

Performancein

Reciprocity

Mutuality

Societal

Benefits

AntecedentsSocietal

OrientationBenefits Consequences

Societal Orientation

efficiency

effectiveness

FIGURE 1. Societal Orientation Construct


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I believe the fundraising environment is becoming a lot more hostile. We

have to spend about 10% more to raise a donation than we would have

had to even five years ago. Too many charities competing for a slice of an

ever-declining cake.

A competitive orientation was also felt to be desirable in circumstances where

a nonprofit might have to compete for the right to provide welfare services on be-

half of the government (see Bryce, 1992). However, informants felt that the no-

tion of competition in respect of service provision was generally inappropriate.

We wouldnt be in this game if someone else was providing the (service).That was the whole point of establishing a nonprofit! We saw an unmet

need and decided to do what we could to meet it.

We therefore conclude that the need to focus on competitors does appear to

have relevance to the nonprofit sector, its influence may not be as pervasive as

has proven to be the case in other sectors. Nevertheless, it seems appropriate to

posit:

H2: The greater the degree of competitor focus, the greater will be the de-gree of societal orientation obtained.

Collaboration

Competition is a key strategic issue for many nonprofits, but collaboration is

an equally important facet of their relationship with other organizations. Many

third world agencies for example, will share transportation channels to maxi-

mize the distribution and impact of aid. Indeed, in addition to other similar or-

ganizations, nonprofits may be able to identify suitable opportunities for

collaboration with both public and private sector bodies (Kotler and Andreasen

1991). It is also commonplace for nonprofits to share lists of lower value donors

with other organizations, in the hope that every participant in the exchange will

benefit from the sharing of these resources (Sargeant and Mackenzie 1998).

From the field research, we can see that collaboration is as much a feature of a so-

cietal orientation as competition. The nature of the collaboration is delineated by

one of our respondents in the following quotation.

This sector seems to me to be unique. Where else would you find an indus-

try group that met regularly once a month to share sensitive data about cus-tomer behavior? We meet regularly with representatives of 20 othercharities to discuss trendsin the market, howvarious communicationshave



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fared and what seems to be working well, or not so well. You just wouldntget that happening anywhere else.

We, therefore, define collaborative orientation as the extent to which an or-

ganization is focused on exploiting the potential for collaboration with other or-

ganizations, either for the joint acquisition of resources, or for the mutual

provision of nonprofit goods and services. We posit:

H3: The greater the propensity to collaborate, the greater will be the degreeof societal orientation obtained.

Interfunctional Co-Ordination

In the market orientation literature this component of the construct directs or-

ganizations to marshal all resources, to call on its entire human and other capital

resources to create superior value for buyers. Narver and Slaters (1990, p. 22)

interfunctional co-ordination would appear to be of relevance to the nonprofit

sector, although, again, some modification is required. The voluntary nature of

the sector (Hatch 1980) makes it imperative that nonprofits adopt an inclusive

democratic approach, where each person can express their personal view (Knapp

et al. 1987). In effect, this adds value, not for buyers, but for all the stakeholders

associated with the organization, as they begin to develop a greater degree of af-

finity with and ownership of, the activities undertaken (Schervish 1997). Our

respondents highlighted the need to share information on a regular basis as out-

lined below

Wetry to set up regular meetings between staff in all departments of our or-ganization. They can meet, exchange ideas, concerns and learn about thework which is taking place in other parts of the organization. In our field,this can be a real motivator, since people often passionately believe in thework were doingso its important to keep them informed. Pay isnt areal motivator for most of the staff working here, its the feeling of doingsomething worthwhile.

As noted above, nonprofits face additional challenges, their services are pro-vided from within the boundaries of the organization, from employees and volun-

teers; supported by donors and other groups who are technically beyond TheseBoundaries But Whose Efforts Must Be Coordinated Nevertheless (Schindler-

Rainman and Lippitt 1997; Drucker, 1989). With such a variety in stakeholders itis difficult to ensure that everyone is familiar with and conscious of customers



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needs (Kohli and Jaworski, 1990) Theinterviews undertaken in this research sup-

port the need for interfunctional co-ordination as can be seen below:

The fundraising department has to liase very closely with (operations).Many funders will only look to fund projects that are of a certain type or na-ture. Some trusts will fund running costs, whilst others wont. There aresome activities that the general public finds attractive and some it doesnt.We have to very carefully talk through with (operations) what services wewould like to provide and get a sense of their priorities. Only then can wematch these services with prospective funders. If we just ran off and did ourthing, it would be absolute chaos.

We therefore define interfunctional co-ordination as the extent to which the

organization shares a common goal and works together synergistically, for the at-tainment thereof. We posit:

H4: The greater the degree of interfunctional co-ordination, the greater willbe the degree of societal orientation obtained.

Responsiveness

The interviews and nonprofit literature suggested that a fourth dimension tothe societal orientation construct should be considered, namely responsiveness.Historically one of the key reasons for the development of a strong voluntary sec-

tor has been the ability of nonprofit organizations to respond rapidly to changingpatterns of need, producing innovative solutions. This is accomplished without a

requirement to consider either the political consequences of action, or the finan-cial returns that might accrue to shareholders (Bryce 1992, Henderson and

Thomas 1982, Wann 1992). Nonprofits have the necessary freedom, flexibilityand moral imperative, to respond rapidly to the dictates of social need and mustensure that they do so if the maximum benefit to society is to accrue (Jordan

1964; Dahrendorf 1997). This view was reflected by one of the interviewees:

We will often engage in projects many other agencies would prefer tosweep under the carpet, either because they perceive the need as transi-tory and it would take time to marshal the resources, or because the fear thepublicity that association with the project would bring. By contrast, iftheres a need and it fits with our mission we just act.

We define responsiveness as the extent to which the organization is capableof developing a rapid response to changing patterns of societal need and posit:



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H5: The greater the degree of responsiveness, the greater will be the degree

of societal orientation obtained.

THE ANTECEDENTS OF A SOCIETAL ORIENTATION

During the course of the interviews and discussions in the literature it was pos-

sible to identify the prerequisites or antecedents essential to developing a societal

orientation. Kohli and Jaworski (1990) noted that there were three core anteced-

ents, which could help or hinder the development of a market orientation; (i) the

commitment of senior management, (ii) interdepartmental dynamics, and (iii) or-

ganizational systems. In a similar vein, this research identifies some prerequisites

or antecedents needed in nonprofits in order to develop an organizational cultureof values and beliefs with a societal rather than market orientation. Even though

these issues are important for any organization, in the nonprofit organization

there is a particular need to (i) emphasize the mission, values and beliefs that un-

derpin the whole, (ii) build stakeholder goal congruence and to (iii) develop sys-

tems and structures to meet the needs of the multiple stakeholders.

Mission, Values and Beliefs

The organizational mission and surrounding values and beliefs are of particu-

lar significance to nonprofit organizations since they are bound to conduct only

those activities permitted thereby. Both British and American law recognizes the

unique status awarded to nonprofits, and in particular the subsetcharities, only

so long as they fulfill their published objects. Indeed, tax exempt status andother key benefits may only be realized when such organizations address certain

categories of need originally delineated in the Elizabethan Charitable Uses Act of

1601 (Williams 1989). Charities therefore need to ensure that they focus solely

on those needs deemed by society as befitting their unique status.

In addition, it is the mission, values and beliefs of a nonprofit that define how

the organization will operate. However this is also true for for-profit organiza-

tions, the profit imperative will usually dictate that the wishes of the customer

predominate. In the nonprofit sector it is often the case that immediate customer

needs will be subordinated to the dictates of the organizations mission (Sheehan,

1996). It is thus appropriate to regard the mission, values and beliefs of a non-

profit as an antecedent to a societal orientation, since it is these dimensions that

will define the societal needs that will be met, how they will be met and under

what circumstances.Lenkowsky (1999) argues that nonprofits differ from for-profits because they

offer both functional and expressive utility to the parties involved. He therefore



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suggests that a nonprofit mission should express the values and beliefs of the or-

ganization alongside the functional goal so often present in for-profit missions.Only then can relevant stakeholders be attracted and a response engendered toappropriate categories of cause. We therefore posit that:

H6a: The successful communication of the goals of the organization to allstakeholder groups is an antecedent of societal orientation.

H6b: The successful communication of the beliefs and values of the organiza-tion to all stakeholder groups is an antecedent of societal orientation.

Stakeholder Goal Congruence

The motives and goals of stakeholders in the business world can be incompati-ble and thus may become a source of internal disharmony (Williamson 1975).

Employees, for example, may act opportunistically and put their own interestsbefore the welfare of the organization. The enhanced number of stakeholders in

the nonprofit context emphasizes the role of this factor. For a nonprofit organiza-tion to function adequately, all stakeholders should share congruent and therefore

not mutually exclusive goals (Rose-Ackerman 1986).Goal congruence plays a key role in focusing efforts and attention on the

cause. This helps to bring cohesion and facilitate the interfunctional co-ordina-

tion needed in the societal orientation. In the nonprofit sector, goal congruence isoften taken for granted as personal motivation is a strong driver for those contrib-

uting albeit in a paid or non-paid capacity. Yet its contribution to a societal orien-tation should be acknowledged, as deficiency in this area would detract

significantly from the degree of societal orientation obtained. As one executivenoted,

The ideal situation is one where the trustees and donors of an organizationhave a perfect understanding of the needs of beneficiary groups and canidentify very clearly therewith. Sadly this isnt always the case and themost pressing needs are not always the ones deemed most worthy of sup-port.

We therefore define stakeholder goal congruence as the degree to which the

goals of an organisations stakeholders are compatible and synergistic. We posit:

H7: Stakeholder goal congruence is an antecedent of societal orientation.



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Systems and Structures

To achieve a societal orientation, it is essential that adequate systems and

structures exist to support the work of the organization (Kushner and Poole,

1996). Nonprofits need to be sensitive to changes in their operating environment

and have adequate systems in place for gathering data in respect thereof. Without

adequate information it will clearly be impossible for an organization to develop

a stakeholder, competitor or collaborative focus (Nutt 1984). We would also ar-

gue that organizational structure should be regarded as an antecedent of societal

orientation since this should reflect the relative importance of various stake-

holders, facilitate communication between these groups and permit the organiza-

tion sufficient flexibility to rapidly respond to changing patterns of need

(Wortman 1983).

H8: Achieving appropriate organizational systems and structure is an ante-cedent of societal orientation.

THE BENEFITS

Drawing on data gathered from both the literature and the interviews it was

possible to posit two primary benefits likely to accrue to nonprofit organizations

successfully operationalizing the marketing concept. These may be categorized

as enhanced performance, and mutuality/reciprocity.

Performance

The link between the extent to which the marketing concept has been

operationalized within an organization and its reported performance has fasci-

nated researchers since the 1950s. The performance measures, typically the sub-

ject of analysis, have tended to be readily-attainable financial criteria such as

profitability, turnover, market share and ROE.

The assessment of nonprofit performance is somewhat more problematic and

for a variety of reasons. Firstly, nonprofits do not define themselves around fi-

nancial returns, but rather around their mission. Indeed, nonprofits have a distinct

legal and fiscal status that bars them from distributing their net earnings to stake-

holders such as governors, members, directors, etc. (Hansman 1980). Secondly,the nonprofit can have amorphous goals (Newman and Wallender 1978). What

Dahrendorf (1997) refers to as creative chaos of the voluntary sector, may



17/26

well be a strength, but this feature complicates the delineation of appropriate

measures of performance. Indeed, authors such as Weick (1977) have cau-

tioned against the use of performance measures, since if efficiency and pro-

duction measures predominate, then the random deviant behaviors that

enhance an organizations ability to be responsive may be lost. This is particu-

larly critical in the voluntary sector where creativity must be encouraged if the

essential essence of the sector is to be maintained.

So how might performance in this sector be assessed? The interviews sug-

gested that both efficiency and effectiveness should be considered. One manager

interviewed stated that;

There are two key issues in the (nonprofit) context. Firstly, to what extentare we fulfilling our mission and secondly, are we making a reasonably ef-ficient use of our resources in conducting this work.

An assessment of effectiveness might therefore begin with an analysis of

mission directedness, or the extent to which an organization might be said to be

fulfilling its mission (Sheehan 1996). Effectiveness could also be assessed by the

extent to which specific objectives have been met. (See, for example, Hall 1978.)

Although there has historically been much support for this view in the literature

(Kanter and Summers 1987) a number of criticisms have recently been forthcom-

ing. Perrow (1981), for example, notes that in many cases an organizations goals

can be multiple, conflicting and inconsistent, making it difficult to identify ap-

propriate assessment measures.Those writers that prefer to regard effectiveness as a function of the fit an or-

ganization might have with its environment, advocate a measurement system

which takes into account the needs of supporters, clients, regulators and, indeed,

all the multiple constituencies with whom the organization may have links (Con-

nolly et al 1980). Indeed, writers such as Gartner and Reissman (1974), have spe-

cifically advocated employing measures of customer satisfaction as a measure of

effectiveness (see also Cummings and Molloy 1977; Connolly et al 1980). While

inherently appealing, we take the view that customer satisfaction may be a less

than ideal measure of organizational effectiveness in the nonprofit sector, since

such organizations often have missions which require them to change customer

behaviors.

Given the preceding difficulties it seems clear that to assess nonprofit effec-tiveness appropriately a composite measure of effectiveness should be devel-

oped, thereby mitigating the weaknesses of any one single approach.



18/26

Nonprofit efficiency is also very much an issue. As Drucker (1990, p. 81)

notes, the nonprofit organization has a duty (towards its stakeholders) to allocate

its scarce resources to results rather than to squander them on being righteous.

Fundraising and administrative efficiency have generated the most interest of

late, certainly in the popular press (Sargeant and Kaehler 1998). Donors are re-

ported as increasingly demanding that ever larger percentages of their gift are ap-

plied directly to the charity cause and not, as they see it squandered on

fundraising and administration. Increasing amounts of press attention and the

particularly bad publicity attracting recently to a small number of organizations,

have all helped to focus the minds of potential supporters on suitable bases for

comparison between nonprofit organizations. Inevitably by virtue of their ease of

calculation it is simple financial ratios that can often be used for this purpose. Theproportion of funds allocated to fundraising and administration appear to be the

most common ratios investigated.

Thus we would argue that in assessing the impact of a societal orientation on

performance it is desirable to consider both efficiency and effectiveness. Since

the extant for-profit literature suggests the existence of a link between market ori-

entation and performance (See for example, Jaworski and Kohli 1993; Narver et

al. 1992; Narver and Slater 1990; Deshpande 1993; Reukert 1992; Liu 1994), we

posit:

H9a: Organizational effectiveness is positively correlated with the degree ofsocietal orientation attained.

H9b: Organizational efficiency is positively correlated with the degree of so-cietal orientation attained.

Reciprocity and Mutuality

Interview data suggested, however, that operational efficiency and effective-

ness should not be regarded as the only outcomes from the successful attainment of

a societal orientation. An additional dimension derives from the division between

resource acquisition and resource allocation; a defining characteristic for many

nonprofit organizations (Shapiro 1973). Those individuals that supply an organiza-

tions funding are not necessarily those that will derive the primary benefit there-

from. We argue here that one of the primary outcomes from the attainment of a

societal orientation will be the bringing together of these two groups, resulting in amutual exchange of values, ideas and a sense of identity. Many nonprofit managers

expressed the desirability of achieving this goal.



19/26

For us, one of the primary outputs has to be a feeling of community. If thethings that we do, dont achieve that goal, it would be difficult to justify ourexistence. Were about bringing people together. If we cant do that, whybother?

We like to feel that we can do something worthwhile for all our stake-holders. We want to make donors feel as though they are part of our com-munity here. Not in a tacky kind of virtual reality waybut simply byensuring that they have a strong association with (our residents). We wantthem to know the names of the people here, to understand the history of theplace and the nature of our needs. We also want them to share in our philos-ophy and that benefits everyone.

We therefore hypothesize that:

H10: The degree of reciprocity/mutuality exhibited will be positively corre-

lated with the degree of societal orientation attained.

This research has, like other qualitative research, a number of limitations,

most notably the subjective nature of the analysis. Whilst every effort was made

to remove inconsistencies in interpretation, as Dexter (1970) notes, an element of

judgement will inevitably be required on the part of the researcher. In the discus-

sion, we mitigate this potential weakness by demonstrating clearly whyeach con-

clusion was drawn with respect to each of the dimensions of the societal

orientation construct (Drumwright 1996; Golden-Biddle and Locke 1993). Inkeeping with a discovery-oriented approach we have also provided additional

support from the extant nonprofit literature (Deshpande 1983 and Mahrer 1988).

Finally, we have been careful to select only those quotations that are representa-

tive of the opinions of the majority of informants.

CONCLUSIONS

In this paper, the concept of market orientation has been reviewed and its rele-vance to and validity in the nonprofit or voluntary sector has been assessed andchallenged. The market orientation construct may be viewed as theoperationalization of the marketing concept within for-profit organizations. Theconstruct has been specifically developed to reflect thecontent of traditional defi-nitions of marketing and hence contains elements such as a customer focus, com-petitor focus, employee focus and an orientation towards profit. Even though thespecific content of the construct would appear to vary from study to study, the



20/26

consensus emerging from the for-profit literature is clearly that these elements

should be considered.

Given the history of the construct it would seem inappropriate to merely

transfer it from one sector to another. Nonprofit definitions of marketing are of-

ten quite different from those developed for use elsewhere. It has therefore been

argued that a new construct for use specifically within the nonprofit sector is re-

quired. Indeed, a societal orientation construct would have considerably more

meaning for the nonprofit sector and provide a more comprehensive

operationalization of the marketing concept in this setting. Such a construct

would still need to consider an orientation towards customers, competitors and

employees, but would also include a number of additional elements, specific to

the nonprofit context. A societal orientation construct should thus consider the

extent to which a nonprofit focuses on the needs of its key stakeholder groups andin addition, on the needs of the wider society of which it forms part. Indeed it is

this latter dimension that perhaps provides the greatest degree of distinction be-

tween societal and market orientation. We have also suggested that a societal ori-

entation construct should consider issues such as the potential for collaboration

with other nonprofits, public sector, and private sector bodies.

In this article we have thus delineated what may be regarded as the compo-

nents of a new marketing construct. There is now a need for further research to

establish an appropriate measurement instrument and to ascertain the nature of

the relationship between the degree of societal orientation obtained and outcomes

such as performance and reciprocity/mutuality. The former outcome is particu-

larly problematic and it seems clear that any subsequent studies should be sensi-

tive to the complexities of measuring performance in this context. In the light of

the literature, previous approaches to assessing nonprofit performance appear

overly simplistic. Future studies should examine the link between societal orien-

tation and both organizational effectiveness and efficiency. Only then will a

rounded picture of an organizations performance be obtained. In the nonprofit

context it is inappropriate to assess performance by simple financial measures

alone andcomposite measures of both efficiency andeffectiveness should be pre-

ferred.

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