It’s becoming less easy to draw a line distinguishing the marketing efforts of For Profit (FP) companies with Not For Profit (NFP) companies. With accelerating consumer expectations and more affordable marketing technology, many NFP’s are adopting more mature FP tactics and talent to enhance their fundraising efforts. And the rise of cause based marketing has FP’s considering grassroots engagement tactics and tools well known in the NFP space. This 5 minute read will describe how NFP’s differ from FP’s in business model, mission, and maturity, and the valuable lessons available to help address existing business challenges.
Don’t think the lack of profit motive means not for profits aren’t big business. According to the Urban Institute, donations approached $430 billion in 2018. That said, its hard to generalize about the sector given the diversity of organizations and models. based on 2018 figures, growth in fundraising and expenses were uneven across not for profit types and sizes, with the less than $50,000 in annual donations growing the fastest. With the readers permission to generalize anyway, I offer five core differences between FP's and NFPs and 5 implications and learnings these provide.
5 ways Not For Profits and For Profit Marketing Efforts are Different
1. Business Model:
Target Audience: NFP’s often include B2B and B2C most for profit companies either focused on end consumers or business customers and have the luxury to focus their efforts on a defined set of products and processes that best serve this audience. Most not for profits, on the other hand, manage two or more tiers of relationships, each with very specific engagement and data management needs. These include the B2C style retail donations (often under $5k-$20k annually), varied B2B style items including high value individual donors, corporations and partnerships, end of life giving, as well as volunteers and partner organizations. Engaging this multifaceted audience often requires separate marketing teams and processes for web, email, events and other activities, increasing organizational complexity and diffusing investment in skills and tools across a diverse set of needs.
Project Funding for non profits is often structured in a manner that discourages coordination and a longterm investment mindset
The Operational Efficiency Ratio (% donations that go directly to programs)vs is extraordinarily important to the credibility and fundraising performance for not for profits. In lean fundraising years, most organizations must pause or scale down projects to maintain the required efficiency ratio. Others starve non-donation generating departments creating organizational imbalances in opportunities and performance..
Grant donations are called “restricted funding” for a reason. Donors often define what, when, who, why and for how long the donation can be spent, creating the tendency to deliver piece-meal and disparate solutions that increase long term tech complexity and costs.
Customer Lifetime Value is different for not for profits. Remember your CLV equation (value of annual payments over the life of the relationship minus cost to acquire and service).
For most B2B and B2C for profit products, there is a linear relationship to the total amount of revenue a specific customer can deliver based on the product cost and consumer need lifecycle. Using softdrinks in a made-up example, an average US consumer will chug 39 gallons Coke every year and sets a reliable ceiling to the potential to annual earn from a given consumer.
In the donation space, while many “retail” donors adopt B2C style behavior such as early attrition and limited growth in donation value, not for profits who engage and sustain their donors over a long period of time have a rare opportunity to:
Generate volunteers and peer to peer fundraisers
Double the donation value in cases of employer matching
Be gifted much larger sums at end of life
According to Imperative’s research, mission-driven workers are 54 percent more likely to stay for five years at a company and 30 percent more likely to grow into high performers than those who arrive at work with only their paycheck as the motivator. Not for profit organizations already know and rely on this to counterbalance disparity of pay and advancement vs for profit jobs. From my own humbling experience working in a global NFP, I can’t overstate the power of a mission-motivated team to move mountains.
Caused based consumer sentiment is equally impactful and growing.IED notes $1.85billion spend in 2014 growing 3.7% annually over the prior 5 years. At the other end of the spectrum, companies who’s messaging or practices conflict with a cause can suffer unforeseen and often severe consequences. The marketplace is increasingly volatile and many examples Companies who’s normal practices are called out by cause based
Technology: In comparison with FP’s NFP’s have historically under invested in technology and salaries and this has generally meant NFP’s lagged FP’s from a Digital Marketing Maturity perspective. As the following NonProfitPro survey suggests, there’s also a tendency to be overwhelmed with the options and interconnectivity.
Talent: NFP challenges related to competitive compensation and overworking people are not new, but new alternatives in cause based marketing and corporation B options have made not for profits begin to reconcile employee worklife balance.
Lets face it, for all of the investment and hype in customer engagement, most FPs are still scratching the service of the type of deep emotional bond an NFP can create with mission minded supporters. Anchored by the defined “I will give you this if you pay me” transaction model, the FP relationship remains commercial and potentially out of synch with the needs of the community.
Successful NFP’s clearly articulate and deliver on a mission that resonates with its audience. This resonance is built upon shared beliefs and shifts the engagement model to us for a greater purpose. This can translate to a range of benefits, from more tolerance for overcommunication to the willingness to volunteer your free time or personally fundraise on behalf of a cause.
Learnings and Implications:
Marketing Technology: remains an opportunity for NFP’s who are reconciling the historical disconnect of investment budget, the pace of change, and the complex needs of diverse stakeholders. Database and integrations management is particularly challenging for NFP’s as they must reconcile a hodgepodge of formats and files from local chapters and silo’ed fundraising teams. NFP’s should take a page from FP’s playbook and invest in a marketing operations team that sits inside of marketing (not IT) and can manage the steady flow of campaign build, tagging and execution.
Marketing Talent: The competition for talent continues to intensify. NFP’s must raise their investment if they want to attract the skills needed, but can enjoy an increasingly cause-minded applicant pool if they can provide a comparable professional experience. For Profits that cannot clearly articulate cause based elements embedded into their employee experience are actually at risk if NFP’s can raise salaries even a little.
Funnel Conversion: FP’s are experts at digital marketing, lead and funnel management. As part of the package, FP’s sashay serious internal skills in UX design, tracking, optin mgmnt, test & control, personas and marketing automations, often with digital consuming more than half of total marketing expense. The vast majority of NFP’s generate less than $500,000 in donations per year and often spend more than 50% of their marketing budget on offline channels like direct mail, telemarketing and events Additionally, most of these small and mid-tier not for profits leverage 3rd party agencies and partners for digital lead gen, with many NFP’s struggling to effectively understand and manage partner performance and media spend attribution. NFPS should continue to develop their digital marketing capabilities as a part of the larger channel portfolio.
Mission: NFP’s are experts at articulating and mobilizing mission based subscribers to take action through a variety of channels including social, peer to peer, advocacy, messaging and events. FP’s have much to learn about how to articulate, connect, and engage customers and employees. NFP’s use of storytelling, connection with local organizations, and volunteer management are among the many secret ingredients that help sustain and grow NFP efforts.
Retention and loyalty: This is perhaps the biggest opportunity for best practice sharing between NFP’s and FP’s. FP’s should pay attention to how NFP’s execute mission based messaging and non-commercial community building through various channels and experiences. Not for profits must recognize the potential incremental value of long-term donors (including employer matching and bequeathment) and invest in the centralized supporter data model, reporting, consumer journeys and personalized cross channel marketing automations to which FP’s excel.
There are likely many more examples of differences and similarities to highlight and I welcome your feedback. That said, the examples shared thus far help point us to the potential conclusion of the value of diversity in its many forms and how both for profit and non-profit business models can benefit from each others successes.
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