Digital Marketing in For Profit vs Not For Profit

It’s becoming less easy to distinguish between the marketing efforts of For Profit (FP) companies with Not For Profit (NFP) companies.  With accelerating consumer expectations and more affordable marketing technology and partners, many NFP’s are adopting more mature FP tactics and talent to enhance their fundraising efforts.  At the same time, 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 describes how NFP’s differ from FP’s in business model, mission, and maturity, and lays out 5 valuable lessons available to each model to help address existing business challenges.

Don’t think the lack of profit motive means not for profits aren’t big business.  There are an estimated 1.8MM NFPs in the US that, according to the Urban Institute, generated $430 billion in 2018. That said, its hard to generalize about the sector given the diversity of organizations and models. Based on 2018 figures, fundraising growth and expenses were uneven across not for profit types and sizes, with the fastest growing segment generating less than $50,000 in donations per year. With the reader's permission to generalize anyway, I offer:

5 ways Not for Profits and For Profit Marketing Efforts are Different

1. Business Model: 

• Target Audience: Most for profit companies have the luxury of focusing efforts on a defined set of products and processes that best serve either an end consumer or business customer.  Most NFP's, on the other hand, manage two or more tiers of relationships each with 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 long-term investment mindset. A few things contribute to this. First, the Operational Efficiency Ratio (% donations that go directly to programs) is extraordinarily important to NFP credibility and fundraising performance.  In lean fundraising years, many NFP's may need to pause or scale down projects to maintain the required efficiency ratio. Others starve non-donation generating departments creating organizational imbalances in opportunities and performance. Second, 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. Managing to these additional restrictions can create the need to deliver piece-meal and disparate solutions that increase long term tech complexity and costs.

2. Customer Lifetime Value differs 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, the product cost and consumer need lifecycle defines a maximum annual and lifetime revenue a specific customer can generate.  Using soft drinks 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. You can cross and upsell other categories, but each product has a reasonably easy to define CLV range. 

• In the NFP space, on the other hand, the donor's long-term relationship can grow into advocacy and peer to peer fundraising. In addition, linking the donor to existing corporate matching program can double annual contributions. Finally, NFP's have the opportunity to exponentially increase donations through end of life bequeathment.

3. Mission Based.  Cause based employee and consumer sentiment is on the rise and a significant lever in driving company performance. 

• 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 the mission based motivation 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 FP's spent $1.85 billion in 2014 on caused based marketing, up 4% over the prior 5 years. Consider how Toms shoes engrained the cause into its the business model. At the other end of the spectrum, follow the rocky brand path of companies like Nike or Apple when product production was exposed to be an unsafe workplace and you can see the value of being on the right side of consumer sentiment. Check out Morning Consult's Catalyzing Consumer Trust for a deeper perspective. 

4. Maturity and Investment levels. 

• Technology: Because of restrictive budgets, NFP’s have historically under invested in technology and salaries when compared with FP's. This has contributed to a general lag in Digital Marketing Maturity for NFP's.  As the following NonProfitPro survey suggests, there’s also a tendency to be overwhelmed with the complexity of a modern marketing tech stack. Some specific areas to note:

• Talent: challenges related to competitive compensation and overworking people are not new to NFP's, but new alternatives in cause based marketing and corporation B options have made not for profits begin to reconcile employee worklife balance. 

• Technical Deficit.  NFP’s often struggle to reconcile a diverse set of platforms, users, and data schemas set up without a central governance structure.  These local solutions eventually run aground because of platform upgrades, new integrations, or even the sole admin leaving without a replacement, and then become unplanned emergencies to be rationalized into standards.  For a similar reason, data silos become a significant hindrance to NFP’s looking to growth and drive personalized automation.. 

5. Consumer Engagement: On different scales or are they?

• 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 or the circle of trust. 

• 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 excessive mails to volunteering or personally fundraising on behalf of a cause. 

5 Implications and Learnings Across Not and For Profits:

1.Marketing Technology: remains an opportunity for NFP’s reconciling the historical disconnect of systems and the complex needs of diverse stakeholders.  Database and integrations management is particularly challenging as NFP's reconcile a hodgepodge of formats and files from local chapters and siloed 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. 

2.Marketing Talent: The competition for talent continues to intensify.  NFP’s must raise their investment if they want to attract the skills, but may gain an advantage with younger recruits 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. 

3. 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 management, test & control, personas and marketing automations, spending over 50% on digital media, 30% of the marketing budget on platforms, and little on offline.   The vast majority of NFP’s spend more than 50% of their marketing budget on offline channels like direct mail, telemarketing and events. NFPs of all sizes often rely on 3rd party agencies and partners for digital acquisition, 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.

4. 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.

5. Retention and loyalty: This is perhaps the biggest opportunity for best practice sharing between NFP’s and FP’s.  Organizations on both sides struggle with the acquisition vs retention paradox and the need to take more holistic approach to loyalty. 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. 

These examples help show the value of learning from diversity in its many forms. There are likely many more examples of differences, similarities and learnings and I welcome your feedback.