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| Nonprofit Market Analysis
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By: Bill Nissim, 2004 ©
I recently attended a lecture series at Oxford University and one presenter, Dr. Richard Schoenberg,
illustrated why some organizations succeed while others fail to harness the essence of customer
satisfaction. His concept could be applied to any ongoing concern and quickly depicts gaps between
products/services offered and actual consumer behavior. Several months later I came across another
body of research that dealt with similar issues, but the model and approach differed. Dr. Clayton
Christensen (Harvard Business School) proposed his theory which unveiled the difference between
innovative verses a sustaining business model and the process of emergent verses deliberate
strategies. A myriad of other relevant concepts from accomplished authors were also applied to this
article to complete the discussion.
This meta-analysis (culmination of works) illuminates and discusses the essentials of several
academic theories and compares/contrasts them to an archetypal, nonprofit organization. The
assumption is that nonprofits utilize flat organizations and their budgetary constraints limit access to
consultants who can acquire and apply such concepts. Furthermore, fulfilling their daily challenges
affords little time to reflect on strategic shifts in their value segment. This brief alerts senior
management to contemplate these theories and to assess applicability to their own organizational
design. The following steps will help the organization’s management apply these concepts to their
own business.
Step1: Defining Business Model Type
Organizations tend to define WHO they are and WHAT they do based on the task at hand. For
example, if you knit sweaters for the homeless, one might consider themselves clothiers and their
goal is to clothe those in need. Another way to evaluate our example is based on disciplines and
methods that constitute a business model. To continue with our example, if one were to make the
highest quality sweater, then they would be considered “best product” and the organizational
attributes would be structured around that process (The Discipline of Market Leaders, Michael
Treacy & Fred Wiersema). If you highly customize your sweaters, you would be considered
“customer intimate” and if your organization was highly efficient at that process, you would be
deemed “operationally excellent.”
According to Treacy & Wiersema, all organizations operate in all three arenas simultaneously, but the
entity is organized around one dominate process. By stepping back and considering these two
strategic issues, mainly WHAT you do and HOW you do it, you can quickly identify your business
model type. This determination, in my opinion, is critical when undertaking a value-gap analysis.
Step 2: Value-Gap Analysis
The framework of a value-gap analysis is comprised of two constituencies: identification of gaps in
consumer value that are not being fulfilled and re-defining the competitive rules. Let’s look at an
organization that most are familiar with – the airline industry. Back in the 1980’s, Southwest Airlines
found a gap (low-cost, no frills travel) in the airline industry and built a business model around that
unfulfilled need. Management understood that competing head-to-head (using their rules) of the other
giant airlines meant certain disaster. Southwest Airlines, in effect, changed the rules and was
rewarded with market dominance and monetary prosperity during tumultuous times. Southwest built a
low-cost business model by employing point-to-point service; one aircraft type (Boeing 737) which
reduced maintenance costs and cross-functionally trained all their employees to engage in multiple
activities.
A value gap analysis consists of plotting your direct competitors on at least seven key attributes they
consistently deliver. Next, by observing behavior or through surveys, have your target audience rate
each attribute in terms of importance. The variance between competitive offerings and customer
behavior will readily emerge. By reducing, eliminating, or increasing those attributes, a new position
will be created that more accurately suits the behavior of your targeted audience. This exercise not
only identifies opportunities, but reduces or eliminates activities that consumers do not value and in
turn, reduces associated costs.
If we apply this theory to the Southwest example (see graph), one can quickly assimilate attributes of
importance to the discount traveler and by filling those needs, how a successful business might be
developed. As the graph indicates, customers felt that food and comfort, which airlines were offering,
possessed little value when compared to on-time flights and a fun experience. As a result, Southwest
eliminated meals, minimized seating, but focused on frequency of on-time flights and created a “fun”
experience from check-in to the destination arrival.
To summarize, Dr. Richard Schoenberg suggests mapping the behavior of your target audience and
find “gaps” that are being ignored or underdeveloped. Next, adjust your business model to eliminate,
reduce, or increase value in areas that are meaningful to the user. Finally, change the rules of the
game and make them hard to follow.
Step 3: Sustaining verses Disruptive Business
Another approach to assessing the marketplace for your organization considers circumstances over
generally accepted quantitative tools/methods for creating growth. Let’s start with how the
organization categorizes its business.
According to Christensen, people “hire” products to do specific “jobs” in everyday matters (The
Innovator’s Solution, Christensen). Most professional organizations utilize market research personnel
or firms to quantitatively analyze the “numbers” and derive correlations between attributes and
customers. Christensen suggests that “the functional, emotional, and social dimensions of the jobs
that customers need to get done constitute the circumstances in which they buy.” The critical point
here is segmenting your business around circumstances verses customers determines your success.
Returning to the Southwest example, the circumstances of discount and business flyers warranted a
demand for inexpensive, high frequency, and fun travel. The Southwest business model embodied
functional (frequency/inexpensive), emotional (fun/relaxing), and social (light-hearted service,
whimsical) with every experience. In short, Southwest segmented their business along the
circumstances of travel and not the customer and has built a 20 year history of success.
Christensen asserts three approaches to creating growth; sustaining, low-end disruptions, and new
market disruptions. What is the importance of these concepts to nonprofits or any other organization?
The unequivocal answer is all organizations need to grow! By now, you have discerned WHO and
WHAT your organization does and if the dominate process entails best offering, customer intimacy, or
organizational competence. Next, you have undertaken a value-gap analysis and determined gaps and
shifting the rules of competition. Also, you’ve considered the circumstances to WHY people buy and
how they hire products/services to achieve them.
The next step involves how you are going to create growth. A sustaining approach seeks to
continuously improve the offering and initiate cost containment. A second approach is deemed a low-
end disruption (ex. Southwest A/L) that delivers “good-enough” performance at affordable prices. The
final, or new market disruption, competes against non-competition. (The depth and complexity of this
topic could not be contained in this article and the author recommends reading Christensen’s book.)
The importance of which growth strategy you select solidifies the direction and actions you’ll take. If
your organization continuously improves its methods to deliver a service while clamping down on
costs, the path taken equates to a sustaining strategy which increasingly adds more performance to
capture growth. If the increasing capability exceeds what customer’s desire (over-shoot needs), the
possibility exists for a segment of donors to seek other venues. An example might be a grass-roots
organization that, over time, has taken on too many causes in an effort to grow. In this case, donors
might feel the message has been diluted and will find another cause to support which is more
centered.
Step 4: Deliberate verses Emergent Strategies
A final theory posed by Christensen culminates WHAT you do and HOW you do it in relation to the
marketplace and your organization on the whole. He suggests that two simultaneous processes
operate in every organization that defines strategy. A “deliberate” strategy is derived by analysis, is
measurable, and is implemented by senior management. An “emergent strategy” is derived from
unanticipated opportunities and is a process of daily decisions of the organization.
Let’s go back to our sweater business example. You make two sweaters – one out of cotton and the
other wool. Your strategic direction is to donate the more durable sweaters next year, but the
organization receives requests for the cheaper cotton sweaters. Thus, the organization allocates
resources to invest in cotton material and the net result is the organization’s actual strategy. Here lies
the critical point – do you adapt emergent opportunities/problems or force a deliberate strategy on
your organization?
Summary
The intent of this meta-analysis was to introduce several market analysis theories and then generate
reflection on the part of nonprofit management. Nonprofits stretch their resources to accomplish the
task at hand without having to consider “competitive forces” which are lurking around the corner.
Since time, money, and energy are limited commodities, the ability to think strategically about your
organization’s direction is more critical than ever.
Undertaking a marketplace analysis achieves two strategic objectives: it identifies WHAT you do and
HOW you do it with respect to the current circumstances of your donor base. A value-gap analysis
quickly discerns those attributes which are important and those to increase, reduce, or completely
eliminate. Defining if you are attempting to sustain your current activities or create new value will
determine a future direction. Finally, will you follow the emergent opportunities or drive deliberate
strategies to initiate growth. These questions will not only define your organization’s future, but re-
organize how you serve your existing constituents.
Bill Nissim consults with organizations on strategic branding
imperatives. His website www.ibranz.com contains reference materials, links, and helpful
articles on the many facets of branding. In addition, Nissim released his first book
“The Brand Advocate” to provide a tool-kit for the marketing practitioner.
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