Public Sector Marketing
Is Different
Charles W. Lamb, Jr.
56
Charles W. Lamb, Jr., is M.J. Neeley Pro-
lessor of Marketing at Texas Christian
University. He is coauthor of several books,
including Strategic Mdrketing for Nonprofit
Organizations----Ca.ws and Readings (New
York: Prentice-Hall, 1987), Marketing
Governn~zt and Social Services (New York:
Wiley, 1986), and Strategic Marketing Cases
and Applications (Homewood, Ill.: R. D. Ir-
win, 1986).
Like private firms, public organizations
identify their clientele, develop services, de-
termine prices, design distribution and de-
livery systems, and communicate the
efficacy and availability of offerings. How-
ever, public sector organizations differ from
private organizations in important ways.
These differences pose unique marketing
problems that require unique marketing
solutions.
n 1969 Philip Kotler a n d Sidney
I Levy a d v a n c e d the view t h a t
m a r k e t i n g is a relevant discipline
for all organizations insofar as all or-
ganizations can be said to have cus-
tomers and products.I This notion that
public sector organizations could, a n d
possibly s h o u l d , a d o p t m a r k e t i n g
practices received immediate and
widespread academic interest and at-
tention. However, the idea o f g o v e r n -
m e n t a n d social s e r v i c e a g e n c i e s
e n g a g i n g in m a r k e t i n g activities did
not diffuse a m o n g public sector m a n -
agers until the mid- to late 1970s.
Several factors stimulated the in-
creased awareness o f and interest in
marketing at that time. One factor was
the rapid decline in the availability o f
financial resources f r o m traditional
I. Philip Kotler and Sidney.]. Levy, "Broad-
ening the Concept of Marketing," Journal ~¢
Marketing, January 1969: I0-15.
tax sources. A n o t h e r was the so-called
"taxpayers' revolt," which led to the
passage o f Proposition 13 in Califor-
nia and to tax and s p e n d i n g limit in-
itiatives being voted on in 15 o t h e r
states in 1978. A letter to the editor
o f the San Francisco Chronicle elo-
quently s u m m a r i z e d the s e n t i m e n t
that prevailecl d u r i n g the late 1970s:
We are saying that we know Prop-
osition 13 will severely disrupt state
and city governments. We are also
saying that we want it to severely
disrupt state and city governments.
We are not anarchists, we are not
radicals, and we do not think we are
irresponsible. We are simply sick and
tired of having our pockets picked
at every level of government. We
want only the most necessary gov-
ernment "services.'"-'
2. Quoted in Milton Friedman, "A Progress
Report," New.s~oeek,April 10, 1978: 80.

Other factors that stimulated an in-
terest in public sector marketing are:
• Decreased customer satisfaction
and participation;
• Increased competition;
• Decreasing n u m b e r s in many
traditional target markets; and
• Increasing d e p e n d e n c e u p o n
client fees and charges to defer op-
erating expenses.
Taxpayers, lawmakers, employees,
customers, consumerists, and other
affected and interested groups began
showing their increasing dissatisfac-
tion with the performance of govern-
ment organizations by withholding
money, votes, and participation, and
offering instead vocal criticism.
At the same time, many public or-
ganizations began facing increased
competition from both public and
private organizations. For example,
attendance at City of Dallas swim-
ming pools dropped by 16 percent in
one year when commercial aquatic
parks near the city opened for the first
time. Many agencies that previously
operated in monopoly environments,
with little or no prospect of ever hav-
ing to compete for financial support
or customers, became increasingly
disturbed as competitive pressures in-
creased and government subsidies de-
clined.
Many of these same organizations
began to recognize that their target
populations were shrinking drasti-
cally. Half as many babies were born
to American women in the late 1970s
as in the late 1950s. The average size
of the U.S. family shrank from 3.7 in
1965 to 2.86 in 1977. Divorce, single-
parent households, dramatically in-
creasing numbers of women in the
work force, and geographic popula-
tion shifts were only a few of the many
factors that substantially reduced par-
ticipation in--and support for--many
government and social service orga-
nization activities by traditional mar-
ket target clientele.
The impact of many of these influ-
ences apparently culminated in the
late 1970s, when many public sector
managers and supporters desperately
turned to commercial sector market-
ing experts in hopes of reversing the
prevailing trends in financial support
and participation. The exasperation
o acteristics separate the marketing of
experienced by many managers is il-
lustrated by the following observa-
tio n:
Well, now it seems like the "artsy"
types view us [marketing profes-
sionals] as their saviors. Whenever
they have a problem, it's now a mar-
keting problem. If they can't get
people to visit a museum, they've
• got a marketing problem and need
a marketing person to solve it....
They believe we have this little box
and all we have to do is open up the
box and all of a sudden they'll have
thousands of people paying millions
of dollars to go into their museums?
The experience of public sector or-
ganizations with marketing has been
mixed. Dozens of success stories have
appeared in professional journals and
trade magazines. Many managers have
found marketing concepts and tech-
niques useful in thinking about and
dealing with difficult problems. Oth-
ers have become frustrated with ef-
forts to convince colleagues of the
relevance of and the need for mar-
keting. Still others have become frus-
trated with efforts to develop and
implement marketing programs. A
major source of this frustration has
been the recognition that unique as-
pects of public sector organizations
substantially influence and often dic-
tate tactical and strategic marketing
decisions.
This article demonstrates that:
3. Shelby Hunt, transcript of a panel dis-
cussion, "Have We Reached Agreement on
What the MarketingDisciplineShould Be?"in
Conceptual and Theoretical Developments in Mar-
keting, ed. O. C. Ferrell, Stephen W. Brown,
and Charles W. Lamb,Jr. (Chicago:American
Marketing Association, 1979), p. I I.
Public Sector Marketing Is Different
1. A n u m b e r of unique char-
public services from the marketing of
private services;
2. These characteristics pose
unique problems for public sector
marketers; and
3. Public organization marketing
problems require public organization
marketing solutions.
These are not new propositions.
Several others have pointed out var-
ious distinctions between public or-
ganization marketing and private
sector marketing?
The characteristics that distinguish 57
between private and public sector ser-
vices fall into three categories:
• Environmental and organization
differences:
• Profit versus nonprofit orienta-
tions; and
• Target market considerations.
DIFFERENCES IN
ENVIRONMENTS
AND ORGANIZATIONAL
STRUCTURES
ifferences in the environ-
D ments and organizational
structures of public and pri-
vate sector organizations may be cat-
egorized under two broad headings:
environmental forces and organiza-
tion-general public interrelation-
ships?
Environmental Forces
Three specific environmental factors
tend to have different impacts on
public and private sector organiza-
tions. These are:
4. See, for example, Christopher Lovelock
and Charles B. Weinberg,"ContrastingPrivate
and PublicSector Marketing,"Proceedings tflhe
1974 AMA Educators Conference, ed. Ronald C.
Curhan (Chicago: American Marketing Asso-
ciation, 1974), pp. 242-47; Christopher Love-
lock and Charles B. Weinberg, "Public and
Nonprofit MarketingComesof Age,"Review of
Marketing (Chicago: American Marketing As-
sociation, 1978), pp. 413-52; and John L.
Crompton and CharlesW. Lamb,Jr., Markeling
Government and Social Services (New York:Jnhn
Wiley& Sons, 1986).
5. See Hal G. Rainey, Robert W. Backoff
and Charles H. Levine,"ComparingPublicand
Private Organizations," Public Administration
Review, March-April 1976: 2,33-44.
 Business Horizons /July-August 1987

"Because government agencies

are owned essentially by citizens,
potential clients often have performance expectations
that exceed their expectations for private organizations.
Government agencies are expected to uphold higher levels
of integrity, fairness, responsiveness,
and accountability."
58

• Autonomy and flexibility; and personal a g g r a n d i z e m e n t by do their private sector counterparts.

• Degree of market exposure; and
• Political influehces.
Autonomy and flexibility. Public
sector organizations have less auton-
omy and flexibility than private firms.
This affects the extent and speed with
which they are able to implement
marketing activities--such as intro-
ducing and withdrawing programs,
changing price structure, advertising,
opening or closing facilities, or focus-
ing attention on the most responsive
segments of a market. This is not to
imply that public organizations can-
not effectively engage in marketing.
It simply acknowledges that they often
do not have as much flexibility as pri-
vate firms in this regard.
Degree of market exposure. De-
gree of market exposure refers to the
extent to which an organization is
subject to the forces of supply, de-
mand, and competition for revenues.
In this sense, public organizations
have less market exposure than pri-
vate firms because they obtain at least
some of their revenues from political
appropriations instead of directly
from clients who purchase their ser-
vices.
Because they experience less mar-
ket exposure, public sector organi-
zations are generally believed to have
less incentive for reducing costs, im-
proving efficiency, or generally im-
proving performance compared to
their private sector counterparts. It is_
frequently argued that "managers of
organizations financed by appropri"
ations will seek organizational growth
maximizing appropriations and thus
tend to deemphasize operating effi-
ciency. ''~
Political influences. Political forces
have a much greater impact upon
public sector organizations than on
private sector organizations. Popular
elections, political appointments, in-
terest group demands, lobbying ef-
forts, and the political agendas of
elected and appointed officials tend
to have a destabilizing effect on many
public sector organizations because
political consensus and program and
resource priorities change frequently.
This adversely affects the implemen-
tation of marketing activities such as
mission and objective specification,
long-range planning, budgeting,
pricing, program prioritizing, and es-
tablishing general operating proce-
dures.
Private organizations are not nearly
so affected by the destabilizing events
that regularly occur in the political
arena because, in the private sector,
professional managers control re-
source allocations and tend to be
guided by consistent long-term objec-
tives.
Organizational-General Public
Interrelationships
Public sector organizations have a
much more comprehensive interre-
lationship with the general public than
6. Rainey, Backoff and Levine (note 5), p.
'235.
These interrelationships provide both
marketing o p p o r t u n i t i e s and con-
straints that do not exist in the private
sector.
For example, individuals cannot
avoid participating in the financing of
most government activities. Regard-
less of whether they use the services
offered, they pay for these activities
indirectly with their taxes. Further-
more, individuals cannot avoid using
many government services, either be-
cause no alternative service suppliers
exist or because use is required by law.
Examples include municipal water,
sewage, and police and fire services.
Government entities exist to serve
the citizens in their jurisdiction. Thus,
the citizenry as a whole establishes
government entities through the con-
stitutional and charter process. Busi-
ness enterprises, by contrast, are
created by, and responsible to, only a
limited number of individuals.
Because government agencies are
owned essentially by citizens, poten-
tial clients often have performance
expectations that exceed their expec-
tations for private organizations. Gov-
e r n m e n t agencies are expected to
uphold higher levels of integrity, fair-
ness, responsiveness, and accounta-
bility. This p r o p r i e t a r y interest of
citizens means that public sector or-
ganizations are subject to much
greater public scrutiny than are pri-
vate businesses. These organizations
can have few secrets. Citizens demand
openness in government, and they
want to eliminate or at least reduce
abuses of government power.

DIFFERENCES IN PROFIT AND
NONPROFIT ORIENTATIONS
he distinction between profit
T and nonprofit orientations is
often cited as a major differ-
ence between private and public sec-
tor organizations. 7 This difference has
implications in three areas:
1. Objectives. Public organizations
tend to pursue multiple, nonfinancial,
qualitative objectives simultaneously,
whereas private sector organizations
pursue measurable financial objec-
tives.
2. Pricing. Public sector organiza-
tions typically rely upon taxation or
philanthropy for at least some of their
revenues, whereas private enterprises
use direct customer pricing to raise
revenue.
3. Performance evaluation. T h e
complexity and intangibility of public
organization objectives make per-
formance evaluation difficult, whereas
private organizations rely on more
precise profit figures for measuring
performance.
Objectives
In the private sector the profit motive
provides both a consistent objective
for guiding decisions and a criterion
for evaluating results. Public sector
organizations do not seek to make a
profit for redistribution to owners or
stockholders. However, most public
sector organizations are expected to
provide equitable, effective, and ef-
ficient services that respond to the
wants and preferences of multiple
constituencies, including users, pay-
ers, donors, politicians, appointed of-
ficials, the media, and the general
public. Their success or failure can-
not be measured in strictly financial
terms.
The lack of a financial "bottom line"
and the existence of multiple, diverse,
intangible, and sometimes vague or
conflicting objectives makes prioriti-
zation, decision making, and per-
formance evaluation difficult for
public organization managers. These
differences require approaches dif-
ferent from the ones that are com-
monly used in the private sector.
7. See, for example, Lovelock and Weinberg
(note 4).
Pricing
The primary function of pricing in
the private sector is to raise revenue.
However, in public organizations the
income redistribution, equity, and ef-
ficiency functions of price are gen-
erally of more concern than its ability
to raise revenue. ~
The purpose of income redistri-
bution is to require higher income
groups to subsidize with taxes the basic
services used by lower income groups.
Equity addresses the relationship be-
tween the one who benefits and the
one who pays for services. The effi-
ciency objective of pricing concerns
the use of a given set of resources so
that society derives the maximum
benefit from them.
Other characteristics of pricing are
unique to the public sector. Indirect
payment through taxes for "free" ser-
~¢ices, separation between those who
pay for and those who use services,
and below-cost pricing are just a few
of the different dimensions that make
pricing in the public sector different
from pricing in the private sector.
Performance Evaluation
The existence of multiple, nonfinan-
cial, and sometimes conflicting objec-
tives makes performance evaluation
difficult for public sector managers.
Cost-benefit analysis and similar
methods of performance assessment
used in the public sector are less ob-
jective and precise than the "bottom-
line" profit figure used by private or-
ganizations for measuring perform-
ance and assessing opportunities.
Public agencies typically evaluate
their performance in terms of three
broad criteria: effectiveness, effi-
ciency, and equity. Effectiveness is the
degree to which an organization re-
alizes its goals. Efficiency measures the
ratio of inputs to outputs. Equity is
concerned with issues of fairness.
Three alternative equity standards
are recognized, each offering differ-
ent guidelines for implementation.
• Equal opportunity entails dis-
tributing equal resources and amounts
of services to all citizens regardless of
8. See Crompton and Lamb (note 4): 321)-
38.
Public Sector Marketing Is Different
need or the amount of taxes or fees
paid.
• Compensatory equity entails al-
locating services so that disadvan-
taged groups or areas receive extra
increments of resources.
• Market equity entails allocating
services to citizens or neighborhoods
in proportion to the tax or fee reve-
nue that they produce.
All of these performance standards
are more ambiguous and difficult to
put into operauon and measure than
are profit and loss standards.
59
TARGET MARKET
CONSIDERATIONS
hree target market issues are
T unique to public organiza-
tions. First, instead of target-
ing the most receptive segments of the
market, public organizations must
often select apathetic, disinterested,
or strongly opposed targets. Second,
many public organizations are pres-
sured or required to adopt undiffer-
entiated strategies. Third, public
organizations are often expected to
complement, rather than compete
against, private sector organizations.
Apathetic, Disinterested, or
Strongly Opposed Targets
Private sector organizations usually
give priority to developing those mar-
ket segments that are most likely to
be responsive to particular offerings.
The necessity of developing market-
ing programs aimed at relatively un-
responsive targets or persons who are
strongly opposed to receiving service
is a problem unique to public sector
organizations. This includes targets
for services such as vaccinations, fam-
ily planning guidance, help for prob-
lems of drug or alcohol abuse, and
psychological counseling.
Given the desire or necessity to
reach unresponsible markets, should
the organization focus on the least re-
sistant segment, the most resistant
segment, or both? Valid arguments
can be made for any of these options,
depending upon situational factors
such as financml resource availability
and public health or welfare consid-
erations.
A critical issue is identifying and,
where possible, overcoming major con-
 Business Horizons /July-August 1987
straints contributing to unresponsive-
ness. Four categories of these
constraints are:
• Barriers caused by weaknesses in
an organization's marketing mix;
• Social constraints involving re-
lations with other people;
• Constraints that are a function of
individual circumstances; and
• External physical constraints,
particularly climate and physical to-
pography.
Pressures to Adopt
Undifferentiated Strategies
60
Public sector organizations often
adopt undifferentiated strategies by
default. Sometimes they fail to rec-
ognize the advantages of targeting, or
an undifferentiated approach ap-
pears to offer economies of scale and
low per capita costs. In other in-
stances, public sectors are pressured
or required to seek to serve the max-
imum number of people (United Way-
supported social services, scouting),
to provide equal opportunity (schools),
or to otherwise distribute services eq-
uitably (streets, sewers, libraries).
The problem with developing ser-
vices that are targeted at the average
user is that there are few "average"
users. Therefore, such strategies typ-
ically fail .to fully satisfy any market
segment. Most profit-seeking firms are
well aware of the need for segmenting
markets and developing targeted
marketing programs rather than
adopting undifferentiated strategies.
Positioningm
Competing or Complementing?
The primary role of many public sec-
tor organizations is to provide ser-
vices, within the scope of available
resources, to those individuals or
groups who are not adequately ser-
viced by private sector organizations.
Concern is with complementing rather
O O
R
'11'
than competing with the efforts of
others. Therefore, it it necessary to
look at similar services that are being
offered if the organization is to iden-
tify its own distinctive contribution
rather than duplicating the efforts of
others.
The positioning task is to identify
underserved market segments and to
develop marketing programs that
match their needs rather than to tar-
get the most lucrative and potentially
profitable niches.
p ublic organizations share im-
portant characteristics with
private sector service firms.
Both market products that cannot be
seen, felt, tasted, o1" smelled in the
same manner as goods can be sensed.
Both often require the customer to be
present during the production pro-
cess. The quality and essence of both
private and public services are char-
acterized by a high degree of varia-
bility fi'om producer to producer and
day-to-day variability fi'om the same
producer. Neither private nor public
services can be inventoried in the way
that tangible goods can be produced,
saved, and sold at a later date.
Public services have a number of
other characteristics that differentiate
them from private servic.es. These
characteristics pose unique marketing
problems that require unique mar-
keting solutions. For example, public
organizations have less autonomy and
flexibility than private enterprises, but
less market exposure. They are sub-
jected to substantially more political
influence than their private sector
counterparts. Because all of the citi-
zens of a jurisdiction "own" its public
facilities and programs, public orga-
nizations have much more compre-
hensive interrelationships with the
general public than do private firms.
Public organizations also face
unique target market challenges. They
are often charged with serving apa-
thetic, disinterested, or strongly op-
posed client groups rather than the
most receptive segments of a market.
Many public organizations have tra-
ditionally been inhibited in (o1" pro-
hibited from) a d o p t i n g market
segmentation and targeting strate-
gies. The result has often been sterile,
uninteresting programs that do not
appeal to anyone.
Public organizations are often not
fi'ee to target the largest, the most re-
sponsive, o1" the most profitable mar-
ket segments. They are often charged
with complementing, rather than
competing with, the private sector.
This often means targeting the small-
est, least responsive, most expensive
to reach, or least sought after seg-
ments of a market.
These differences pose interesting
challenges and exciting opportunities
['or:
• Public sector managers;
• Business professionals who serve
on voluntary boards and advise gov-
ernment and social service agencies;
• Consultants charged with pro-
riding practical solutions to a wide
range of difficult problems; and
• Researchers interested in this
specialized area of study.
They also suggest that public or-
ganization marketing problems re-
quire public organization marketing
solutions. []