The Concept of Marketing Within the Context of Public and Government Sector

The aim of this paper is to discuss the concept of marketing within

the context of the public/government sector. Also, issues of
relevance, benefits, constraints and implementation, including
literature based or organisation specific adaptations or models,
trends and current practises have been included.

The paper begins with the discussion of traditional marketing mix that
is what marketing is and the 4Ps of marketing. It suggests that the
simplicity of this marketing mix paradigm has become a taken for
granted path rather than considering it a social exchange process and
hence customers suffer.

It discusses broadening the concept of marketing and new approach to

marketing, which emphasises on social and relationship marketing.
Then, the government/public sector has been introduced and it proceeds
with whether traditional marketing principles can be applied to the
marketing of organisations in this sector. It concentrates on issues
of relevance-how marketing mix fits to it, what are the benefits and
constraints.

1.1 The Marketing Concept and the Marketing Mix:

Before proceeding further, it is essential to define what marketing

is:

Kotler (1991) defines marketing as a social and managerial process by

which individuals and groups obtain what they want and need through
creating, offering, and exchanging products of value with others.

Chartered Institute of Marketing defines it as the management process

responsible for identifying, anticipating and satisfying customers
requirements profitably.

However, there exist numerous definitions of marketing, it is always

about meeting existing needs and anticipating future needs (Bagozzi,
1975).

The marketing concept is a kind of recipe how a company can achieve

its goals by understanding the exchange partners and associated costs,
being a response to external opportunities and threats and to internal
strengths and weaknesses as a means of competitive advantage (Houston,
1986). Bagozzi (1975) underpins this viewpoint, arguing that marketing
is much about the exchange paradigm which focuses on the question why
parties take part in exchanges and how these work. The marketing mix
is the organizations overall offer or value to the customer. The
Marketing Mix is a term used to describe the combination of tactics

used by a business to achieve its objectives by marketing its products

or services effectively to a particular target customer group.
Businesses need to make sure they are marketing:

the right product to the right person at the right price at the right
place and at the right time.

The aim of doing this is to gain a competitive advantage (De Wit and
Meyer, 1998) and thus to outperform competitors.

The concept of marketing mix and 4Ps was introduced in 1965.It has
become the basic model of marketing and has been unchallenged since
then. It is defined as the set of controllable tactical marketing
tools that the firm blends to produce the response it wants in the
target market. The marketing mix consists of everything the firm can
do to influence the demand for its product. It is considered that a
common model for achieving this is the 4-P framework as put forward by
Kotler and Levy (1969). . Lauterborn (1990) proposed that there were
twelve dimensions of marketing, however, McCarthy reduced the model so
that it became known as the 4Ps: Product, Place, Price and Promotion.

Marketing Mix

[IMAGE]

Figure 1: Marketing Mix

Product means the totality of goods and services that the company
offers the target market. The BMW product is automobile-the car. The
main elements of the product include design, engineering features
(like engine capacity, power, etc), comfort and style, which all
together provide them a competitive edge.

Place includes company activities that make the product available to

the target customers. BMW has a strong distributive channel, which
includes independent dealers as well as company owned showrooms.
They select the dealers and place carefully and so that the consumers
may have easy access to the product.

Price is what the customers pay to get the product. BMW decides their
product price and even suggests dealers by considering profit margin
for them. They offer better services, style and quality to attract
customers to bring the price into line with customers perception of
products value.

Promotion means activities that communicate the merits of the product

and persuade target customers to buy it. BMW spends millions on

advertising each year to tell consumers about the company and its
products. The promotional offers may include buy now pay later, 0%
interest loan, free services or insurance for particular duration,
etc.

1.2 Marketing Mix Emergence and Implementation:

Kohli and Jarowski (1990) argue that even if the marketing concept is
a universally relevant philosophy, its implementation is still the
weakest link. Though market orientation is a sign of aligning the
marketing activities with the business strategies (Lynch, 2003), the
problem still is to find appropriate activities.

Defining a target group or choosing the important customers (Shapiro,

1998) is the first step in the marketing effort, as the products
should serve particular customers in a particular way. A key success
factor is a strong decision making process (Lafferty and Hull, 2001),
including a sound understanding of markets and customers in
combination with making well-defined, strategic and tactical
decisions.

The segment, target, position (STP) model has dominated marketing

thinking for many years. The basic idea is that the needs of different

people are different and it is impossible for a marketer to satisfy

all of them. However, it is possible to differentiate or segment and
to position within the markets in order to meet the customers needs
as precisely as possible. This effect is even bigger if the marketed
product is a generic one (Levitt, 1960). The marketer should then
choose a segment (Target) that can be profitably exploited by the
company by offering a product needed by the group at a price
affordable and make it available in places that are convenient for the
target customers and promote (Position) the product as meeting a
specific need of the target group. Hence, the concept of Marketing
Mix emerged.

The problem with the marketing mix paradigm is of the theoretical

nature. Many marketing-related phenomena are not included. It is
arguable that the 4Ps of the marketing mix are not well able to fit to
all the requirements of the marketing concept. The marketing mix and
its 4Ps constitute a production-oriented definition of marketing, and
not a customer-oriented one (Dixon and Blois, 1983). The 4Ps model was
suitable in most cases and was originally developed for FMCG marketing
where transaction marketing is most appropriate. But it may be
restrictive for the organization, which doesnt have any tangible
product to offer to consumers rather intangible product or service. In
this case, marketing mix may be important enough only to support
marketing activities.

Kotler and Levy (1969) said that marketing is a pervasive societal

activity that goes beyond the selling of toothpaste, soap and steel.
They raised a question whether the principles of marketing in
traditional product areas are transferable to the marketing of
services, persons and ideas. There is a great opportunity to expand
the thinking of marketing to an increasing range of societal activity
as increasing amount of societys work being performed by
organisations other than business firms. Some authors have defined
social marketing as the use of marketing skills in social causes or
the study of markets and marketing activities within a total social
system (Bagozzi, 1975). For Bartel, it designates the application of
marketing techniques to nonmarketing fields. Social marketing also
addresses a particular question: Why and how are exchanges created and
resolved in social relationships?

2.Government and Public Sector:

Government and public sector include organisations, which may be

owned, and run totally by government or may have partial part in that.
Even the definition includes the concern is that at what extent it is
controlled by the government i.e. how much part it has to play in
taking decisions for the organisation and its future. Government and
public sector includes organisations such as NHS, Police department,

Fire Department, Inland Revenue, A public transport company, Public

library, University, and a lot more.

Now onwards, this paper will consider NHS as an example whenever it is

required to discuss organisation specific marketing.

2.1 Why do they need marketing?

For commercial organisations, marketing serves to reach the prospect

of profitability (Houston, 1986). Generally, the aim of the government
and public sector organisations is not profitability. Mostly, they
dont offer any tangible product to the consumers. Rather, their
product is a service, information, training, advice, decision and
like. But, it is not the case always. Some government and public
sector organisations have tangible products to offer to the consumers.
For example, ONGC is a public sector company in India, which offers
petroleum products and has the aim of profitability. Even in this type
of cases, profit gained is invested in other government service
ventures. Overall, in this context, a consumer is seen as a citizen
and/or a voter (Bagozzi, 1975). So, marketing is considered as citizen
oriented rather than customer oriented. . Every country has a
different style to market their public sector in their own way.

According to Kotler and Levy (1969), they supply two types of

products. First, the product as physicals products or services, that

takes part directly to the exchange. Second, the product as the idea
of public service, through the quality perceived of the product.
Government sells their political action by selling services and ideas
to public rather citizens. Literature shows that the product of public
service is created from the responsibility of government to satisfy
the customer-voter need.

Talking about NHS, the purposes of NHS are:

- Encourage and assist individuals to remain healthy

- Provide equality of entitlement to health services

- Provide a broad range of services of high standard

- Provide equality of access to these services

- Satisfy the reasonable expectation of its users

- Remain a national service responsive to local needs

To serve these purposes, NHS needs marketing. Also, in the past,

hospitals began to face falling admissions and low occupancy. In the

scramble to pull in new patients, many hospitals turned to marketing.

Some began to focus on offering certain specialities while others
focused on serving the special needs of certain demographic segments
(Kotler and Armstrong, 1993). During January 1999, NHS was criticized
by British newspapers that patients who were arriving at hospital
accident and emergency departments faced long waits; in some cases,
passing their first night in hospital on a trolley because of bed
shortage. Hence, NHS decided that they would shape their services
around the needs and preferences of individual patients, their
families and carers. (Dept. of Health, 2000)

2.2 Marketing in government and public sector:

This chapter deals with market orientation in this sector that

includes researching and selecting target markets, planning marketing
programs with the marketing mix and organising implementing and
controlling the marketing effort, within the public and government
sector. The latter part examines the benefits and constraints of such
a marketing approach for this sector.

As discussed earlier, marketing is a pervasive societal activity that

goes considerably beyond the selling of tangible products (Kotler and
Levy, 1969). Bartels (1974) defines application of marketing to
non-commercial firms as social marketing, being concerned with the

exchanges in social relationships. Social marketing is not the simple

quid pro quo (Bagozzi, 1975) but more complex, as the tangible and
intangible features have to be combined and causes are marketed
(Kotler and Levy, 1969). Thus, social marketing distinguishes itself
from generic marketing only in the idea that social behaviours shall
be influenced not for the advantage of the marketing organisation but
to benefit the target audience and/or the general society (Andreasen
and Kotler, 1996). Luck (1974) argues that no exchange takes place in
a social relationship as a person who receives a free service is not
a buyer and has conducted no exchange of values with the provider of
the service. But this view is very narrow and neglects factors like
psychological benefits. Bagozzi (1975) and Kotler (1972) are convinced
that undisputable a transaction i.e. the exchange of values between
two parties takes place, as not only goods, services and money but
also time, energy and feelings should be regarded as values.

2.3 Market orientation in government and public sector:

According to the marketing theory the first step of the market

segmentation of a service is to define of the user of this service.
This so-called STP marketing (Kotler, 1990), should be considered as
the all-important aspect in designing an appropriate marketing
strategy for non-profit organisations as well as profit-orientated
ones. How does the public sector identify market segment, select and

gain information about target markets? Concept of behavioural

segmentation comes into the picture here while deciding the customer
and the target segment. Behavioural segmentation can group customers
in terms of occasions, usage, loyalty and benefits sought. However,
usage and benefits are the main concerns in public sector marketing as
the public sector market is normally divided between user and non-user
and how to deliver the benefits to the overall public. The concept
segmentation can be irrelevant. This is true because if government
does not segment the market carefully it could lead to the problem of
discrimination.

Due to political issues, policies, procedures and hence restricted

amount of resources, the organisations in this sector are often not
able to serve all possible customer segments with respect to greatest
customer value (Kelley and Mahady, 2003) and still they cannot ignore
any particular segment. NHS has to provide its services to all the
segments of the market rather to say society of citizens here. NHS
cannot neglect any particular class of the society for providing
services. Contradicting this, profit-orientated organisations can more
easily ignore unresponsive, unprofitable or unappealing segments of
the market.

Here the market orientation enables the public service to get closer
to the user by serving the social need of the citizen. It serves also

in a larger extend the expectation of the voter. After defining the

segment and the targets, the public sector is able to influence and
exploit it with the marketing mix.

2.4 Marketing Mix in government and public sector:

Product:

The product strategy is one of the four tools of the marketing mix and
enables to make the exchange more valuable. As said earlier, the
product in the sense of social marketing does not only include
physical offerings but also services and ideas. Therefore, Andreasen
and Kotler (1996) introduced the term offerings, which includes all
aspects provided by government and public sector. The aim of the
sector is to ensure that the citizen gets good service and good value
for money. Bagozzi (1975) said Getting good service and good value
for money aims at developing a long term relationship. NHS has to
decide what forms of service delivery are most effective e.g. which
vaccine and outreach programmes give highest immune coverage. They
need to make sure that consumers are benefited as societal health
increases by buying their product. In short, the product policy in
this sector talks about safety, credibility, security and continuity
values which belong to the national interest.

Price:

The second element of the marketing-mix is the price policy. According

to Zeithaml (1988), from the customers perspective, price is what is
given up or scarified to obtain a product. The price is related to the
achievement of marketing and government policy goals. Pricing is the
key to companies profitability and survival. But in the public sector
the pricing is a dilemma between the covering of the cost and the
reaction of the people to the price rising. However, in government
sector, the customer has to comply with the price e.g. monopoly.
Government agencies such as police forces and taxing bodies are often
not responsive to the public because of monopoly status, but even here
citizens have shown an increasing readiness to protest (Kotler and
Levy, 1969). If NHS raises its charges to cover rising costs and
additional services, it may provoke a reaction from community. Also,
the price strategy results in a legislative decision in this sector.
So there is no price sensitivity and elasticity to the market demand.
Moreover the public service sector is very often in a strategic branch
for the national economy, e.g. defence force. This makes the
acceptation of its price policy inevitable. In order to encourage the
purchase of an offering, operating bodies in this sector need to
ensure that the perceived costs do not outweigh the benefits for the
individual, because if the perceived value is rather low, the offering
is likely to be ignored (Weinreich, 2003; Kotler and Zaltman 1971).

Free or low priced products might be perceived as lacking quality or

the beneficiary might not value it or feel patronised as sometimes a
recipient of alms without consumer rights (Bruce, 1998). Thus,
government and public sector must analyse their market and decide
price accordingly like commercial organisations.

Place:

Place or distributive channels is the third element of marketing mix.

As Bruce (1998) said, Place or distribution, is the activity that
ensures that products get to customers when and where they want them.
In regard to intangible offerings suitable, adequate and compatible
distribution and response channels have to be chosen through which
information or ideas are delivered to customers (Weinreich, 2003;
Kotler and Zaltman, 1971). Furthermore, government and public sector
organisations have to ensure the accessibility of their offerings for
their target segment. The market of public and government sector is
represented with spatially dispersed consumers. The distribution
channel has to respond to the mission of public service. It means
finding a balance between service the all citizen without reducing
accessibility to isolated citizen. This is especially important
concerning individuals who are disabled or have to overcome language
barriers (Shapiro, 1973). That is why NHS has adopted intensive
distribution. It aims to create maximum citizen convenience by a

continuous and mass distribution by interactive methods such as

conferences or workshops (Sheaff, 1991).

Promotion:

In order to create and sustain a demand for an offering, the potential

benefits have to be communicated to the clients. Communications is the
process of transmitting messages with the objective of making the
organisations products or services attractive to target customer. The
communication of the image of public service has an impact on the
consumer perceived values of the government policy. The principles and
methods of communicating promotions to consumers are also in essence
the same as in commercial markets although the message content is
likely to differ. Buyers promotional decisions mainly concern social
marketing in health promotion and health education. NHS Management
Executive guidance also suggests that buyers should stipulate, in
broad terms, what information providers make available to patients and
public (NHS management executive, 1990). Also, NHS promotional
activities include both external and internal communication. External
promotions are primarily for operational purposes: attracting
patients, carers and donors, explaining to them what services are
available and how to use them. Internal communication include
recruiting staff, motivating and training them, etc. (Sheaff, 1991)

2.5 Planning and budgeting the marketing mix in government/public

sector:

The critical marketing strategic planning task is choosing and

developing cost effective marketing programmes as these types of
organisations have limited resources. For example, police department
is trying to decide between a campaign to educate people against
pickpockets or adding a few more permanent policemen to the force.

Generally, an organisation faces following three issues in its

marketing programmes to be cost effective (Kotler and Andreasen,
1991).

1.How can the organisation choose among competing marketing programs?

2.How much should the organisation spend on marketing?

3.How can the organisation determine the best mix of marketing

tactics?

For choosing between alternative programs, organisation can carry out

cost-benefit analysis. Here, they have to identify both types of
benefits that is:

Monetary-whose total value can be expressed in currency

Nonmonetary- such as lives saved or happiness created (Rothschild,

1973).

2.6 Marketing Model for NHS:

Overall, the marketing model followed by the NHS can be derived as

follows:

(Some of the factors and phases of the model have not been discussed
in this report)

[IMAGE]Structural Analysis

Nature of NHS

Incentives facing organisation

[IMAGE]Organisations general objectives

[IMAGE][IMAGE][IMAGE]Situation Analysis

Users: demand profile (personal motivation, segmentation,

influence

from outside health sector)

Users: need profile (technology available)

Substitutes for formal care: Competing health care providers

Marketing audit

[IMAGE]Marketing Objectives and Strategy

Needs analysis

SWOT analysis

[IMAGE]Marketing Plan

[IMAGE]Marketing Mix (4Ps)

[IMAGE]Service Provision

[IMAGE]Tracking (data collection, reporting, remedy)

Figure 2: Marketing model for NHS

Ref: Sheaff, R. (2002) Responsive Healthcare Marketing for a Public

Service, Open University Press

3. Benefits and Constraints

3.1 Benefits:

Government, like all other businesses, has to market its products or

services. Consequently, both the government and the public tend to
gain from it. Since the government provides a lot of services, the
benefits of each service would probably be different. According to
official NHS website, they have recently set up a website which is
user friendly. Users can access this website and get any information
relating to health issues. This marketing campaign would save the NHS
thousands of pounds and help put resources elsewhere. Another benefit
of marketing NHS service would be to know the perception of different
people from different location, gender and ethnic backgrounds in
respect of the above issue. This is very important feedback. If
citizens dont trust the NHS or have a negative perception, the health
system would do more harm than good. This is why they market their
products or services to let people know that the NHS is around to
benefit the public. Another example of benefit in the sector would be

the transportation service. Public transport marketing promotes local

transport services by working with bus operators and large companies
to develop effective marketing of the transportation system. The
public benefits because of the fact that the government has made an
attempt to make transportation easier by advertising the services
available. On the other hand, people would use public transportation
more often leading to new services and developing existing ones to be
more efficient (Jobbes, 1998).

In general, marketing in this sector enables to see the customers as

citizens. If one is more satisfied as a person, one will feel more
listened as citizen. Marketing can improve the responsiveness to
citizen claims. It develops trust and long-term relationship between
the consumers (citizens) and the government.

3.2 Constraints:

In the government and public sector, as the offerings is spread very

widely across the nation, segmentation has to be applied with care.
For many services the public expectation of fairness may imply that
people should receive the same quality of service whoever and wherever
they are. Most government spend too much to provide a particular
service. Because of inability to know how much to invest in a
particular service or product, other public services suffer.

Government should not compete in commercial market but its supplier

includes commercial market. As a result one of the barrier- high cost
solutions emerges. The second barrier government and public sector
face in terms of constraints and barriers to marketing is personal
ambition It can hinder the progress of marketing in the sector
(Jobbes, 1998). The third barrier is the reward system. According to
Stanton and others (1991), behaviour is influenced by the reward
system. They believed that a person would do a better job if paid
well. Webster (1988) claimed that developing the market and customer
oriented business lies in how managers are rewarded. Another barrier
on marketing for the sector would be the gap between what managers say
and what they do.

[IMAGE]

[IMAGE]

[IMAGE]

[IMAGE]

Figure 3: Barriers to implementing the marketing concept

Ref: Jobbes, D. (1998) Principles & Practice Of Marketing 2nd

Edition McGraw Hill

Government will never find themselves under pressure in making profits

or being extra competitive. Although it could be argued that
government does not seek product improvement due to the low

competitiveness (Porter, 1998) but their responsibility is much

greater than those of the private sector which means a reasonable
level of standard is required in the public sector which is usually
above average. In the public sector, it is a constraint as a low
return on investment because selling is not necessarily associated
with buying, as recipient does not always have to pay for the product.
Due to the lack of return and competition, government might not
produce all products at a quality level that can meet customers
satisfaction.

Government and public sector organisations typically have not

integrated their marketing activities. Also, their administration
includes a variety of marketing positions, which becomes the cause for
poor coordination. These types of organisations are more casual about
collecting information on how they are doing and what is happening in
the market place (Kotler and Levy, 1969).

4.Conclusion:

From the details presented above, it is very clear that the concept of
marketing has been broadened from product oriented to customer
oriented. It might be agreed that the marketing concept is
transferable from commercial sector to the public sector in its
present form. The ease with which marketing can be transferred is

dependent upon the nature of the exchange process. It is almost

unarguable that no organisation can avoid marketing. The choice for
government and public sector organisations is not whether to market or
not but the choice is whether to do it well or poorly.

Numerous authors such as Kotler and Levy (1969) and Shapiro (1988), to
name a few, put forward the need of tailored marketing strategies,
supporting the corporate strategies and argued that an open-minded use
of the marketing tools and techniques and strategies are a lever for
superior performance (Levitt, 1960; Becker, 1993).

In private sector, exchange takes place whenever a transaction in made

in between cash and products. But, in the public sector the exchange
is not always the same thing. In the case of a free or low price
service, the government and public sector do not attempt to gain
advantage at the expense of the customer. Marketing is a tool for the
modernisation of the sector and the society. By identifying the lack
of profit motivation and social objectives of the public sector
marketing has a direct impact on the social change. Therefore
marketing in its quest of improving relation between public sector and
society, and improve its image is become relevant. But the relevance
of the issue has limits. Marketing implementation has to follow the
political decision because of the political nature of the public
service.

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WWW.NHS.CO.UK