Transcript Strategic Marketing for Nonprofit Organizations

Chapter 11 –
nd
2
Half
Choosing Among Competing
Programs Through Benefit/Cost
Analysis
John M. Godwin
PADM 7040
Dr. Gerald Merwin
October 26, 2005
What is at stake?
There will always be more programs than
funding, so the question remains as to
which programs an organization should
pursue. Cost/Benefit Analysis provides a
method of determining ‘the most bang for
the buck,’ so to speak, in deciding which
programs to pursue at any given time.
Types of Benefits
There are three main categories of benefits:
► Monetarily quantifiable – can be expressed
with a definitive dollar value.
► Nonmonetary quantifiable – expressed not
with a dollar value, but with a definitive
numerical value.
► Nonquantifiable – cannot be expressed
monetarily or numerically, but still retains a
definitive intrinsic value.
Cost/Benefit Determination
► Net
benefit = Benefits minus the Costs
► Benefit/cost ratio = Benefits divided by the
Costs
A positive net benefit or a benefit/cost ratio
greater than one indicates a program worth
pursuing. Those in this category should
then be compared with each other to
determine the greatest yield per dollar.
Problems in Benefit/Cost Analysis
► Program
outputs might change the market
prices used to determine initial benefits,
thus altering final costs.
► Some programs benefit one group of people
over another, creating disparities among
them.
► Not everything worth having has a bottom
line.
Determining Marketing Expenditures
Several methods exist in determining this
level:
► Affordable – simply asking what can be
spared from the operating budget. This
shows little relevance between marketing
and outcomes.
► Percentage-of-Revenues – allocating a
certain percentage to marketing, only this
should be more of an inverse relationship.
Determining Marketing Expenditures
(cont.)
► Competitive-Based
– equaling the marketing
allocations of similar organizations as not to
loose market share.
► Objective-and-Task – involves defining
marketing objectives, determining methods
of achievement, and estimating the costs for
completion.
Determining Marketing Expenditures
(cont.)
► Response
Optimization – considered the
best, it involves “the likely response of a
market during a specified time period
associated with different possible levels of a
marketing element” (Andreasen & Kotler, p.
301). There is a point in marketing where
more is less (returns diminish as price
increases).
Estimating Response Function
► Statistical
– gathering past data and
performing statistical analysis. This can be
difficult with the amount of data gathering
required and ensuring a varied marketing
mix.
► Experimental – varying expenditure levels in
different geographical areas and noting the
outcomes.
► Judgmental – ask the experts.
Additional Factors
► Type
of consumer – different groups require
different approaches.
► Marketing Task – at what stage in
development is the target audience?
► Stages of Offer Life Cycle – at what stage is
the offering itself?
► Economic Outlook – how much expendable
income is out there?
Work Cited
► Andreasen,
Alan R., & Kotler, Philip (2003).
Strategic Marketing for Nonprofit
Organizations (6th ed.). New Jersey:
Pearson Education.