Identifying target customers for a social enterprise

Delivering on the value proposition to the target customer is the critical element of any business model. The customer in turn will pay for the service, generating the revenues to make the business viable. For most businesses, customer adoption is a key measure of success. 

Every type of business, both social and traditional, has many types of customers; however, typically in traditional businesses, the paying customer makes the purchase decision. In the case of social enterprises, the customer who buys the product or service may often not be the ultimate consumer of the product or service. The decision-maker on the product or service is likely the party paying for it (the payer) and this may be the government, a foundation, an individual or other third party such as a funder. The customer who consumes the product or service (the participant) will likely have access to the product or service at no cost or a lower than market price through the payer.

An effective participant-focused marketing plan shifts the focus of your organization’s business plan from being program driven to being market-driven. Without the key bottom line metrics that keep for-profit businesses on track, focusing on and understanding your participants may be the only way for a social enterprise to accomplish its mission.

To fully understand the needs of each of the target participants and payers for your organization you should apply customer segmentation strategies, a key marketing tool for social enterprises. As a result, you will be able to refine and deliver your product or service, establish the appropriate marketing mix and develop a pricing model that is appropriate to help scale your organization considering both the needs and resources of both your participants and payers.

Your ongoing marketing program to both payers and funders should include describing, quantifying and promoting how you’ve improved social and environmental conditions. You need to demonstrate a measurable impact by using tools like outcome evaluations, customer satisfaction surveys and other market/impact research tools  You should prove further impact through outreach, influence and leadership in the community.

When market demand and social impact differ

For social enterprises, customer preferences, as reflected in market demand, do not always indicate social value creation and might mislead from the optimal social impact. See below for examples of when this might happen.

• Incentives of third party payers do not align with the social mission or the interests of the intended beneficiaries. For example, a public health organization may be pressured to lower payments for drug rehabilitation services to a point lower than practical. In this case, organizations compete to be the lowest cost provider, which may compromise social impact.
• Paying customers cannot accurately assess quality of programs or services. Measuring social value is difficult. As a result, customers lack adequate information to gauge the quality of social goods and services. Social value is not determined by customer demand or a lack thereof.
• Social benefits created by social ventures often exceed consumer value. The total societal benefits surpass what they directly provide to the individuals they serve. This would be seen in programs that prevent youth from committing crimes that generally have a high cost to society or reducing the incidence of spreading diseases among the healthy population. Alternatively, high consumer demand does not necessarily indicate high social value. Homeless shelters serving alcoholic beverages may demonstrate high demand, but this demand is not a sign that these shelters would be superior.

Marketing tips for social entrepreneurs

Think of the payers as customers (the retailers of your product or service to the end-consumer); this helps to shift the perspective away from feeling that the third party isn’t getting anything in return for their financial purchase.

Market your social mission as well as your product or service. A social enterprise can further enhance their reputation through public recognition.

When evaluating your current participating customers think about:

• Which participant do you serve most effectively? How do you serve them using limited resources?
• How can you best attract more users of the product or service?
• Why is your cost so high relative to the social outcomes for certain participants? How can the cost be decreased without reducing the impact?

References

Dees, J.G., Emerson, J.,& Economy, P. (2001).Enterprising Nonprofits: A Toolkit for Social Entrepreneurs. Toronto: John Wiley& Sons.

Dees, J.G.& Anderson, B.B. (2003).For-Profit Social Ventures. Duke University.

Tags: marketing, social-entrepreneurship, social-innovation