16. Marketing in the Public Sector

There is an international public sector. Multilateral cooperation was a feature of the second half of the twentieth century, representing a historical reckoning of the nation state with the growing array of social, political, economic, and environmental issues that affect us all. The composition of this international public sector is varied and evolves; its institutions range from large organizations that are household names, e.g., the United Nations, to smaller regional organizations comprising a few member countries. Areas of broad-based international cooperative activity include (i) political and administrative cooperation; (ii) international justice and law; (iii) international cooperation for development; (iv) regional cooperation; (v) science, technology, and education; and (vi) human rights and humanitarian affairs.

At its most common level, namely, that of the country, the composition of the public sector varies. Yet, public institutions typically deliver such critical services as national defense, police protection, public buildings, fire fighting, urban planning, modes of transport, public transit, corrections, taxation, primary education, and various social programs. They might extend goods and services that nonpayers cannot be excluded from such as street lighting; that benefit all of society, not just individuals such as parks and recreation areas; or that encourage equal opportunity such as subsidized rent. Sometimes, provision is moved from the public to the private sector. This is known as privatization, which has from the early 1980s taken place on a large scale everywhere in the world. (In other, less common instances, provision may shift from the private to the public sector—health care is but one area where some public institutions now make available, or are experimenting with, goods and services previously furnished by the private sector.) Elsewhere, with differing extents even within countries, areas of overlap exist: this is most often seen in water management, waste management, and security services, among others. To note, the public sector routinely engages the private sector to provide goods and services on its behalf, a practice known as outsourcing.

From the twentieth century, growth in gross domestic product per head in Western Europe and North America, and later in some Asian countries, was accompanied by a more-than-proportionate growth in government expenditure. Some consider this the most important single influence on the evolving structure of advanced economies.

Government expenditure affects the structure of employment, the direction of private sector efforts to conform to government policies and supply government needs, and the composition of personal incomes (which increasingly depend on government expenditure).

The authors contended that government bureaucracy in the United States, appropriate to the industrial era and times of economic and military crises during which it was created, is not the best system of governance for the postindustrial information age. From the 1960s, the American public has increasingly desired quality and choice of goods and services and efficiency of production. Arguing that quality and choice are not what bureaucratic systems are designed to provide and that efficiency is not possible in a system of complex rules and drawn-out decision-making, David Osborne and Ted Gaebler introduced 10 principles of reinvention to guide the transformation of industrial-era public systems. The principles are (i) catalytic government (steering rather than rowing); (ii) community-owned government (empowering rather than serving); (iii) competitive government (injecting competition into service delivery); (iv) mission-driven government (transforming rule-driven organization); (v) result-oriented government (funding outcomes, not inputs); (vi) customer-driven government (meeting the needs of the customer, not the bureaucracy); (vii) enterprising government (earning rather than spending); (viii) anticipatory government (prevention rather than cure); (ix) decentralized government (from hierarchy to participation and teamwork); and (x) market-oriented government (leveraging change through the market).

From 1988, the United Kingdom had made an early start with the Next Steps initiative to transforming the functions, organization, and traditions of the executive and its relations with Parliament. The reforms sought to separate service delivery functions from policy functions, and have the public sector provide services through markets or market-like arrangements, managed by people with the resources and authority to provide those services. The difficulties met by the Next Steps agencies were lack of clarity in the relationship between these agencies and their parent departments, uncertainty concerning who is accountable for performance, and complexity in developing and setting performance goals.

On a par with the reforms, personnel in the public sector are being transformed from administrators and custodians of resources into accountable managers with greater delegated authority. The notion of delegated authority is important: it provides managers greater opportunities to match the provision of goods and services to the needs of clients, audiences, and partners in their area.

In summary, socialists favor a large public sector consisting of state projects and enterprises (while social democrats tend to favor a medium-sized public sector limited to the provision of universal programs and public services); liberals favor a small public sector; and libertarians favor no public sector, with government tasked primarily with safeguarding property rights, drafting and enforcing laws, and resolving disputes.

In economics, a market failure exists when the production or use of goods and services by the market is not efficient. The externality (or spillover) of an economic transaction is an impact on a party that is not directly involved in the transaction.

The uptake of notions of entrepreneurial government suggests that we may perhaps be moving toward public sector organizations that have extensive powers and responsibilities but, except in times of crisis, produce few public goods and services themselves.

Naturally, marketing a service also differs from marketing a product. What is significant about services, as opposed to products, is the relative dominance of intangible attributes in their makeup.

Politics is the activity through which people make, preserve, and amend the general rules under which they live. It is inextricably linked to the existence of diversity and conflict and willingness (or lack thereof) to cooperate and act collectively.

All the same, differences should not be exaggerated and used as an excuse for inefficiency, ineffectiveness, and waste.

Examples include the promotion of local areas for tourism or economic development.

Consumerism has both fuelled and been sped by decentralization, rising customer consciousness, improved communications, greater choice, and systems of redress.

If the public sector must now abide more closely by the key market principles of transaction, price, and competition—which rest inter alia on encouraging end-user choice, internal markets, quality-based management systems, market testing, competitive tendering, and contracting out—it is de facto being placed in a similar position as the private sector, against which it may have to compete. Public sector organizations must therefore also become conversant with such notions as market segmentation, market positioning, and the marketing mix. (Even where there is no competition from the private sector, public sector organizations are often part of an internal market and are compelled in any event to compete against one another.)

Notions of relational capital and relationship marketing can do much to offset resistance to the use of marketing in the public sector. First, they offer a conceptually valid framework with which to locate and articulate in public sector organizations a marketing function that emphasizes its strategic rather than operational significance. Second, they give practical insights into how marketing might help meet the challenges of the plural state, including suggestions as to intra- and interorganizational management and governance aspects of it.

Advertising is a case in point: the same advertising techniques used to promote commercial goods and services can be used to inform, educate, and motivate the public about noncommercial issues, such as HIV/AIDS, political ideology, energy conservation, and deforestation. In its noncommercial guise, advertising in the public interest can be a powerful educational tool capable of reaching and motivating large audiences.

Kotler and Lee (2007) agree: “Marketing is much more than advertising; it is about knowing your customers, partners, and competitors; segmenting targeting and positioning; communicating persuasively; innovation and launching new services and programs; developing effective delivery channels; forming partnerships and strategic alliances; performance management and pricing/cost recovery. Marketing turns out to be the best planning platform for a public agency that wants to meet citizens’ needs and deliver real value. In the private sector, marketing’s mantra is customer value and satisfaction. In the public sector, it is citizen value and satisfaction”.

The book ends with vital information on how to manage the marketing process by gathering data, input, and feedback; monitoring and evaluating performance; and developing a compelling marketing plan.