By: Steve Zimmerman
Unlike for-profit markets where the customer is often paying directly for services or a product, nonprofits operate in a split market where those receiving services are often not the same as those funding services. One of the implications of this is that because of the intense focus and need for revenue, it is easy for leadership to focus on funders when considering their market. However, sustainability is built when there is alignment between the impact and financial strategy, and to have impact organizations need to understand and be relevant to the beneficiaries of their programs.
The efforts of nonprofits benefit many segments of the community. Prioritizing the list and focusing on those that benefit most directly from the organization’s activities provides leadership clarity and the ability to understand the beneficiary in more depth. Direct beneficiaries can be defined by:
- Age or demographics;
- Socio-economic status;
- Specific needs; or
- Other distinguishing characteristics.
Prioritizing direct beneficiaries can be difficult, but stratifying them in concentric circles recognizes the broad impact organizations have while focusing efforts.
The innermost circle reflects constituents who are core to the organization – individuals who would either benefit most from the organization’s services or who the organization most wishes to serve. Answering the question, “Who must the organization serve to accomplish its mission?” helps identify the core direct beneficiary in the center circle.
Moving outward, the other circles reflect groups also benefiting from the organization’s efforts but less directly. Identifying distinct subgroups of the market in this manner acknowledges that different groups that benefit from the organization may have different needs and, at times, trying to reach and satisfy the entire range of different needs is difficult. Concentric circles enable prioritization, which proves useful in setting strategy after the completion of the market analysis.
Beyond direct beneficiaries, there are many other groups that benefit from the efforts of nonprofit organizations. Understanding these segments of the market helps organizations not only in honing their impact but also in strengthening their revenue strategy and remaining relevant to funders.
In this case, it is worth considering a more expansive view of benefits than we took with direct beneficiaries. People may be drawn to your organization’s work because they believe that you share their values. Neighbors may be supported by your programs unknowingly as their quality of life increases as a positive consequence of your work. There may also exist untapped potential in the form of individuals willing to donate for the services provided to your core.
The following questions answered by board and staff will help identify other beneficiaries:
- Who benefits from the results of our work?
- Who else’s missions are more successful because of our work?
- Are there other initiatives which are less costly because of our work?
- Are they aware of our organization?
- What other interests might these populations possess?
A board of directors which is truly reflective of the community served is a great asset in identifying direct and other beneficiaries and understanding them more in-depth. This is an excellent opportunity to engage them in robust discussion.
Lastly, there’s a direct link between other beneficiaries and an organization’s revenue strategy. Understanding this market component, the motivations of other beneficiaries and how they’re changing will help leadership stay close to those funding the organization’s impact, explore potential new sources and build organizational sustainability.
Our next post will operationalize the market analysis framework by explaining how leaders can focus their attention on the most volatile components most likely to impact their business model.
This blog is part three of our series on Community Influence & Understanding Nonprofit Markets, which is drawn from our new white paper by the same name. Check out our second blog on this topic, Using Intended Impact to Define Your Market.