The High-Performing Government Agency: Using A Marketing Mindset In The Public Sector

What Are Citizens Getting From Public Agencies?

All too often we hear of government programs that cause inefficient and wasteful allocation of goods and resources. Consider the example of the Australian government’s home insulation program (HIP), which was designed to prop up business in the wake of the global financial crisis, providing rebates to insulate the ceilings of 2.2 million houses at a cost of (AUS) $2.7 billion. As well as claiming that the scheme would create jobs, the government sought to boost its “green” credentials, insisting that home energy bills would be cut dramatically. Countless problems plagued the HIP; houses caught fire, thousands of cases of fraud were claimed, numerous installation companies went bankrupt, and a number of deaths and injuries occurred (despite multiple safety warnings from regulatory agencies). A lack of effectiveness in the program design, administration, and delivery arrangements and a poor management structure for dealing with the risks associated with a rapid program rollout (along with making the program instantly available to millions of household owners and suppliers without first piloting the offering) were cited by an independent review as the main contributors to the failure of the HIP program. After sustained media pressure, and in an effort to exercise damage control, the program was scrapped in early 2010.

With dwindling budgets and mounting expectations on government agencies to act in the best interests of their customers (the public), a new view about how to best develop and implement such ambitious government programs must be undertaken.

Learning From the Private Sector

Most citizens expect government agencies to develop and run programs that are relevant, efficient, effective, sustainable, and impactful to theirs and the nation’s welfare. With their activities under increasing scrutiny by the public, governments need to adopt practices and proven methods that facilitate the successful implementation of public programs. One solution is to adopt the best practice marketing tools that are routinely deployed within the private sector.

When a government department develops a “product” – be it a physical product such as running water in a poor village, an idea such as “don’t drink and drive”, or the provision of a service such as the upkeep of a national park for visitors – and then prices, distributes, and promotes it to a targeted audience to promote an exchange, marketing is taking place. By providing focus, marketing helps avoid the “knee-jerk reactions” that usually result in wasted time and resources.

Philip Kotler is one of the world’s foremost experts on the strategic practice of marketing. In his book, Marketing in the Public Sector, Kotler claims that marketing has been most overlooked and misunderstood by the public sector.

When applying a marketing mindset, Kotler and others would stress that there are obvious differences between public and private sector organizations. They typically have different mandates (citizen interests vs. maximization of shareholder wealth), competitive environments (monopolies vs. competitive markets), and focus (usage levels and cost savings vs. sales and profits).

Moreover, many of the perceptions and behavior changes that government marketing tries to address are long term projects. Monitoring the outcomes of a national smoking cessation program, for example, would typically require a 10 to 20 year perspective. While this may be a reasonable time horizon, some stakeholders, such as those within health authorities, may expect to see results a lot sooner: this can make government marketing a lot more complex than in the private sector.

Persuading people to break an ingrained habit or do something they find difficult, can be a significant challenge. This compares to the private sector where consumers are persuaded into choosing one brand over another – the results are far more tangible.

Despite substantial challenges, governments are still held accountable for tangible performance improvements. Whether a public agency wishes to maximize revenue, increase service utilization or product purchase, ensure compliance with laws, health, and public safety or to increase customer satisfaction, their functional mandates must be met.

And it should be highlighted that government has certain features that can be used to their advantage. For example, they tend to have more information on their customers then most private organizations would ever dream of.

Using the Marketing Mindset in the Public Sector

In order for programs to succeed, a disciplined approach to conducting a situation analysis, setting goals, segmenting the market, conducting market research, positioning, choosing a strategic blend of marketing tools, evaluating results, preparing budgets, and formulating an implementation plan is required. Adopting this strategic approach towards program or service delivery forces an organization to focus its efforts on priorities, rather than applying a “bandage” to a wide range of never-ending issues.

Publicly-driven organizations and professional associations need to adopt a marketing mindset in order to thrive. Kotler’s five principles of a successful marketing mindset are:

Adopting a customer-centered focus

Segmenting and targeting the market

Identifying the competition

Utilizing all four P’s in the marketing mix

Monitoring efforts and making adjustments

Adopting a Customer-Centered Focus

Too often, public or member-driven organizations plan and implement programs without consulting their clients and are left wondering why these initiatives are not getting the anticipated take-up. Effective organizations ask their clients what they want first – and then plan accordingly.

Starting with something as simple as a survey can be a powerful tool to figure out what your market – the public – needs, and how you can best position your product or service.

Segmenting and Targeting the Market

By developing a better understanding of the customer, the high-performing government agency can then begin to ‘categorize’ similar wants and needs into distinct groups that may require different products and services. With this in place, services can be far better targeted with the appropriate marketing strategies, satisfying the different preferences of each chosen segment, and optimizing the use of resources.

Identifying the Competition

One of the tricks in marketing is to describe offerings in short, simple terms. Schools are in place to provide education. With this same goal in mind, public schools compete with private schools, just as they do with home schooling. Government-run post offices compete for business with privately-run courier services, libraries compete with bookstores, and so on.

Offerings provided by the government are not necessarily the best answer to the benefits sought, and therefore public sector agencies must continue to look at what it is they offer, who their competitors are, and how their offerings match up.

The Marketing Mix (Product, Place, Price, Promotion): An Egyptian Public Sector Success Story.

With customer needs analyzed, the market segmented and understood, and the competition identified, all the elements required to shape the offering are in place.

To better explain effective use of the marketing mix, consider the ambitious (and successful) example of Cairo’s taxi scrapping and recycling project, which has delivered a multitude of direct and indirect benefits for citizens and project stakeholders. It was launched to support the enforcement of a 2008 traffic law that announced the end to the renewal of licenses for taxis older than 20 years, which made up the majority on the clogged and polluted streets of Cairo. The goal was to improve air quality and reduce greenhouse gases associated with Egypt’s aging fleet of taxis and other public vehicles. The project also tackled a variety of other issues such as safety (accidents due to mechanical breakdowns), economic losses (commute time due to increased traffic congestion) and the weak image the filthy, ancient cabs provided tourists.

Product

The taxi replacement and recycling program was launched on a voluntary basis, where private taxi owners received financial and other incentives to surrender their old vehicles for new, more fuel-efficient models, while the old vehicles were scrapped and recycled.

A range of models were available to choose from as part of the scheme, each one locally manufactured. Given the financial challenges to tax drivers that the purchase might present, the government introduced a variety of subsidies and discounts through collaborative efforts between the finance, interior, and environment ministries, several private sector participants (commercial banks, insurance companies, auto dealers, advertising firms), and other program stakeholders (taxi owners, the recycling and scrapping operator, and the World Bank Carbon Finance Unit).

Price

To maximize collaborative efforts, The Ministry of Finance (MoF), that spearheaded the project, structured it as a Public Private Partnership (PPP), with different government and commercial organizations contributing financial incentives. These included a low-interest loan offered by participating banks and sticker price discounts offered by automobile dealers. The MoF provided payment for the surrendered vehicle along with sales tax and customs fees exemptions for the replacement. Taxi owners were also offered an option to participate in an advertising scheme, where a portion of advertising revenue was directly paid by an agency to the lending bank toward vehicle owners’ debt service payments. The owners also received a reduced cost for maintenance and spare parts along with insurance for all new taxi vehicles against all standard casualties (theft, fire, accidents, etc.). With the combined incentive assistance, vehicle owners could expect to pay back the car loan in less than six years.

Place

Land, in the form of a project site, was provided by the Ministry of Interior (MoI) to complete all replacement activities, ranging from vehicle inspection and surrender, to financing and incentives and the purchase of new vehicles. The use of this one-stop-shop for the taxi exchanges made it convenient and helped achieve a high program participation rate.

The auto dealers, advertising agencies, insurance firms, and banks were also available to vehicle owners at the project site. Additionally, on-site personalized help was made available, where candidates were given an orientation on project details and provided resource material illustrating eligibility and participation procedures.

Promotion

To maximize participation, the MoF conducted a public awareness campaign prior to the project launch, which included announcements of the program through advertisements in newspapers, radio, television, and other public media. The campaign outlined the program objectives, eligibility and participation criteria, and financial incentives available to vehicle owners who volunteered to participate. The Ministry also established a telephone hotline to address all project enquires.

Monitoring Efforts and Making Adjustments

Key to the program’s success was careful planning and close monitoring. This included several stakeholder meetings prior to launch to ensure coordination between project partners, detailed record keeping (project vehicle and scrapped vehicle databases), and periodic random surveys of project participants to estimate emissions reductions. The program has also maintained a degree of flexibility, allowing for periodic procedural changes to be made based on feedback from the vehicle owner surveys and interviews.

With 20,000 vehicles replaced in the first year, and plans for the rollout to include all public transport vehicles, including microbuses, trucks, and buses, the program has made significant early progress. And the Egyptian government’s estimate of reducing 1.3 million tons of CO2e emissions between 2009 and 2018 is an example of the scale and reach that government programs can have, and the breathtaking effects their successful implementation can provide.

Conclusion

With mounting pressure on governments around the world to address citizen complaints, alter public perceptions, and improve performance, effective implementation of public programs is critical. In order to perform services that are in line with the public’s interest, governments need to introduce the marketing planning platform that has long been utilized by their private-sector counterparts. Those public sector organizations that adopt this approach, as we have seen from the example demonstrated by the Egyptian government, will have the right focus to deliver maximum value to society.