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BUSI 525 Marketing: Individual Assignment Stakeholder Relationship Management in Modern Public Sector Governance Fa Niemi MBA 31 23 May 2007 Stakeholder Relationship Management in Modern Public Sector Governance Executive Summary Once considered large impersonal bureaucracies delivering poor-quality low-value services, the modern public sector has the opportunity to improve governance by renovating its mission and image through revitalized service delivery and the adoption of private sector practices. The new practices include using marketing tools to segment, target, and position offerings within stakeholder markets. Additionally, the four Ps of marketing, product, price, place, and promotion can be used to re-focus public sector performance on stakeholder needs. The public sector, like the private sector, should be moving away from an individual transaction approach to offerings. Instead, using a mix of tools and techniques to support a relationship-marketing strategy, this “emphasises building stronger relationships between the organisation and all its stakeholder markets.” (Christopher, Payne & Ballantyne, 2002, p. 79). Within this new paradigm, both the public sector and the complex market network of individuals and organisations it serves, each interaction provides an opportunity to strengthen the stakeholder relationship. Table of Contents Executive Summary ....................................................................................................................... 2 Table of Contents .......................................................................................................................... 2 Introduction .................................................................................................................................... 3 Barriers to Developing Stakeholder Relationships .................................................................... 3 Organisational structure............................................................................................................ 3 Incongruent marketing communications ............................................................................... 4 Strategies for Improving Relationship Management ................................................................ 5 Re-orientation towards service delivery ................................................................................. 5 Breaking down functional silos ............................................................................................... 6 Relationship Marketing ............................................................................................................. 6 Recommendations & Conclusion ................................................................................................ 7 Reference ......................................................................................................................................... 8 Page 2 of 8 Stakeholder Relationship Management in Modern Public Sector Governance Introduction The public sector performs most successfully when it delivers services at an appropriate level of quality for an acceptable value to stakeholders such as citizens, businesses, taxpayers, and voters. This perception of success depends on both stakeholders’ opinion about the government in general and impressions from personal interactions with public institutions. According to Chapman and Cowdell (1998), John Major’s The Citizen’s Charter in the UK and similar government policies on free market modelled reform emphasise themes such as “a desire to improve the quality of public services.” They continue that this focus on quality improvement is an example of societal marketing defined as, “aiming to create long-term customer satisfaction and welfare as a key business strategy.” The authors conclude that in the public sector, societal marketing manifests as a desire to satisfy stakeholder needs through service offerings. Barriers to Developing Stakeholder Relationships The challenges in overlaying private sector practices in an attempt to improve public sector societal marketing are many including, defining the markets, shaping the offerings, and developing constructive stakeholder relationships. The public sector, as a collection of public service providers, operates within a number of complex and varied markets such as intra-governmental, consumer, and societal. Furthermore, the offerings, usually services, can be ephemeral and “often take the form of intangible benefits – benefits which cannot be stored or even easily quantified.” (Cowell, 1984). Organisational structure Traditionally, the public sector has not delivered an integrated message to stakeholders because it uses a variety of channels to deliver information about service offerings and the organisational objectives from many different functional units. Public affairs, public relations, or public information officers manage some of the channels including media relations and external websites. Additionally, human resources staff generally communicates similar information to potential and current employees through recruitment and yet other divisions such as customer services, administration, and operations are responsible for communicating and providing service offering to still more groups of stakeholders through other channels including call centres and supporting documentation. “As so many different parts of the organisation are involved [in Page 3 of 8 Stakeholder Relationship Management in Modern Public Sector Governance stakeholder management], the various stakeholder groups are frequently managed in an uncoordinated, disparate manner.” (Christopher, Payne & Ballantyne, 2002, p. 77). Moreover, public sector organisations are typically structured by units based on function, functional silos, working in isolation from other units with little or no communication or cross-functional collaboration. Functional silos frequently define unique goals, mission and direction apart from the other units and the organisation as a whole. “As Emshoff and Freeman (1979) have noted, functionally based organisations typically place too much resource emphasis on highly visible stakeholders such as their customers, and too little emphasis on other special interest groups whose management falls outside specific functional boundaries.” (Payne, Ballantyne & Christopher, 2005, p861). Incongruent marketing communications Conventionally, service organisations have restricted their stakeholder communication to a one-way push or pull from service provider to recipient. Information is offered on a website, policies and procedures are published in governmental tomes, and press releases are sent to media outlets. For stakeholders seeking information, automated voice systems offer standard responses to questions. Gradually public sector entities are moving away from mass communication to more customised and interactive models. Call centres are being established to handle constituent questions, websites offer feedback mechanisms, and liaisons visit community groups to solicit conversations with stakeholders. The intent is to move away from self-interested communication to more mutually beneficial interactions with stakeholders. According to Varey and Ballantyne (2005) this shift in perspective to incorporate the stakeholder interests in the goals of communication requires a model accommodating “the idea of a ‘market’ as a socially constructed network of relationships where interactions have economic consequences.” The implication is that a dialogue between public sector organisations and stakeholders includes tangible financial benefits as well as the intangible benefits from improved customer service. Regrettably, the public sector, like other service offering organisations has suffered from poor quality service delivery, not only caused from within a functional unit, but also from passing from one unit into another. The service, along with the stakeholder communication can be disrupted between silos, providing a poor service experience and inconsistent organisational message to customers. “All too often, companies fail to Page 4 of 8 Stakeholder Relationship Management in Modern Public Sector Governance integrate their various communications channels. The result is a hodgepodge of communications to consumers.” (Kotler & Armstrong, 2006, p. 429-30). The authors continue that this dilemma can be remedied in part with integrated marketing communication, “under which a company carefully integrates and coordinates its many communications channels to deliver a clear, consistent, and compelling message about the organisation and its products.” Strategies for Improving Relationship Management The public sector can use a mix of marketing relationships ranging from discrete transactional exchanges, interactive encounters and a network of interactions compromising long-term relationships benefiting both the organisation and stakeholders. Re-orientation towards service delivery In a public service organisation, whether providing legal, counselling, or IT services; employees are the key to success. Frontline workers, an integral part of the service offering, communicate a marketing message in each customer interaction. Whether it is the preferred message and it is communicated appropriately can be influenced by several factors, including human resources practices like training, marketing influences such as reinforced and consistent communication of organisational goals, and operational practices, which encourage employee empowerment and job satisfaction. Moreover, both frontline employees and organisations as a whole have many tools available to aid in service delivery efforts. “When a public-sector agency considers the wants, needs, problems, and preferences of citizens in developing and delivering programs and services, its needs are served and its performance improves.” (Kotler & Lee, 2007, p. 1). The marketing mix four Ps enable these organisations to focus on matching services to needs. Starting with the first P, Product, the public sector needs to consider what services are offered to customers and how those offering affect other stakeholders including regulatory bodies, community groups, and civil servants. Continuing with the second P, Price, there often seems little discretionary control over setting the prices for fees in government, but there are many opportunities to influence the fee-setting process. Organisations can analyse the effectiveness of current pricesetting strategies for both public and intra-governmental fees to make recommendations about future policies. Potentially the most influential of the Ps are Place and Promotion. Page 5 of 8 Stakeholder Relationship Management in Modern Public Sector Governance As public sector organisations develop relationships with stakeholders, the distribution channels for services will become increasingly important. According the Kotler and Lee (2007, p. 2) a mix of channels including new technologies such as websites and kiosks will need to be available to reach more customers. Along with the enhanced delivery channels, promotion can be used to inform, educate and persuade stakeholders. All of this effort, though, takes coordination. Breaking down functional silos Starting with a common purpose and vision is the first step to bridging gaps and unifying organisational areas. Re-structuring units by offerings can better meet customer and other stakeholders’ needs. According to Lovelock and Wirtz (2007, p. 449), “an organisation that is recognised as a service leader offers its customers superior value and quality.” It does so through coordinated marketing, human resources, and operations efforts. Initially, a unified marketing message communicates not only offerings to customers, but establishes the character, values, and vision of the organisation to stakeholders. Subsequently, human resource managers are better able to recruit and retain talented employees because of the appeal of the organisation. Finally, operations improve both the quality and value of offerings through employee innovation and stakeholder support. Ideally, with cross-functional collaboration between functional areas, the cycle continues and the relationship between organisation and stakeholders strengthens. Relationship Marketing To improve service delivery the public sector must extend the definition of stakeholders from service recipients to include all entities and organisations effected by its behaviour. It can then transcend the short-term focus of the current customer engaged in the current transaction and look beyond to a continuum of transactions and interactions that make up the long-term relationship. “Relationship-based approaches to marketing offer a reformist stakeholder agenda with an emphasis on stakeholder collaboration beyond the immediacy of market transactions.” (Payne, Ballantyne & Christopher, 2005, p856). One such approach is the Six Markets Stakeholder Model developed by Christopher, Payne and Ballantyne (2002, pp 80-107). Under the model, the authors’ recommend segmenting the stakeholders into six markets for marketing management, customer, referral, supplier/alliance, influence, recruitment, Page 6 of 8 Stakeholder Relationship Management in Modern Public Sector Governance and internal. Of particular interest to the public sector as potential areas of service delivery improvement are recruitment and internal markets comprised of potential and current employees respectively. In the public service sector, where the quality of individual customer service interactions define the success of governance overall, recruiting, retaining, and training frontline employees is a priority. Organisations can use a variety of recruitment techniques including promoting a brand or governmental identity, matching candidates to organisational culture, or psychometric profiles. The recruitment process is expensive and mistakes can be even costlier, so it is important to invest in good practices that yield good results. In service organisations, well-placed qualified employees are pivotal to performance and success. “To attract and retain the highest quality recruits – those who share the organisations’ values and will contribute significantly to its future success – firms have to market themselves to potential employees, or the recruitment market.” (Christopher, Payne & Ballantyne, 2002, p. 101) Once high quality candidates are hired, the organisation must support their continued development and success. In the public sector where hierarchical organisational structures prevail, emphasis is often placed on functional duties over business priorities or stakeholder needs. “Internal marketing should ensure that all staff ‘live the brand’ by representing the organisation as well as possible, whether face-to-face, over the phone, by mail or electronically.” (Christopher, Payne & Ballantyne, 2002, p. 107). One method of supporting internal marketing is by flipping the organisation chart upside, emphasising the importance of frontline staff communicating the organisation message and ensuring quality service delivery with the support of (not in support of) other divisions and senior management. Recommendations & Conclusion Public sector governance can be improved by introducing stakeholder relationship marketing to improve service offering quality and customer service delivery. Organisations that encourage employees to ‘think globally, but act locally’ will communicate a consistent message to stakeholders while providing higher quality services that better meet customer needs. Employees will no longer focus on the Page 7 of 8 Stakeholder Relationship Management in Modern Public Sector Governance customer and the transaction of the moment, but will consider their individual service delivery in terms of how their actions will influence future customer experiences. There are many tools available for increasing customer value in service offerings. Organisations can use models such as the six markets to define and manage stakeholder relationships. With stakeholder feedback mechanisms in place, organisations can also analyse problem areas by reviewing cross-functional workflows, service delivery processes, flowcharts of service offerings, or monitor the quality of service, all from a customer perspective. With all of the private sector marketing tools and techniques available to the public sector, the opportunities for improvement are many, but the key is focussing on the public; “the only real magic in marketing is a citizen-oriented approach.” (Kotler & Lee, 2007, p. 5). Reference Chapman, D. & Cowdell, T. (1998). New Public Sector Marketing. London: Financial Times Pitman Publishing. Christopher, M., Payne, A. & Ballantyne, D. (2002). Relationship Marketing: Creating Stakeholder Value. Oxford: Elsevier Butterworth-Heinemann. Cowell, D. (1984). The Marketing of Services. London: Heinemann. Kotler, P. & Armstrong, G. (2006). Principles of Marketing (11th Edition). Upper Saddle River, NJ: Pearson Prentice Hall. Kotler, P. & Lee, N. (Spring 2007). Marketing in the Public Sector: the final frontier: government agencies can use the four Ps – product, price, place, and promotion – and other marketing techniques to transform their communication with the public and improve their performance. The Public Manager, 36.1, pp 12 – 18. Lovelock, C. & Wirtz, J. (2007). Services Marketing: People, Technology, Strategy (6th Edition). Upper Saddle River, NJ: Pearson Prentice Hall. Payne, A., Ballantyne, D. & Christopher, M. (2005). A stakeholder approach to relationship marketing strategy: the development and use of the “six markets” model. European Journal of Marketing, 39, pp 855 – 871. Varey, R. & Ballantyne, D. (2005). Relationship Marketing and the Challenge of Dialogical Interaction. Journal of Relationship Marketing, Vol. 4 No. 3/4, pp 11 – 28. Page 8 of 8