Traditionally, nonprofit social service agencies have been oriented toward the funder as the main external stakeholder. Funders monitor the quality of their investment by the social impact achieved but do not typically receive the services themselves. Social enterprises, on the other hand, take on a whole set of relationships – relationships not anchored by a social mission but by the imperatives of running a successful business.
A business only succeeds when customers perceive that it consistently provides them superior value. One of the greatest challenges facing a social enterprise is becoming a customer-driven as well as mission-driven organization. Internalizing the reality that business decisions must be guided first and foremost by customer behavior can be very difficult in organizations founded for the purpose of helping clients meet goals such as employment or self-sufficiency. The social mission is typically the personal priority for the social enterprise’s founders and for many of its staff. Client employees who are used to receiving social service assistance focused on meeting their own needs also often need a strong push to internalize a focus on the customer.
Despite these obstacles, however, social enterprises can apply three proven for-profit techniques:
- Create a compelling value proposition
- Use customer-focused sales strategies
- Deliver on the value proposition
Social enterprises can also employ one technique that is uniquely their own:
- Communicate their mission
Create a compelling customer value proposition
Social enterprises are often attracted to a potential business because of the employment possibilities that it presents for their target population. However, feasibility studies and business plans must first determine “Can we realistically offer a product or service that customers will purchase in sufficient amounts to cover our costs of running the business?” Answering this question means objectively assessing the basis on which potential customers make their purchase decision.
A company’s social mission is usually way down the list of priorities when a customer buys a product or service. This is one of the hardest, yet one of the most important, realities for social enterprises to accept. Again and again, research has found that social mission is only a competitive advantage on the margin, when customers already find high value in the product or service they want to purchase. At each stage of growth, social enterprises should listen to the results of objective market research and resist the temptation to assume that customers will value their mission as much as they do.
On occasion, meeting customer needs may conflict with the business’ social mission. For example, being responsive or flexible may require extending store hours, promising next day delivery, or replacing a trainee with a more experienced employee. Getting a clear understanding of the business’ operational requirements as you plan your business gives you the opportunity to anticipate potential conflicts with meeting customer priorities. Before proceeding you should either find a solution to this conflict, potentially by meeting other important customer needs, or adjust your strategy to create a business that will be a better fit.
Use customer-focused sales strategies
This same objective assessment of customer priorities must inform the sales strategies of a social enterprise. Good salespeople tailor their pitches to what motivates the potential customer, not what motivates them or their management. For many customers, the rationale of “repair your bicycle here because you’ll help homeless youth” would be no more compelling than “buy this television because I will make a $50 commission.” In contrast, “your bicycle will be fixed in three days or fewer at a competitive price with a year’s guarantee on both parts and labor” responds to customers’ desire for a quick, fairly priced and risk-free way to get their bikes working again.
Because of their cultural heritage, social enterprises may have to concentrate particularly hard on creating a workforce that is also a “salesforce” that always keeps the final customer’s perspective in mind. Communicate to all management and staff, as well as to all client employees, that they are responsible for sales. In return, let them know how the business is performing, how they have contributed to its success, and what more they could do to increase revenues – then tie it all back to how it impacts the mission .
Social enterprises should evaluate the cost-benefit of bringing in professional salespeople for key positions. Not only do salespeople have a specialized skill, but they are also much more likely to sell the product or service rather than the social mission of the organization. Of course, a salesperson must still fit with the culture of the organization and genuinely believe in its mission.
Deliver on your value proposition
Once they’ve made the sale, social enterprises often face even greater pressure to deliver than do their competitors. Because of negative assumptions about nonprofits, customers are often quick to let one mistake confirm their negative expectations. Unlike their for-profit competitors, social enterprises may not get another chance to prove themselves. Being aware of the importance of a good first impression and only promising what you know you can deliver – no matter how tempting it is to say yes to a potential customer – is essential. To reduce this risk it is also important to be conservative and invest in the additional resources that may be necessary to do the first job well.
Potential customers are also likely to assume they will be paying a premium if they buy from a nonprofit. Social enterprises are well advised to carefully watch and match competitors’ pricing as much as possible while still meeting the business’ financial needs unless they have evidence that customers place a premium on some aspect of their product or service.
A social enterprise’s mission will influence the consumer’s decision to buy a product only if they first find it attractive, reasonably priced, and convenient to purchase. If not competitive on any one of those three factors, the mission doesn’t help at all.
Communicate your mission
Yes, there still is value in communicating your mission to your customers. First, as described above, a social mission does prompt some customers to purchase a product, all other conditions being met. Second, once you have demonstrated the worth of your product, your social mission provides one more reason for your customers to be loyal to you. Finally, communicating the social outcomes of your social enterprise may perform a valuable educational function. For example, having a satisfied customer learn that their work was performed by an individual in recovery from mental illness may start to break down some of the stigmas attached to that condition.