The Journal of Public Policy and Marketing released a special issue devoted to stakeholder marketing this month, which among other things, features an article by our academic partner Jenny Mish, professor of marketing at Notre Dame, with her colleague Debra Scammon.

As the journal has limited visibility with people in business and non-profits who engage with stakeholders, I’m reporting here on some of the ideas that have the most applicability to day to day practice.

What is Stakeholder Marketing?

Stakeholder marketing is an approach to marketing that examines the impact of marketing on stakeholders other than the customer.  Our short-hand description is that it is about “marketing with rather than marketing at stakeholders.” It seeks to partner and collaborate with stakeholders in the creation of value for the company, its customers and other stakeholders. One article in the special edition, “Stakeholder Marketing and the Organizational Field,” says that research demonstrates a strong business case for responding to stakeholder issues efficiently. Among the benefits are improved financial performance, greater stakeholder identification with the firm, and stronger stakeholder support.

The ideas from this special edition, combined with my own research, leave me with two observations on the current state of stakeholder marketing:

Best Practices Not Yet Clear

First, the primary obstacle to the adoption of stakeholder marketing it that it does not lend itself to tactical considerations as easily as green marketing, social media marketing, relationship marketing or any other similar approaches. These other practices often comprise a set of tools and tactical strategies that can captured and shared. So far, stakeholder marketing has not been reduced to a checklist of best practices. These articles, rather, describe an intention. One essay suggests that stakeholder orientation is best represented in a definition of marketing management. As Jenny’s article indicates, stakeholder marketing begins with a set of principles rooted in values, which then inform the culture of the firm, which then informs marketing practice.

Jenny’s article actually goes farthest toward identifying practices that show up in a stakeholder oriented approach to marketing. Among them:

• Approaching promotion and sales from the perspective of educating consumers about their choices rather than persuading them or seeking to control their behavior in favor of the firm’s objectives.
• Engaging customers as partners in creating value for other stakeholders
• Giving away innovations and market intelligence in service of improving the overall well being of the industry or market.

Marketers alone are not organizationally empowered to implement these practices.  More so than other marketing approaches, stakeholder practices must be supported from the top and must be coordinated across functional boundaries throughout the company. This leads us back to the role of marketing management as key in implementing stakeholder marketing.

How is Stakeholder Marketing Different From Stakeholder Engagement?

The second takeaway is that this edition does not yet answer the question “How is stakeholder marketing different from stakeholder engagement?” To answer this will require comparing companies’ stakeholder engagement or Corporate Social Responsibility (CSR) programs with their marketing strategies, taking into account all aspects of the marketing mix: product/service, pricing, distribution/sales, and promotion. Where are the linkages, overlaps or gaps?

Over the last several months I have contacted a number of well-known companies that I perceive to be practicing aspects of stakeholder marketing. Unfortunately, they don’t recognize their actions as such. They are more inclined to say that their CSR programs have elements of customer engagement. Even Timberland, whose stakeholder initiatives have been integrated into aspects of marketing and promotion, declines to call what they do stakeholder marketing.

It may well be that in many companies a stakeholder orientation in marketing will come from gradual encroachment of CSR initiatives.  As long as companies reinforce short-term thinking among marketers through mandates on measurement and quarterly financial goals, marketers will understandably resist embracing stakeholder methods which are often long-term in nature and difficult to measure – even though enhanced financial performance may be the ultimate outcome.

In the following series of articles, I’ve taken some of the topics raised by the authors in this special edition and provided brief summaries of findings that I feel are the most practical for those who manage marketers or have strategic oversight on a firm’s marketing.

Evolution of the Marketing Orientation – Researchers propose that stakeholder orientation is the next evolution in what began as a product orientation and evolved next to a market orientation.

Stakeholder Practices of Triple Bottom Line Firms – What does stakeholder marketing look like? Exemplary Triple Bottom Line firms provide the most insight and examples.

Like it or Not: Dragging Companies into the Stakeholder Perspective — Market events often trigger stakeholder activism that forces companies to shift from stakeholder management to stakeholder engagement.

Social Networking Taps the Creative Potential of the Stakeholder System — Social media marketing technology gives companies ways to manage stakeholder ideas and input.

Copies of the Journal of Public Policy and Marketing are available from the American Marketing Association. Purchase requires a subscription, which for individuals costs $90. The Journal publishes twice a year. Digital versions are available, but only to subscribers. Additional Information is available here .

If you are interested in integrating stakeholder strategies into your own marketing programs or strengthening stakeholder relationships in other ways, please contact us.

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This series of articles is dedicated to my beloved friend Coffee, with whose help they were written.

By Kathleen Hosfeld

Bhaskar Chakravorti, a senior lecturer at Harvard University and a partner of McKinsey & Co. writes in his article “Stakeholder Marketing 2.0” about one contribution that social media marketing can make to stakeholder commitments in marketing.  Marketing with customers rather than at them is one of the paradigm shifts that occur in the movement to a stakeholder perspective.

In a traditional setting, he writes that “the intended targets (customers) did not have the opportunity to interact with decision makers; provide feedback; and influence the product, the experience or the brand in an ongoing manner ….Consumers were downstream participants and suppliers, partners or employees played their respective roles upstream.”

What social media marketing tools allow companies to do is to create manageable forums for interaction – what Chakravorti calls “harnessing distributed intelligence.”  Specific examples of “crowd sourcing” that he cites are Dell’s Idea Storm for external stakeholders and EmployeeStorm for internal stakeholders, Starbucks’ MyStarbucksIdea.com, Mujii Awards and Staples Invention Quest.

Chakravorti describes five characteristics of desirable social network solutions for stakeholders – by which he means primarily customer and employee stakeholders. Chief among them is an emphasis on encouraging diversity of participation, making the decision-making model for the company clear in the design of the system, and preventing the potential for manipulation such as minority coalitions campaigning to create greater weight for their ideas in the system.

Chakravorti notes that research has not yet proven that utilization of these ideas results in better financial performance or enhanced stakeholder marketing outcomes. Given the overwhelming curiosity that business has in social media networking, I doubt that this caveat will deter any company of a size from investing – and perhaps considerably — in designing social media programs like Starbucks’, Dells’ and Staples’.

As much as organic models of organizations may be taking root, and the industrial metaphor of “business as machine” may be dying back, the latter lives on in marketing. As a result, many companies may be missing one of the biggest opportunities of social media as a tool for growth and profitability – supporting authentic relationships.

In the industrial paradigm, marketing is a machine that makes sales. Depending upon how many resources one plugs into the machine, one can turn a crank and expect sales as an outcome. The machine pumps messages through pipelines directed at target audiences. The messages fall upon the target audiences, a portion of which respond. It’s believed that the more resources one puts into the machine, the more sales occur. The problem is that many companies feel the machine has become unreliable.  They are putting more and more resources in, and getting fewer and fewer sales as a result.

A Machine That’s Running Down

Continuing to conceptualize marketing with this metaphor is to ignore many cultural shifts that point to change. The emerging metaphor depicts marketing as a series of co-creative dialogues with stakeholders. A book published a decade ago, The Clue Train Manifesto, put this idea on the map: “Markets are conversations.” Mutually constructive dialogue builds trust, which leads to sales.

The traditional paradigm of marketing is a push model, where target audiences are passive receptors (or at times victims) of marketing campaigns. While most good marketers understand the role of dialogue, in the push model it’s a relatively small part of the overall mix.

Strengthen Your Core

In the trust paradigm, marketing starts as dialogue with a core group of stakeholders that share the company’s passion for its products or services.  This core group can be viewed as the center of an ever-widening series of relationships, depicted as concentric circles (but not nearly as neatly categorized). In the center of the circle, the relationships with the company are the strongest and are the most likely relationships of advocacy. As word of the company and its products or services travel outward through layers of connection, the marketing message is propelled by the network’s relationships with each other rather that a direct interaction with the company.

What gets lost for many companies is the importance of cultivating that inner core. One of the important tasks for companies is to determine who the key stakeholders are. Who lives in the center circle? And what do they need to be advocates for the company? Traditional marketing focuses primarily on customer prospects, but employees and other stakeholders are often part of the core.

In his book, The Gort Cloud, author Richard Seireeni notes that many of today’s successful green brands used little or no push strategies during their start-up phase. Contrast this with the start-ups of many of the dot.com companies in the ‘90s that spent millions on brand awareness and mass media (many failed). The companies in Seireeni’s book didn’t have those funds and couldn’t grow that way. Instead they cultivated a network of advocates – employees, suppliers, specialized journalists – that grew steadily until the companies reached critical mass and were able to scale.

Pushing less

What’s the role of “push” tactics – traditional advertising and promotion – in a trust-based paradigm? Increasingly such tactics focus on permission-based or “opt in” techniques like search marketing and social networking.  Even when a company is doing all it can to collaborate with its core, there may always be a role for push strategies that invite people into permission-based relationships. The degree to which this is necessary will vary by industry. The point is that push strategies and their associated costs will diminish as a percent of marketing budgets and activities.

Unfortunately, many of the organizations using social media don’t recognize this paradigm shift. They are using social media as another form of push marketing, instead of a tool for dialogue. It’s a step in the right direction to convert to permission-based or opt-in communications with prospects or customers. If that’s where social marketing ends, however, a great opportunity for relationship and mutual advocacy is lost.

Who’s Your Primary Relationship?

Using social media only as a push strategy places the emphasis on customers’ or prospects’ relationships with each other, rather than their relationship with the company. Building a sense of community around your products or services is a great thing to do – it’s what makes Harley Davidson, as one example, as successful as it is. These communities take the company’s message out through viral networks. This works best, however, when the company is an integral part of that community and strong relationships have been established at the core.

What are some ways to capture the benefit of social marketing to foster authentic relationships?

Start With Face to Face Dialogue With Core Stakeholders – Identify your core stakeholder groups. Who cares deeply and passionately about your product or service?  Design in-person, face-to-face conversations with people who are core stakeholders. This certainly will include employees, some customers or clients (but not all), suppliers, regulators, distributors, etc.  Adopt a position of mutual learning. Nurture these relationships over time.

Use Social Networking to Continue and Broaden the Conversation – After establishing key issues with your core stakeholder groups, invite more people into conversations on those issues. Include feedback options social marketing campaigns. These can take the form of polls, surveys, discussion groups, etc.

Networks That Connect Other Stakeholders – Many of the free social networking resources are more appropriate to prospective customers or customers. Remember to support ongoing dialogue with other stakeholders through online collaboration software or other technology appropriate to those audiences.

Not Everyone Uses The Web – While many people do enjoy connecting online, there are many high-value contacts that don’t. An inclusive approach that designs opportunities to connect in person in person or on the phone will ensure you do not miss important customer segments.

Don’t Spread It Too Thin – Nurture the core.  Remember Gerald Weinberg’s Law of Raspberry Jam: “The wider you spread it the thinner it gets.” Keep in mind that the mass communication doesn’t take the place of face-to-face in creating a core of committed advocates.

Many younger companies have used this model because they didn’t have the money to do it any differently. Yet for decades, companies with diverse clients – from highly affluent individuals, other businesses, athletes, foodies, and more –  all have gone to scale, and navigated numerous lifecycle transitions by cultivating relationships of trust with key stakeholders. Social media, in this context, can be a powerful tool for cultivating these relationships.

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This article began as a conversation with my associates Jenny Mish and Ron Benton, at the Portland State University Business and Sustainability Conference in October 2009.  It evolved in conversation with Matthew Wesley of Agility Partners. Thanks to all of you for collaborating with me.