The Trudeau Affair: What are the implications for Canadian Non-Profits?

Fundraising is a big business. It is a significant way that non-profit organizations obtain money for their operations. These operations can involve a very broad array of concerns such as religious or philanthropic groups, research organizations, health and environmental issues etc.

Special events are one of the most popular methods of raising funds. Events are used to increase visibility and support for an organization as well as raising funds. Events can feature activities for the group such as well-known speakers to encourage group participation and most important charitable giving. These speakers can come from the world of entertainment, sports, community leaders, and yes in some cases politicians.  For some non-profits, this is there major way of fundraising and in most cases these activities are successful. However some do fail, particularly if the event is not managed properly.

Recently in Canada there has been a flurry of criticism over Justin Trudeau’s decision to accept a $20,000 speaking engagement for a charitable organization while he was a sitting MP. Months later, the charity says it lost money on the event and asked him to return the fee.

There are questions whether parliamentarians should or should not be disqualified from earning extra income, but I will leave that question to others who blog on politics.

So what has happened in the past few weeks, well for starters a  chorus of politicians from other political parties and their supporters , including some in the media suggest  that Trudeau should not take money for speaking to charities; that Trudeau is rich (because he inherited $1.2 million) and, by extension, greedy.

Here is some background on the story. One of Mr. Trudeau’s past clients, the Grace Foundation in New Brunswick, hired him to speak at an event to raise money for a seniors’ home, which apparently did not go well. In fact, the event lost $21,000. Disappointed with the results, a Foundation board member asked Mr. Trudeau to reimburse the speaking fee.

fees

His initial refusal to do so generated plenty of controversy. But consider this: Since a speaker’s bureau was involved, asking Mr. Trudeau to reimburse the full amount would have meant that he is on the hook for not only his fee, but also the bureau’s commission – on a transaction that is more than a year old. Moreover, if the Foundation had in fact found a sponsor to cover the fee which seems to have happened according to sources, any refund might not go directly to the charity, but to that third party.

Experts in fundraising are now asking why Trudeau should return the money. Charities routinely pay high-priced speakers to draw crowds. That Trudeau didn’t do so that day wasn’t his fault. (That’s the job of the organizer). Another concern is why did the charity come back to him months later? Is it because he is now vulnerable as Liberal leader and they feel they can embarrass him to give back the money.

Is this the way to operate a charitable organization i.e.by using black mail? Also, what is the message to other potential speakers who charge a fee to speak at  fund raisers in Canada … if we don’t make any money from your appearance at our fundraiser we may ask you for a refund? Will the charity also ask the caterer, the band, the hotel, and many other suppliers to also turn back the money they paid, if not why not?

Also imagine if you are a well-known actor, singer, sports personality etc. who also get paid to speak at events, would you now think twice about doing a fund raising event when there is a possibility that the charity may blackmail you in the media and tarnish your name if they are unsuccessful in their charitable event.

W. Brett Wilson, a well-known Canadian business leader, philanthropist, and former panelist on CBC’s “Dragons’ Den” states the following in a recent Op Ed piece

“What I would like to address is the controversy over how that extra income was earned — specifically the suggestion that it was somehow wrong for Mr. Trudeau to accept a reasonable fee to attempt to help a charity raise awareness and support for its cause. This notion is misguided. Indeed, it is precisely the kind of limited thinking that is hurting our philanthropic sector.”

I believe that creating a relationship of mutual benefit is far more advantageous to the charity in the long run, because it forces them to think and act with an entrepreneurial mindset. Effective charities will lever the popularity of a given speaker to multiply interest and generate greater revenue. At least that’s how it’s supposed to work.

This bigger issue is the failure by the Foundation to acknowledge its own obvious incompetence. This Foundation failed to do what it needed to do to make the event a success, and now they turn around and ask Mr. Trudeau to bear the economic cost. My impression is that this Foundation deserves to go under (or endure a wholesale change of management), rather than be propped up by Mr. Trudeau’s repayment.

Nevertheless, I understand that Mr. Trudeau has now promised to do another event for the Foundation — at no cost, of course — in order to right his alleged wrong. While I applaud his gracious response, I would suggest he is killing the Foundation with kindness. It clearly has bigger problems to deal with, and Mr. Trudeau’s efforts at life support are not likely to save it. Nor should they.

This politically motivated circus and related backlash may now have the effect of eliminating some great speakers from the rubber-chicken charity circuit — including Senators Roméo Dallaire and Jacques Demers — speakers who deliver great value to forward-thinking charities.”

I would suggest we use this lesson as a rather important opportunity to rethink the way we coddle inefficiencies and ineptitude in the philanthropic sector. Then, we might be debating something useful.

I think Mr. Wilson is “on the money” with his comments. I have worked for many years with the non-profit/charitable sector and was very saddened by the events of the past few weeks. Clearly this so called scandal may have given a “black eye’ to charitable organizations involved in fund raising and may result in unattended consequences … the reluctance of well-known personalities to speak at fund raisers. Now I fully appreciate and understand that many personalities including politicians give freely of their time for fund raising but there are many personalities who earn money as a professional speaker and this recent event may do long lasting damage to fund raising in Canada.

Let me know what you think.

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Branding in Politics Fact or Fiction

Political branding is always something that intrigued me as in some ways it is one of the purest forms of marketing.  Those in politics are wise to understand the principles of positioning, brand development, and consumer brand marketing. In fact, getting a politician elected might be the ultimate marketing/branding challenge. In my blog Political Parties should have Marketers run their Campaigns, I discussed the importance of marketing strategy in politics

However one thing that has always intrigued me with political campaigns is that branding and positioning, although planned by political parties, are not always truthful and sometimes rely on old inaccurate stereotypes of a political party and/or their philosophy. For example one of the most popular ones is that Liberals are tax and spenders and Conservatives are great fiscal managers who are very careful about spending.

If you ask the public to describe the difference between Liberals and Conservatives, inevitably one of the things they would mention is the issue of spending and taxes based on this stereotype.

So as a little experiment, I decided to find out if there is any truth to this notion of Liberals are spenders and Conservatives are “fiscally prudent. Here is what I found.

 The worst deficit spending in Canadian history is a Conservative legacy, not one of the Liberals according to Steven Pate.  The Conservatives have been in power under 2 Prime Ministers in the last three decades. In both cases they showed an alarming record of deficit spending. When Brian Mulroney took office, the Canadian debt (adjusted for inflation) was about $250 billion. In ten years, the Conservatives almost tripled our debt to $630 billion. It took the Liberal government another 12 years to pay down that debt to $500 billion. After a brief respite, the  Conservatives are back into deficit spending, with our debt on the rise again.

In the past few years, under the Conservatives, the number of public servants has soared, government spending has skyrocketed, and the deficit has bulged. Some of these results – spending and the deficit – are due to the severe recession, to which the government responded, as did governments throughout the Western world.

But even before the recession, the Conservatives had shown themselves to be big spenders, allowing government spending to rise about 6 per cent yearly. This spending, combined with lower taxes, did away with the large surplus the Liberals had bequeathed the Conservatives. Source

In the USA, most people believe that Democrats are big spenders and that Republicans are tight-fisted. The evidence leads to a very different conclusion. Since 1970, spending has grown 64% faster when a Republican sits in the White House than when a Democrat does.

In the twelve years that a Democrat has sat in the White House, spending has increased at an average rate of 1.29% per year; during the 22 years of Republican presidencies, government spending has risen at an average rate of 2.12%. In other words, spending has grown 64% faster when a Republican sits in the White House than when a Democrat does.

During the 20 years Democrats have controlled both houses of Congress, spending has grown at an average rate of 1.84% per year, more than double the average rate of 0.89% per year during the six years the GOP ran Congress. (During the other eight years, when control of Congress was split between the two parties, spending grew at an average rate of 2.52%. The split-control years all occurred during Republican presidencies.)

When Democrats controlled the White House plus both houses of Congress, spending grew at 1.70% per year, slightly below the average growth rate of 1.83% for the entire period.

The slowest spending growth occurred when a Democrat sat in the White House and Republicans controlled both houses of Congress. Spending rose by an average of just 0.89% during the six years of this situation, which all occurred with Bill Clinton as president and Newt Gingrich as Speaker of the House.

During the 14 years Republicans controlled the White House and Democrats controlled both houses of Congress, spending grew at an average annual rate of 1.92%. During the eight years with a Republican president and a split Congress, spending grew at 2.54% per year.

The day the Bush administration took over from President Bill Clinton in 2001, America enjoyed a $236 billion budget surplus — with a projected 10-year surplus of $5.6 trillion. When the Bush administration left office, it handed President Obama a $1.3 trillion deficit — and projected shortfalls of $8 trillion for the next decade. The Obama legacy is still to be played out but finding themselves in a very “deep hole” over the past few years Obama has spent a tremendous amount of money with stimulus funds to try to dig the USA out of the deep hole. Source

Will the facts, figures, or statistics inform voter’s decisions? I doubt it as people believe what they want to believe and giving them the facts won’t change their mind. Liberals are branded as tax and spenders and Conservatives as great fiscal managers.

Let me know what you think.

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Political Parties should have Marketers run their Campaigns

I constantly hear political pundits talking about marketing in relation to politics but the truth is that most people I have met who run political campaigns here in the nation’s capital have probably never read a marketing book and think that communications strategy and marketing strategy is the same thing. They’re not.

So, to my readers who hopefully read my blogs because they think they may learn something about marketing in the public arena, I will try to bring some marketing thinking to the present Canadian election campaign. The Marketing Warfare approach to marketing which was developed by Al Ries and Jack Trout will be very helpful in explaining how the marketing approach can be helpful to better understand how to develop an effective strategy for a political campaign.

First, some background on the Marketing Warfare concept.

In Marketing Warfare Al Ries and Jack Trout argue that marketing is war and that the marketing concept’s customer-oriented philosophy is inadequate. Rather, companies would do better by becoming competitor-oriented. If the key to success were to introduce products closest to those wanted by customers, then the market leader would simply be the company that performed the best market research. Clearly, much more is required.

To illustrate their point, Ries and Trout compare marketing to a football game. If a team simply identifies the goal line and moves the ball toward it without regard to the competing team, they most likely will be blocked in their efforts. To win the game, the team must focus its efforts on outwitting, outflanking, or over-powering the other side. This is the case in football, war, and marketing, according to Marketing Warfare. Because of the importance of the competition faced by the firm, a good marketing plan should include an extensive section on competitors.

There’s a saying that it is easier to get to the top than to stay there. Ries and Trout disagree, arguing that once at the top, a company can use the power of its leadership position to stay there. The larger company has the resources to outnumber smaller competitors. It can advertise more, perform more R&D, open more sales outlets, etc. This is not to say that smaller companies do not stand a chance. Rather, smaller companies must recognize the principle of force and attempt to win the battle by means of a superior strategy, not by brute force.

Some managers may believe that they can overcome a larger competitor through superior employees. Ries and Trout maintain that while it may be possible to assemble a small group of star performers, on a larger scale the employee abilities will approach the mean. Another argument is that a better product will overcome other weaknesses. Again, Ries and Trout disagree. Once consumers already have in their minds that a product is number one, it is extremely difficult for another product, even if superior, to take over that number one place in the consumer’s mind.

The way to win the battle is not only to recruit superior employees (although this is a good thing to do) or to develop a superior product. Rather, Ries and Trout argue that to win the battle, a company must successfully execute a superior strategy. Source

Now this is pretty basic marketing strategy but many people who do not understand marketing think that marketing is about creating better or more compelling products. This may sound logical to the uninitiated but marketers know that this is not necessarily true.

Now think of the Canadian political situation.  You have the Conservatives, Liberals, New Democratic Party (NDP), Bloc Québécois (BQ) and the Greens as well as a number of other fringe parties but for this blog we will use these five.

Ries and Trout argue that marketing battles do not take place in geographic areas. Rather, marketing battles take place in the mind of the consumer. Ries and Trout propose that the most important information is to know which positions are held by which organizations in the mind of the consumer. In other words, who holds the high ground?

Ries and Trout discuss four strategies for fighting a marketing war:

  • defensive
  • offensive
  • flanking
  • guerrilla

A company’s market share relative to that of competitors determines which strategy is appropriate. There often is a significant market share gap between two competitors such that each has more market share compared to the next weaker competitor. Because of this large gap, the principle of force plays an important role in the choice of each firm’s strategy. Source

For this discussion, we will deal with the 5 political parties mentioned above.

In such an environment, each of the five parties has a different objective:

  • Number 1 market domination: This would be the Conservatives who are clearly the leaders
  • Number 2 increased market share: This is clearly the Liberals who are clearly number 2
  • Number 3 survival:  This is the NDP
  • Number 4 survival: The Greens and the BQ who are small players except the Bloc is the major player i.e. in the Defensive position in one market in Canada which makes them somewhat of an anomaly.

According to Ries and Trout, the main competitor is the market leader that holds the majority of the market share i.e.  The government. The best strategy for such an organization is a defensive one. Note the Conservatives are clearly in a defensive mode trying to protect their lead and not take too many chances. They are happy where they are for the most part and with a little bump can win a majority which is their endgame.

The number two best strategy is an offensive attack (i.e. the Liberals) on the market leader organization. The reason is that the gaining of market share from the number three organization is unlikely to make a large impact on the much larger number two organization. However, there are potentially significant rewards if market share can be gained from the dominant organization – the Conservatives. Some may argue that the Liberals and NDP share the vote (2 left of centre parties) and they also split the vote allowing the Conservatives to come up the middle. By eliminating the competition i.e. Number 3, puts them head to head with the Number 1 leader.

The number three organization is too small to sustain an offensive attack on a larger organization. (Although, this seems to be what the NDP seem to be doing and going down in the polls). Its best strategy often is to launch a flanking attack, avoiding direct competition, for example, by launching a program that is positioned very differently from those of the larger parties. That is clearly what the NDP should be doing.

The smallest organization probably does not have sufficient resources to launch any type of sustained attack. If it launched a flanking product, a larger competitor likely would launch a similar one and would have the resources to win more voters. The smallest organization would do best to pursue a guerrilla strategy, identifying a segment that is large enough to be interesting to them (i.e. the Quebec voters for the Bloc and Environmentalists for the Greens) but not large enough to attract too much competition from any of the larger organizations except in very niche markets. As mentioned above the BQ are in the offensive position in Quebec, necessitating the Conservatives and Liberals to run an Offensive campaign in that market.

So what are the key strategies for the political parties?

A defensive strategy is appropriate for the market leader. Ries and Trout outline three basic principles of defensive marketing warfare:

  1. Defensive strategies should only be pursued by the market leader. It is self-defeating for an organization to pretend that it is the market leader for the purpose of strategy selection. The market leader is the organization who has attained that position in the mind of the consumer.
  2. Attacking yourself is the best defensive strategy. Introducing programs better than your existing ones preempt similar moves by the competition. Even if the new programs or policies have less impact that your existing programs, it accomplishes the more important long-term goal of protecting the organization’s market share.
  3. The leader should always block strong offensive moves made by competitors. If the leader fails to do so, the competitor may become entrenched and permanently maintain market share.

An offensive strategy is appropriate for an organization that is number 2 in the market. Ries and Trout present the following three principles of offensive strategy:

  1. The challenger’s primary concern should be the strength of the leader’s position, not the challenger’s own strengths and weaknesses.
  2. The challenger should seek a weakness in the leader’s strength – not simply a weakness in the leader’s position.
  3. Attack on as narrow a front as possible. Avoid a broad attack at all costs.

The strength of the leader’s position is of primary importance because the leader has the top position in the mind of the consumer, and it is this position that must be attacked.

A weakness in the leader’s strength must be found. Simply attacking any weakness is insufficient. For example, the leader may develop policies or programs which are similar to the challenger. The leader usually has the resources to defend against an attack against its weaknesses, whereas there may be weaknesses inherent in the leader’s strengths that cannot be defended.

The challenger should attack on as narrow a front as possible. Generally, this means focusing on programs and policies where the leader is weak and cannot adopt as it would destroy their overall strategy. For example the political program in their red book if offered by the Conservatives would conflict with their basic strategy not to mention their conservative principles. The reason for keeping the attack narrow is the principle of force; a narrow attack allows the challenger to concentrate its resources in the narrow area, and in that area may present more force than the leader. Many number two political parties ignore this principle and try to increase market share by broadening their programs and policies to compete in more areas, often with disastrous consequences. A narrow attack is particularly effective when the leader has attempted to be all things to all people with their programs and policies. Many Conservatives feel that the party has become very much like the Liberals. Sometimes referred to as “Liberal Light” to describe the middle of the road policies which normally would not be associated with a Conservative party? In that situation, a challenger can identify a segment within the leader’s market and offer a program and policy that serves only that segment. The challenger then stands a chance of winning a position in the voter’s mind for that more narrow class of program.

A flanking attack is not a direct attack on the leader, but rather, an attack in an area where the leader has not established a strong position. Ries and Trout present the following three flanking principles:

  1. A flanking move is best made in an uncontested area. The product should be in a new category that does not compete directly with the leader and should be the first to target the segment.
  2. A flanking move should have an element of surprise. Surprise is important to prevent the leader from using its enormous resources to counter the move before it gains momentum.
  3. Follow-through (pursuit) is equally as important as the attack itself. The organization should follow-through and focus on solidifying its position once it is established before competitors launch competing products. Too often, political parties turn their attention to the programs and policies that are not performing well rather than strengthening the position of the winners. If the party does not have the resources to strengthen its newly won position, then perhaps it should have used a guerrilla strategy instead of a flanking one.

A flanking move does not require a totally new program. Instead, the program only needs to be different enough to carve its own position. Flanking is not a low-risk strategy. Market acceptance of an innovative program is unknown, and test marketing must be kept to a minimum to guard the element of surprise. Whether the leader will take prompt action in response is an unknown. Being well-tuned to the political environment is helpful since their public speeches often provide clues about their stance on potential programs. This is where the NDP should have a strategy which is very different from its competitors’ and needs to find policies and programs that are totally different that the Conservatives and Liberals.

Guerrilla marketing differs from a flanking campaign in that the guerrilla move is relatively small and differs significantly from the leader’s position. Guerrilla marketing is appropriate for organizations that, relative to the competition, are too small to launch offensive or flanking moves. Ries and Trout list the following three principles of guerrilla marketing warfare:

  1. Identify a segment that is small enough to defend. For example, the scope can be limited geographically, demographically, etc.
  2. Never act like the leader, even if successful in the guerrilla attack. Some parties that make a guerrilla move are successful in it and begin to act like the leader, building a larger, bureaucratic organization that slows it down and increases overhead costs. A guerrilla should resist the temptation to give up its lean and nimble organization.
  3. Be ready to enter or exit on short notice. If the market for the program takes a negative turn, the guerrilla should exit quickly rather than waste resources. Because the guerrilla has a nimble organization, it is better able to make a quick exit without suffering huge losses. Similarly, the guerrilla can respond more quickly to a market opportunity without spending months or years having committees analyze it. Guerrilla opportunities sometimes arise when a large organization discontinue marketing an idea or program, leaving a gap on which the guerrilla can capitalize if it acts quickly. For example the Liberals seem to have abandoned the environment leaving a large opening for the Greens (the problem is that the Environment is no longer top of mind among the voters, but that could change).

The idea of guerrilla marketing is to direct resources into a limited area, using the principle of force to win that area.

Demographic guerrillas target a specific segment of the population. Guerrillas target a specific field or issue using vertical marketing to tailor a program to the special needs of that niche. The focus is narrow and deep rather than broad and shallow. They may offer a unique program for which there is a small market.

Strategy can be developed using a top-down or a bottom-up approach. Ries and Trout argue for the bottom-up approach because a deep knowledge of the tactics actually used is needed to formulate a strategy that has the goal of achieving tactical objectives. More specifically, Ries and Trout argue that the sole purpose of a strategy is to put the forces in motion to overpower the competitor at the point of contact using the principle of force. In the marketing arena, it means overpowering the competitor in a specific position in the mind of the voter.

As I have mentioned in many of my other blogs marketing is about STRATEGY and NOT TACTICS. Ries and Trout explain that a good strategy does not depend on brilliant tactics. Mediocre tactics are usually sufficient for a good strategy. Even the best possible tactics are unlikely to compensate for a poor strategy. In political campaigns, advertising can be considered a tactic and many campaign managers falsely assume that success depends almost entirely on the quality of the advertising campaign. If a strategy requires top-notch tactics to win the battle, Ries and Trout maintain that such a strategy is unsound because tactical brilliance is rare.

Any strategy should take into account the probable response of the competitor. The best way to protect against a response is to attack the weakness in the leader’s strength so that the leader cannot respond without giving up its strength.

To support the argument of a bottom-up strategy, Ries and Trout point out that many large organizations incorrectly believe that they can do anything if they simply allocate enough resources. History shows otherwise and they give many examples in the business world. Such diversions they say “shift resources away from the point of battle where they are needed. This is one of the dangers that can be avoided by a bottom-up strategy based on what can be accomplished on the tactical level.”

Ries and Trout believe in having relatively few people involved in the strategic process. The organization needs a strong “marketing general” to formulate the strategy from the tactical realities. A marketing general has the following characteristics:

  • Flexibility – to adjust the strategy to the situation.
  • Courage – to make a decision and stand by it.
  • Boldness – to act without hesitation when the time is right.
  • Knows the facts – in order to formulate strategy from the ground up.
  • Knows the rules – but internalize them so they can be forgotten.
  • Lucky – marketing warfare has an element of chance; a good strategy only makes the odds more favourable.

Summary

Ries’ and Trout’s work in the business world have interesting and useful commonalities between political marketing strategy and business marketing strategy. The appropriate marketing strategy in business and politics depends on the organization’s position relative to its opponents. In developing its strategy, the political party must objectively determine its position in the market. Once this is done, a defensive, offensive, flanking, or guerrilla strategy can be selected depending on their position relative to the competition. It also helps if you have a marketing strategist running your campaign.

Recommended Reading

Al Ries and Jack Trout, Marketing Warfare

Note the book has been around for many years and many of the examples are 20 years old but the thinking behind the strategies is still relevant

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