Corporate Social Responsibility and Customer Integration -

Diplomarbeit von Heike Löber

Introduction:

‘There is a difference between a good company and a great company. A good company offers excellent products and services. A great company also offers excellent products and services but also strives to make the world a better place’.

As this quote clearly demonstrates, the importance of corporate social responsibility (CSR) is on the rise. Indeed, more and more companies are engaging in CSR-related activities such as cause-related marketing (CRM), employee volunteering (EV) or corporate philanthropy (CP). According to Bhattacharya and Sen more than 80% percent of Fortune 500 companies deal with CSR issues in the United States (US). In European countries such as Germany, the numbers of companies with CSR initiatives is similarly growing. Among those firms are famous examples such as Starbucks and The Body Shop as well as the German companies BMW or SAP.

There are several reasons for this trend. On the one hand, companies are increasingly put under pressure to behave socially responsible from different sides. First, consumers today are more sensitive to business practices of companies and can exert their power by means of boycotts resulting in negative economic consequences for firms. This is especially the case in times of increasing media coverage and advances in information technology where bad business practices become more easily transparent. Particularly, recent corporate scandals like those of Enron, or Shell, among others, make a contribution to consumers’ skepticism. Then, globalization leads to new challenges for companies because on the one hand, they are operating in countries with lower standards of living resulting in higher needs for socially responsible behavior in the respective society. On the other hand, worldwide competition is being strengthened in markets, which are characterized by low levels of product differentiation. CSR offers a source of competitive advantage because it enhances the overall reputation of the company and provides a valuable basis for differentiation. Besides that, companies are feeling pressure by a rise in public standards for social performance (e.g. the United Nations Global Compact).

On the other hand, there is evidence that CSR is not only ‘the right thing to do” but it also leads to ‘doing better” because there is a positive relationship between a company’s CSR activities and its stakeholders; especially consumers can be positively influenced. For one thing, market polls confirm the benevolent reactions of consumers to these kinds of companies. Furthermore, a rising stream of academic marketing research attests to the fact that engaging in CSR activities is a business strategy worth doing. By means of lab experiments and field studies, it was found out that CSR has an impact on consumer product responses as well as on their attitude toward the firm. CSR is also reported to positively influence customers’ satisfaction as much as customers’ identification with the company. These internal aspects can translate into behavioral outcomes such as product purchase, which in turn can improve a company’s financial performance. Thus, CSR is also of increasing interested from academia.

However, more research is needed. Most empirical studies give a rather incomplete picture of CSR as they do not consider single CSR activities but view CSR as a whole program. This is in part responsible for the fact that past studies, especially when investigating the effects of CSR on financial outcomes, have lead to controversial results. Hence, the urgent need for research comparing the outcomes of different CSR activities has been emphasized. As was stated: ‘Future research should examine variation in the outcomes of specific types of CSR’.

Table of Contents:

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Chapter 3., Development of Hypotheses:

After having developed the basic conceptual and theoretical framework in the preceding sections, the model of the present study will now be developed. First of all, the dependent variables (DVs) of the study will be chosen. In a first step, it will then be investigated whether these outcomes can actually be achieved through the three activities CRM, EV, and CP and thus, it will be looked whether CSR has an impact at all. Therefore, hypotheses with main effects will be proposed. After that, the study tests which of the three activities is best in doing so by comparing the activities with each other. This corresponds to the development of the hypotheses with the relative effects. Finally, it will be examined whether the DVs differ for consumers who are integrated into the three initiatives. To do so, hypotheses of CSR effects with CI are being postulated. The theoretical development of all hypotheses draws upon existing literature in CSR focusing on customers as well as upon SIT, AT, Moral Behavior, BDT, Means-end theories and the Empowerment Strategy.

3.1, Absolute Effects of CSR-related Activities:

The present investigation measures the effects of the CSR factor in the form of CRM, EV, and CP on the DVs CSR belief, C-C identification, positive company evaluation and product purchase intent. Among the firm’s possible economic benefits from a marketing perspective as seen in the literature review, those four customer-related outcomes were chosen because firstly, they refer to internal results such as attitudes and intentions and as such, they can easily be requested in an online experiment as no direct behaviour is involved. Secondly, research shows that those responses are quite common and of interest to companies; they should by no means be neglected as they often mediate behavioural outcomes and are, by nature, potentially-related marketing objectives. The hypotheses will be developed by embracing the three single activities under the umbrella term CSR as was done in most preceding studies even though the respective activities were then separately used as stimuli in the actual experiment. As far as the DVs are concerned, they will be dealt with in the above mentioned order because customer reactions often start with a CSR belief, leading to C-C identification which both, in turn, often trigger a positive evaluation of the respective company as well as its products, with the latter leading to an intention to buy them.

CSR belief:

A first outcome of CSR, which will be dealt with is CSR belief, which is also referred to as CSR associations or CSR reputation. In general, people have knowledge about a company, which consists of company characteristics associated with it such as skills or values belonging to that firm. Brown and Dacin called this knowledge corporate associations accordingly, which mainly comprise corporate abilities (CAs) understood as the firm’s ‘expertise in producing and delivering its products/services’. If, however, a company engages in CSR activities, then CSR is added as a further component to corporate associations which is frequently unconnected to CAs and is termed CSR associations. For this reason, it is then possible that the consumers seize this CSR component and that they additively include it to their total company-related information such that CAs and CSR do coexist in their corporate associations. In other words, individuals might develop a belief about a company referred to as CSR belief. This relates to an overall assessment of the ‘extent to which a company (…) is socially responsible” and may result in consumers perceiving the corporation as ‘doing good” in a social and sustainable way. Before individuals can develop a CSR belief, though, they must be aware of the company’s CSR initiative. Following that, CSR awareness is a prerequisite of CSR belief. Extant academic research gives evidence that CSR belief is one of basic outcomes of CSR initiatives. CSR belief, in turn, is an antecedent for many other customer-related responses of CSR, which will be discussed subsequently like C-C identification. As such, a CSR belief is an extremely important result of CSR. Based on these considerations and findings, it can be predicted that CSR will lead to customers’ CSR belief.

C-C Identification:

A further stakeholder outcome of a company’s CSR initiatives is customers’ identification with the company, C-C identification. This has been defined as ‘consumers’ psychological attachment to a company based on a substantial overlap between their perceptions of themselves and their perceptions of the company”. This CSR effect bears on SIT, which suggests that individuals define their character through group memberships which helps them satisfy key self-definitional needs like self-esteem as stated above. According to research in organizational identification such a group can also be an organization because ‘people often identify with an organization they belong to’ such as an employee with their employer’s organization by ‘incorporating favorable aspects of the organizational identity into their own’ for reasons of self-consistency, self-enhancement, and self-definition. In experimental studies, this stream of research has further been extended from employees to customers even though there is no formal membership between a company and them. Nevertheless, customers develop relationships with companies, for example, by purchasing their products, which may be sufficiently enough so that such a formal membership may not be necessary for the process of identification. Thus, customers are similarly in the position to identify with organizations, which is motivated by the desire to share traits with an attractive organization. SIT suggests that such an identification is especially probable if consumers perceive a corporation’s identity to be ‘enduring, distinctive, and capable of enhancing their self-esteem”. As has been proven, a company’s character in this connection is best revealed by its CSR actions, i.e. CSR associations, because an identity which is grounded in a CSR program is more enduring and additionally more distinctive due to its characteristics than an identity based on a corporation’s CAs (e.g. expertise in producing goods). Moreover, a company that engages in social practices appears to be attractive and to possess admirable traits like being civic-minded, which people would not negate as part of their own identity and which could increase their self-esteem. Consequently, consumers may be prone to identify with companies for which they possess CSR associations (see above), which is why C-C identification is also a consequence of subjects’ CSR belief. If they do so, consumers become more supportive of the respective firm as prior identification research assumes and therefore, it is likely that other company favoring responses such as a more positive company evaluation, which will be described next, will follow. Companies like The Body Shop or Harley-Davidson, as illustrations, have achieved such a high level of customer identification with the company that those do even engage in positive word-of-mouth. From the reasoning above, it can be assumed that a company’s CSR commitment will lead to C-C identification.