Scholarly Insights: AMA’s digest of the latest findings from marketing’s top researchers
As corporate social responsibility initiatives gain steam in the business world, studies are indicating a positive relationship between CSR and stakeholder interests including consumer preference, employee job performance and even shareholder wealth. Despite all this, one area persists as problematic when it comes to CSR.
“Warm Glow” Effect and Price Valuation
A new study from the Journal of Marketing highlights the implications of CSR on price valuation—likely the biggest issue concerning CSR efforts. Specifically, authors Johannes Habel, Laura Marie Schons, Sascha Alavi and Jan Wieseke investigated the purchase-decision process as customers determined whether higher prices placed on products from socially responsible brands are really fair.
According to the research, CSR efforts lead to an expected “warm glow” effect defined by the feel-good sensation accompanying purchases that help worthy causes. However, this effect can be thwarted if the customer has any reason to believe that CSR efforts are motivated primarily for the company’s own benefit. If the company and the cause don’t align, or if there is any reason to doubt the sincerity of the company’s CSR efforts, customers will likely reject higher priced products, even if they claim to help good causes.
Examples in Authenticity
For marketers and managers, this research indicates that CSR initiatives should be carefully considered before associating a cause with a particular brand. The consideration should result in a cause that exudes authenticity in order to increase the effectiveness of a CSR campaign.
Reporting is also critical to CSR. Companies must track, document and publicize the impact a campaign has on a cause. Not doing so can prevent customers from determining price fairness in their purchases. Fortunately, sharing the impact of a CSR campaigns is not difficult. Video and pictures can be shared through the many social media platforms available.
The more that you share, the more customers can continue enjoying that “warm glow.”
Krochet Kids Intl., for example, is a nonprofit brand that distributes high quality knit and crocheted accessories made by women in developing nations. The company releases annual financial reports disclosing sales, expenses and a breakdown of wages paid to the women participating in their program. They then harness Instagram’s capacity for visual storytelling by sharing testimonials and highlighting their products and company culture.
Unilever has also deftly addressed CSR in an effort to help children in India where hygiene is crucial to preventing diseases in early childhood. Unilever’s stated goal is to increase life expectancy beyond the age of five by promoting handwashing. The pairing of this cause to Unilever’s Lifebuoy soap makes an ideal match to persuade the campaign’s sincerity to even the most skeptical of customers. Further, videos made for the campaign creatively inform customers of the hygiene issue’s urgency and effectively captures the impact Lifebuoy is making.
Lifebuoy’s first video for the “Help a Child Turn 5” campaign has garnered 19 million views to date.
Johannes Habel, Laura Marie Schons, Sascha Alavi, and Jan Wieseke (2016) “Warm Glow or Extra Charge? The Ambivalent Effect of Corporate Social Responsibility Activities on Customers’ Perceived Price Fairness“. Journal of Marketing: January 2016, Vol. 80, No. 1, pp. 84-105.