The Impact of Cause-Related Marketing on Consumer Choices - Research Paper Example

?The Impact of Cause-Related Marketing on Consumer Choices Contents Contents 2 0Introduction 3 2.0Definition of Cause Related Marketing 4 3.0 The Use of Cause-Related Marketing 5 3.0Theories Influencing Cause-Related Marketing 7 4.0Previous Studies Testing the Influence of Cause-Related Marketing on Consumer Choices 8 5.0Rationale for Cause-Related Marketing 11 6.0Sample Cause-Related Marketing Campaigns 12 RadioShack 12 American Express 13 7.0 Conclusion 14 References 15 The Impact of Cause-Related Marketing on Consumer Choices 1.0 Introduction In the current marketplace, there are numerous products with very little, if any, distinctions in price, quality and services (Grewal, 2000). In seeking to distinguish their products from those of competitors, many businesses are turning to cause-related marketing (CRM) as a means of communicating with consumers (Lamb, Hair & McDaniel, 2012). In general CRM involves communicating with consumers via advertisement, packaging, promotions, campaign and many other communication techniques about the firm’s corporate social responsibility by virtue of an association with a non-profit organization or the firm’s support of a specific cause or causes (Bronn & Vrioni, 2001). As a communication tool, the success of a CRM campaign is highly reliant on consumer responses and perceptions of the cause to which the CRM campaign is attached. Much depends on the consumer’s awareness of the identified cause and the cause’s contribution to social goods. The consumer’s connection to the cause can either improve or reduce the chances of the CRM campaign’s success (Baack, Harris & Baack, 2011). This research studies analyses the concept of CRM and its influences on consumer choices. By taking this approach, the effectiveness and ineffectiveness of CRM as a tool for communicating with consumers can be identified. 2.0 Definition of Cause Related Marketing A working definition of CRM is borrowed from Varadarajan Menon (1988). In this regard, Varadarajan and Menon (1988) define CRM as: The process of formulating and implementing marketing activities that are characterised by an offer from the firm to contribute a specific amount to a designated cause when customers engage in revenue providing exchanges that satisfy organizational and individual objectives (p. 60). In this regard, CRM is a form of business orientated philanthropy geared toward “profit-motivated giving” (Varadarajan & Menon, 1988, p. 58). CRM is also characterized by symmetrical relations between business organizations/for-profit organizations and non-profit organization on the basis of shared advantages. To this end, the business organization seeks to obtain an increase in sales and the non-profit organization seeks to obtain an increase in funding (Kahle & Close, 2011). Thus CRM is both a “positioning” and “marketing tool” that intentionally connects a business or a brad to “a relevant cause or issue” for the benefit of the business and the social cause or its non-profit promoter (Pringle & Thompson, 1999, p. 3). A business firms’ investment in CRM is based on the concept that consumers for the most part will choose a brand for both “expressive” and “practical reasons”(Linton, 2005, p. 604). Therefore a business may choose CRM as a means of promoting attachment to brand by tapping into the social and environmental consciousness of consumers to their products. When businesses’ brands are already experiencing a high level of loyalty to their products and brands, CRM can be used as “brand extensions” (David, 2000, p. 132). Ultimately, the marketing strategy employed in CRM is to engage the consumer’s emotions with the result that the consumer is left feeling that by purchasing a specific product, he or she is helping to further social goods (Strahilevitz, 1999). From the perspective of the business organization, there can be two specific benefits. First, in the long term, CRM can provide an advantage in that it may improve the business’s image or the image of its brand. In the short term, CRM can increase sales (Strahilevitz, 1999). 3.0 The Use of Cause-Related Marketing According to Benjamin and Stoler (2001), the first case of CRM occurred in 1887 when the Royal National Lifeboat Institution was the recipient of a Sunlight Number 1 lifeboat funded by a Sunlight Soap Competition in the UK. However the term cause-related marketing was first used by the American Express Company in the early part of the 1980s in connection with a fundraising project for the restoration of the Statue of Liberty on Ellis Island, New York (Ciconte & Jacob, 2009). The promotion consisted of American Express Company donating one penny to the Statute of Liberty’s restoration each time a new AMEX card was issued, or each time a consumer used an American Express Card, American Express Travellers Cheque, or the American Express Travel Package (Ciconte & Jacob, 2009). The American Express Company’s cause-related marketing campaign consisted of aggressive advertising and marketing as a means of publicizing the intrinsic value of lending support to the non-profit organization spearheading the renovation of the Statue of Liberty. Consumers could participate in the restoration effort by simply using or receiving American Express product. By all accounts the campaign was successful as it secured US$1.7 million for the restoration of the Statue of Liberty representing a 28% increase in the use of American Express products (Ciconte & Jacob, 2009). Since the 1980s and the launch of cause-relating marketing the American Express Company, CRM has caught on and has become increasingly popular. Lamb, Hair and McDaniel (2010) reported that CRM generates approximately US$7 billion in revenue annually. CRM is also associated with “good public relations for the firm” and is believed to be capable of stimulating brand sales (Lamb, Hair & McDaniel, 2010, p. 81). CRM has become a popular marketing strategy among Western businesses (Taylor 2007). Firms typically report that CRM increases sales particularly in terms of trial purchasing offers, repeated sales or promotional sales (Till & Nowak, 2000). Companies also report using CRM as a method for creating and sustaining a positive brand and business image (Till & Nowak, 2000). A study/survey conducted by Business in the Community (BITC) in the UK in 1998 revealed that 70% of the chief executives, marketing managers and community affairs manager surveyed indicated that they thought that CRM will only increase in significance. 75% of the respondents also indicated that CRM was directly linked to the business or the brand’s reputation. 81% of the market managers participating in the survey believed that companies were required to respond to social issues (Benjamin & Stoler, 2001). The result of BITC’s survey indicates that the use of CRM is valued by firms and will likely continue to direct marketing strategies and implementation. It is therefore hardly surprising that CRM has emerged as among the “fastest growing marketing strategies” in Western businesses (Hebb, 2002). Business are using CRM as a method of creating distinction in markets and non-profit organizations are using CRM as a viable method of injecting revenue into their on-going projects (Hebb, 2002). 3.0 Theories Influencing Cause-Related Marketing Fishben and Ajzen’s theory of reasoned action makes a connection between perspectives, intention and conduct to consumers’ purchasing patterns (Cited in Summers & Bellau, 2006, p. 407). According to the theory of reasoned action, perspectives are important as they are connected to purchasing intentions and can therefore be used to predict consumer purchasing patterns. Ajzen built on the theory of reasoned action and constructed the theory planned behavior (Cited in Verdurme & Viane, 2003). By virtue of the theory of planned behavior, the consumer is informed by personal perspectives and attitudes that are further informed by specific belief systems and personal assessments (Verdurme & Viaene, 2003). Thus when brands or products correspond with a consumer’s own values and belief systems, the consumer has a more positive attitude toward that brand or product (Page & Luding, 2003). It therefore follows that consumer purchasing patterns are directly influenced by perspectives and attitudes relative to particular products and marketing messages linked to products and brands. In the meantime, marketing communications are designed to heighten brand consciousness, influence positive consumption attitudes in connection with a certain brand or product and to promote an intention to purchase (Belch & Belch, 1998). To this end, CRM is a viable marketing communication technique for achieving marketing objectives. However, successful CRM depends on socially aware consumers who are prepared to contribute to a social cause. Marketing managers aim to reach or influence a consumer perspective that wants to make contributions to a common social cause rather than personal issues and interests (Youn & Kim, 2008). 4.0 Previous Studies Testing the Influence of Cause-Related Marketing on Consumer Choices Barone, Miyazaki and Taylor (2000) conducted a two-part study testing the hypothesis that CRM positively influences consumer choices. The study was comprised of two groups of participants. Study 1A tested “trade-offs” relative to the performance of a product and Study 1B tested “trade-offs” relative to price (Barone, Miyazaki & Taylor, 2000, p. 251). 165 undergraduate students in the business field were divided into two groups. The company’s CRM incentives were represented differently to the two groups. Company A was presented as strongly involved in CRM incentives and Company B was presented as having a weak and no CRM inclination. The participants were required to select products offered by Company A and Company B and to provide reasons for their choices (Barone, Miyazaki & Taylor, 2000). Results of the study demonstrated that when prices and product performance were different, the participants more frequently selected products of weaker performance and higher prices “in return for perceived corporate social responsibility” (Barone, Miyazaki & Taylor, 2000, p. 253). The study also revealed that the participants were more inclined to select products attached to strong CRM motivation over products with weak CRM motivation (Barone, Miyazaki & Taylor, 2000). It therefore follows that it is not enough to simply state a social cause or to advertise in generic fashion. Consumers will generally be more persuaded when CRM appears to have a strong motivation toward a social cause. Baghi, Rubaltelli and Tedeschi (2009) argued that even where a CRM is capable of connecting with a consumer in terms of promoting a common cause, marketing strategies must be capable of fostering confidence and trust in the consumer. In other words, the consumer will need to trust that the firm will actually contribute toward the cause. To this end, Baghi, Rubaltelli and Tedeschi (2009) conducted two experiments to demonstrate that vivid messages relative to the cause has a more positive influence on consumer preferences and confidence as opposed to “pallid messages” (p. 15). The first experiment conducted by Baghi, Rubaltelli and Tedeschi (2009) consisted of 610 undergraduate students of which just over 37% were males and the mean age was 22 years. The participants were provided with two spaghetti products, two toothpastes brands and two cell phone chargers. The products were described with their respective prices and the cause it supported was also described. It was reported that 5% of the purchase price would be donated to the cause. Each of the product pairs were matched in pricing and similar causes. Each pair consisted of a pallid product and a vivid product. Pallid products were linked to a basic description of the cause such as a general campaign against world hunger. The vivid product was linked to more comprehensive description of its cause such as an international program for the starving and undernourished in Ethiopia (Baghi, Rubaltelli and Tedeschi, 2009). The research results indicated that students chose the vivid product far more frequently than the pallid product (Baghi, Rubaltelli and Tedeschi, 2009). In a second the experiment using 118 undergraduates of a mean age of 22, the participants were presented with the same products as the participants in the first experiment. The products however were priced differently, with the pallid products offered at a much lower price than the vivid products. Results indicated that the participants were more attached to the vivid products despite the higher pricing (Baghi, Rubaltelli and Tedeschi, 2009). Pracejus and Olsen (2004) conducted a study testing whether or not there was a connection between charity and brand in a CRM campaign and the extent to which brand and charity fit affected the results of a CRM campaign. The study population consisted of 28 undergraduate students from the University of Florida. The students were divided into four groups and were presented with copies of two advertisements for two theme parks of equal brand reputations, but with differences in admission tickets, facilities, food pricing and driving distance. One of the advertisements contained the sentence, “As part of our continuing support of the Children’s Miracle Network/Kennedy Center for the Performing Arts, we’ll donate five dollars to this worthy cause for every ticket sold until the end of the month” (Pracejus & Olsen, 2004, p. 637). Prior to conducting the experiment, the researchers obtained information by using a questionnaire to determine the participant’s social cause preferences. The results of the actual study indicated that where the charity corresponded with the participants’ social cause, they chose the theme park that fit their preferred social cause regardless of prices, facilities, driving distance or park facilities (Pracejus & Olsen, 2004). Hebb (2002) examined national surveys conducted in the US and Canada and found overwhelming support for the contention that CRM has a positive effect on consumer choices. For instance a 2001 survey conducted by the Conference Board of Canada revealed that 72% of Canadians participating in the survey were more inclined to purchase products from a firm that invests in social issues and another 68% were more apt to invest in firms that visibly supported social or community issues (Hebb, 2002). Hebb (2002) also reports that a survey conducted by Time magazine in the US in 2001 demonstrated that 76% of US consumers participating in the survey would purchase products that were connected to a social cause that they cared about provided the price and quality of the products were competitive. Studies reported in the literature therefore support the perception that CRM campaigns can positively influence consumer choices in terms of the decision to purchase a product. There are some caveats, however. For instance, consumers are typically more apt to select a product attached to a CRM campaign if the quality and price of the product is competitive in relation to similar products. Moreover, consumers need to have confidence that the business is truly committed to the cause it promotes or supports and will actually commit proceeds to the cause as promised. In addition, consumers are more apt to purchase a CRM product if the campaign contains a vivid as opposed to a pallid message. Consumers also prefer CRM products when the cause is one that the consumer is attached to. It therefore follows, that CRM strategies are required to adopt campaigns that pander to these caveats in order to be successful. 5.0 Rationale for Cause-Related Marketing Over the last ten years of so, businesses have been under increasing pressure to engage in socially responsible operations and to therefore take into consideration, the extent to which their business operations impact society (Chang, Chen & Tseng, 2009). Consequentially, there is a growing number of business firms, regardless of size, that have established corporate social responsibility frameworks for conducting their respective businesses. CRM has been embraced as one way of adopting corporate social responsibility practices (Chang, Chen & Tseng, 2009). The primary reason for using CRM as a method of meeting the demands for corporate social responsibility practices is the positive connection between CRM and consumer behavior. Farache, Perks, Wanderley and Filho (2008) conducted a review of the literature and confirmed that consumers are typically positive with respect to CRM motivation. Moreover, Benjamin and Stoler (2001) argued that CRM can be used in tactful ways to change the perceptions and attitudes of consumers toward products and/or brands by emphasizing the product or the brand’s connection to a social cause or event. It therefore follows that CRM is a valid marketing strategy for companies to accomplish two primary objectives. First, it is a method by which businesses may respond positively to the on-going pressure to address the demands of corporate social responsibility practices. Secondly, CRM provides a method by which businesses can legitimately increase sales and improve the firm’s brand reputation in the long term. 6.0 Sample Cause-Related Marketing Campaigns RadioShack In 2009, RadioShack Corporation in the US partnered with Livestrong, a charity established in 1997 by Lance Armstrong to support more than 28 million cancer patients globally. On October 2, 2010, RadioShack and Mindshare Chicago converged with imc2 to spearhead a campaign entitled Team 28 Mosaic. The campaign involved the showing of a large digital photograph of Armstrong on New York’s Time Square’s billboards. The photograph was created out of “mosaic of thousands of Facebook and Twitter supporters” (WWP, 2011). RadioShack’s CRM involved a promise to donate US$1 for each individual who tagged the Team 28 mosaic to their social medial profile for at least 24 hours. The campaign was entirely successful in that it generated over US$29,000 for Livestrong and since its partnering with Livestrong, RadioShack has generated over US$7 million from CRM campaigns for Livestrong (WWP, 2011). However, this case study as reported by (WWP, 2011) does not reveal the extent to which the Livestrong campaign has been successful for RadioShack’s sales or brand. However, since RadioShack continues to launch the Livestrong CRM, it can be assumed that the campaign has been good for the company’s sales and brand reputation. American Express American Express Members Project is a CRM campaign designed to provide consumers with an outlet for donating to social causes that are important to them. The campaign was introduced in 2008 and in 2010, O&M and Mindshare partnered with American Express to launch the Members Project once again with a view to getting more consumers involved (WWP, 2011B). The campaign included television spots comprised of motivational narratives of Yvon Chouinard who founded Patagonia and Geoffrey Canada who founded the Harlem Children’s Zone and encouraged consumers to become involved and become members of the Members Projects. Another television campaign included members of the case of FOX TV’s Glee who pleaded with consumers to join Glee’s cast in working with children. Cardholders were also encouraged in a separate social medial campaign narratives about the causes that they support on the Facebook page for Members Project (WPP, 2011B). More than US$4.2 million was earmarked for donations to at least 61 charities. Users navigating to MembersProject.com or the Facebook page are requested to vote each weak for a charity they think American Express should get behind. Visitors can also donate Reward Points or money to charities at the Members Project website and Facebook page. Overall, US$6,000,000 and 648 Membership Rewards points have been donated to more than 7,000 charities (WPP, 2011B). The Members Project launched by American Express is a high risk CRM as it does not depend on American Express consumers purchasing products. The funds spent on the television campaigns can only be seen as a tax benefit. The campaigns only reached out to American Express consumers to support various charities. However, in the long-term, American Express’s philanthropic endeavours should increase or sustain its brand value and the firm’s reputation, which will in turn generate consumer loyalty and can possibly attract new consumers. 7.0 Conclusion CRM has gained significant currency since it was officially introduced by American Express in the 1980s. CRM has been seen as a tool for distinguishing brands and companies from one another in a marketplace where product quality, quantity and pricing are virtually the same. 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