Strategic Marketing is Inadequate unless it Encompasses Social Corporate Responsibility - Coursework Example

Strategic Marketing is Inadequate unless it Encompasses Social Corporate Responsibility Total Number of Words 907 Table of Contents I. Introduction ………………………………………………………………. 3 II. The Impact of Traditional Strategic Marketing in Satisfying the Customers …………………………………………………. 3 III. The Effects of Having Satisfied Customers …………………………….. 4 IV. About Corporate Social Responsibility (CSR) …………………………… 5 V. Importance of CSR on Customer Satisfaction ……………………………. 6 VI. Importance of CSR on the Market Value ………………………………… 7 a. About Corporate Ability …………………………………………. 8 VII. Conclusion ……………………………………………………………….. 9 References ……………………………………………………………………….. 10 - 12 Introduction Globalization contributes to the tight competition in the global market today. For many years, marketing managers have been carefully establishing a strategic marketing plan that is effective in enabling a business to be successful in the global markets. The customer satisfaction is one of the biggest areas being focused in the modern market research since satisfied customers could eventually lead to customer loyalty. (Szwarc, 2005) It is said that companies that are able to gain the most customers’ loyalty are usually the ones that are successful in grabbing the biggest market share. For this reason, organizations today are heavily investing on unique marketing activities and programmes such as the corporate social responsibility with the goal of retaining their current pool of customers. Specifically the tight competition in domestic and global markets encourages the businesses today to view customers’ loyalty as an important factor in sustaining the constant increase in the company’s profit and market value. This study will discuss and analyze the significant impact of implementing corporate social responsibility (CSR) initiatives as a marketing strategy in establishing customer satisfaction. Based on the literature research concerning the effect of CSR in creating customer satisfaction and market value, this study will conclude whether strategic marketing will be inadequate in the absence of the application of social corporate responsibility in the business. The Impact of Traditional Strategic Marketing in Satisfying the Customers There are several ways in which a business organization could satisfy the customers. Increasing the customers’ satisfaction is not only dependent on marketing communication such as traditional advertisements on the television or print advertisements on the newspaper and magazines. Today, it is more important for the marketing managers to meet the specific needs and satisfaction of the customers rather than spending a huge amount of money on ineffective traditional marketing approach. In short a successful business organizations are the ones that could base the marketing strategy more than meeting the common demands of the customers such as providing them with “a 100% available products” including the capability of the company to offer the product at a reasonable price. (Szwarc, 2005) It is normal to achieve customer satisfaction when a company is committed in delivering good quality products and services. (Luo and Bhattacharya, 2006) In order to keep up with the customers’ needs and wants, it is necessary for each company to continuously innovate new strategic ways that could attract the attention of the consumers. The Effects of Having a Satisfied Customers One positive effect of being able to achieve customer satisfaction on a company’s market value is the fact that satisfied customers tend to be loyal to the company despite the tight competition within the same industry. (Bolton and Drew, 1991) It is expected that the customers’ positive experiences will be passed on to other prospective customers through word-of-mouth. (Szymanski and Henard, 2001) In the long run, some of these customers will be more than willing to pay the premium price of that company has declared. (Homburg, Koschate, and Hoyer, 2005) All of these aspects contribute to the increase of the company’s market value. Several studies in the past shows that companies with a much higher level of cash flows and a less volatility to the future cash flows could lead to a more superior market value. (Fornell et al., 2006) Since the customer satisfaction could result from CSR initiatives and other related activities, we may conclude that the customer satisfaction represents the pathway in which the CSR activities could affect the market value of the company positively. In some cases, CSR activities could affect the market value through a ‘non-customer routes.’ CSR could also create a positive ‘moral capital’ to improve the market value of a particular company. (Godfrey, 2005; p. 777) Improving the employees’ moral could result to a higher productivity rate whereas boosting the customers’ moral would bring in more sales and profit to the company. About Corporate Social Responsibility (CSR) CSR is broadly defined as the company’s activities and status in relation to its societal and/or stakeholder obligations. (Sen and Bhattacharya, 2001) Due to the tight competition in the domestic and international markets, CSR becomes very popular and is considered important strategy in keeping the customers satisfied. In fact, almost 90% of the Fortune 500 companies had already adopted the CSR initiatives. (Kotler and Lee, 2004) According to the Business Week report, a lot of giant companies have been investing a lot of money on the implementation of CSR. (Berner, 2005; p. 79) It is believed that the use of CSR is better than the use of high cost advertisements since it could establish a direct and more effective relationship with the customers. Based on the observation of Drumwright (1996), the use of advertisements together with a social dimension is gradually increasing. In fact, several marketing studies have shown that the social responsibility programmes have a significant direct and indirect positive effect on several customer-related outcomes. (Bhattacharya et al., 2004; Brown, 1998) The good relationship developed between the company and the customers contributes in establishing a positive attitude on the company’s products. (Berens, Van Riel, and Van Bruggen, 2005) Since most of the companies who are knowledgeable on how to take advantage of the CSR initiatives have proven that social participation could result to a better relationship with the satisfied customers, investment on CSR is considered as “the smart thing to do.” (Smith, 2003; p. 52) Importance of CSR on Customer Satisfaction In most cases, the number of satisfied customers are measured based on the customers’ total purchases and consumption experiences over a long period of time. (Anderson, Fornell, and Mazvancheryl, 2004) For many years, customer satisfaction has become a very important part of marketing strategy since it could trigger a long-term profitability and increase the market value of the company. (Fornell et al., 2006; Gruca and Rego, 2005) Based on the stakeholder theory (Maignan, Ferrel, and Ferrel, 2005) and the institutional theory (Scott, 1987), the action of a company towards the societal aspect appeals to a multi-dimensionality of the consumers both in economic aspect and as a member of a family, community, and a country. (Handelman and Arnold 1999) For this reason, a company that is socially responsible is expected to attract a wider scope of consumers as compared to a company that is only focusing on the economic aspects of the society. CSR could indirectly boosts a positive attitude towards the company based on the consumers’ personal evaluation. (Sen and Bhattacharya, 2001) In some cases, CSR initiatives could persuade the customers to identify themselves with the image of the company. (Bhattacharya and Sen, 2004) A strong relationship between the customers and the company creates long-term benefits for both parties. In some cases, some customers could derive a better perceived value and a much higher satisfaction when consuming products that are made by a socially responsible company such as recyclable cups, recyclable papers, etc. This encourage the customers to become religious in purchasing the company’s products and services whereas the company enjoys the good image it creates to the public including the continuously inflow of sales and income. Along with the process of engaging in CSR initiatives, a lot of companies are given the chance to understand a more generalized customer better. In the end, the company gets to know more about the needs and wants of the customers and eventually improve their customer-specific knowledge and services. (Sen and Bhattacharya, 2001) Importance of CSR on the Market Value Not all companies that have invested on CSR initiatives are earning good profit and/or enjoying a larger market share. This is possible since each firm has its own ways of executing, supporting, and exploiting the CSR initiatives in the marketplace. (Brown, 1998) In fact, a lot of companies have considered the CSR initiative to cause a lower or a negative financial return since it adds up to the costs of implementing the system instead of using the company’s fund in improving the quality of products and services. (Sen and Bhattacharya, 2001) A firm could either have a positive or negative market value from the CSR initiatives. It has been argued that companies with good corporate abilities in terms of product quality and innovativeness could generate more market value from the CSR program. (Aiken and West, 1991; pp. 12 – 14) On the other hand, companies with less competent corporate abilities may conclude that CSR is causing harm to customer satisfaction as it decreases the company’s stock performance. To know whether a company is benefiting from CSR, a person could simply check on the market value of the firm. (Fornell et al. 2006) About Corporate Ability Corporate ability refers to a wide range of elements in terms of a company’s expertise and competency such as its ability to generate new products and services through a constant innovation based on the creativeness of its employees. (Rust, Moorman, and Dickson, 2002) It is observed that a combination of CSR and corporate abilities could positively influence the customers’ perception on the products and services the company is offering. Businesses with a low level of corporate abilities could generate a negative market value from the CSR initiatives. Based on the institutional theory, Handelman and Arnold (1999) argued that companies should be engaged in CSR for good causes and at the same time offer high quality products to its consumers. (Handelman and Arnold, 1999) It is also possible for a company with CSR initiatives to offer less quality products than its competitors. (DiMaggio and Powell, 1983) The main intension of the company’s effort in investing on the CSR initiatives is important factor that could affect its success. According to Sen and Bhattacharya (2001), CSR initiatives could backfire and result to a lower purchase value and a negative perception. A negative perception could result when the consumers starts to develop the idea that CSR investments is done only for sales purposes. A lot of companies with a high level of corporate abilities are successful in generating a positive market value using the CSR initiatives. Many times, these companies are able to build a good and better corporate image as they become more attractive to the consumers. (Bhattacharya and Sen, 2003) It simply means that CSR combined with high corporate abilities could result to a more favourable outcome. In line with the company’s success on the CSR initiatives, the business gains customers’ loyalty. (Bhattacharya and Sen, 2004) Conclusion Basically, large companies implement CSR programmes in order to add on the customer satisfaction. Along with the process, it is possible for the company to increase its sales and eventually gain a good market value. Marketing managers should always be reminded that it takes a good combination of the external CSR initiatives and a well functioning internal corporate abilities to make the CSR work its miracle for the company. On the other hand, marketing managers should also consider the negative side of CSR. Companies with low innovativeness capability are not recommended to invest on CSR programmes since it could result in the reduction of the customer satisfaction level and eventually harm the company’s market value. Considering the fact that the implementation of CSR could result to either a positive or negative effect on the company’s overall performance, it can be argued that strategic marketing is not inadequate without incorporating CSR in a company’s marketing plan. A company could still earn good profit and have a remarkable market value without the implementation of the CSR initiatives. *** End *** References: Aaker, D. and Jackobson, R. (2001) ‘The Value Relevance of Brand Attitude in High-technology Markets’ Journal of Marketing Research. 38 (November), 485 – 493. Aiken, L and West, S. (1991) ‘Multiple Regression: Testing and Interpreting Interactions’ Thousand Oaks, CA: Sage Publications. Anderson E., Fornell C., and Mazvancheryl S. (2004) ‘Customer Satisfaction and Shareholder Value’ Journal of Marketing, 68 (October), 172 – 185. AIA (2006) ‘Five Factors of Employee Satisfaction’ Revised December 2006. 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