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An Analysis of Consumer Attitudes and the Effectiveness of Cause-Related Marketing

Updated on September 26, 2013

Consumer Attitudes and the Effectiveness of Cause-Related Marketing


Problem


Does cause-related marketing, as a form of corporate social responsibility, actually benefit a non-profit organization and for-profit business in the win-win approach often touted by corporations?

Background

Corporate social responsibility (CSR) is when businesses merge social and environmental affairs into corporate operations. Relations with stakeholders voluntarily go beyond the legal requirements of complying with society’s expectations in an attempt to enrich stakeholder relationships (Demetriou, Papasolomou, & Vrontis, 2009). CSR existed in Ancient Greece. Citizens expected businesses to “serve the public” and “use their wealth for the greater good” (Eberstadt, 1973). By the 1800’s, social-welfare was no longer viewed favorably as capitalism became the dominant economic form (Eberstadt, 1973). In the early 1980’s CSR began to re-emerge in the business world, and by the 2000’s it was “integrated into the business activities of enterprises around the world” (Demetriou, 2009).

Cause-related marketing is one of many forms of CSR which entails businesses and charities forming an alliance to “market an image or product, for mutual benefit” (Demetriou, 2009). Cause-related marketing (CRM) existed over 2,000 years ago as a donation system within Jewish communities. Farmers donated portions of their crops to destitute individuals in their communities (Yechiam, Barron, Erev, & Erez, 2003). Yet, CRM only began to be considered worthwhile by the business world in 1983 when American Express formed an alliance with the Statue of Liberty/Ellis Island Foundation. American Express agreed to make a donation to the foundation each time consumers used their credit cards. The Ellis Island Foundation ended up receiving $1.7 million from American Express, and American Express’ card usage increased by twenty-eight percent. This success inspired numerous other businesses and non-profit organizations to adopt CRM programs (Demetriou et al., 2009). In 1986, the United States passed a tax act which restricted donations of “appreciated property to charities.” This led businesses to implement new methods of philanthropy, including cause-related marketing.

After the Ellis Island campaign through to 2003, businesses have donated $828 million on CRM campaigns (Morgan & Ryu, 2007). According to Demetriou et al., two-thirds of Americans believe that businesses should practice long-term CRM (2009). A study by Lavack & Kropp (2003) found that consumers in countries with established CRM practices have more positive attitudes towards CRM than countries where it is less established, such as Korea. CRM is prolific in the U.S., Canada, and the U.K. According to Balmond (2003), 83% of consumers in the U.K. have participated in “at least one cause-related marketing programme.” Balmond (2003) also claimed that over two thirds of consumers would like to see more companies become involved in cause-related marketing. CRM is spreading into India, Brazil, China, and South Africa with a positive appeal to customers. However, researchers have pointed out that individual businesses across the globe must carefully analyze their individual consumer bases on cultural levels (Brϕnn & Vrioni, 2001).

A study from the Danish Institute for International Studies claims that cause-related marketing can be divided into three different cause categories: local or proximate causes, distant causes, and global causes. Local or proximate causes are related to the “communities and environments adjacent to the {business’s} sites of operation. Distant causes involve businesses assisting with issues located in places other than their local community, within or outside of the business’s country. Global causes include issues such as climate change, poverty, environmental sustainability, birth control, and breast cancer. These are issues which have effects across the world (Ponte, Richey, & Baab, 2009).

An analysis of the research findings is contained within the Discussion of Findings.

Discussion of Findings

Currently, CRM campaigns have “become an increasingly popular marketing tool” (Kim & Lee, 2009). Consumer purchases are vital to the success of CRM campaigns (Lafferty, Goldsmith, & Hult, 2004). Many consumers expect to receive an increase in utility based on altruistic motivations when they purchase cause-related marketing products. The product may also create a placebo effect or “facilitate self-fulfilling expectations” (Yechiam et al., 2003). Yet, skepticism abounds in consumers’ perceptions of CRM (Kim, 2009). The results of this examination reveal that cause-related marketing is only truly successful when consumers recognize all variables of brand-cause fit, product-category fit, awareness of the cause, and transparency of the business’s donations.

The investigation findings are structured into categories of brand-cause fit, product-category fit, awareness of the cause, and transparency of the business’s donations.

Brand-Cause Fit

Brand-cause fit indicates how consumers’ perceive the matching of the business’s brand name and the non-profit organization’s cause. If the match is not logical then consumers are likely to disregard the cause-brand alliance (Lafferty et al., 2004) or doubt the “authenticity of the partnership” (Chiagouris & Ray, 2007). Brand-cause fit plays a role in consumer evaluation and decision-making from luxury goods to fast-moving-consumer goods. Although, it appears to be more important to consumer purchases of luxury goods since it helps allay the guilt of the frivolous purchase (Hamlin & Wilson, 2004). A study in Alberta, Canada found that businesses that partner with high-fit non-profit organizations may bring in five to ten percent more consumer purchases than they would with a low-fit charity (Pracejus & Olsen, 2003). According to Hamlin & Wilson (2004), who conducted a study in New Zealand, brand-cause fit may actually be the most critical element for cause-related marketing to be successful.

According to Brϕnn, of the Norwegian School of Management, consumer perception of a brand and cause before an alliance is made has an impact on the brand-cause fit. If a brand already has a poor reputation for CSR, linking with a non-profit may or may not enhance their position in consumers’ views of their brand. Typically, the brand must convey to consumers that CSR has become an integral part of their strategy. Otherwise, consumers will doubt the brand’s actual commitment to the cause; in return it will reflect poorly on the non-profit organization as well (Brϕnn & Vrioni, 2001). A 2008 Brazilian study by Farache, Perks, Wanderly, & de Sousa Filho confirmed that “Corporations should affiliate themselves with a good cause or charity in a long-term partnership. This helps demonstrate a true commitment to the cause or charity.” When businesses are truly dedicated to the cause consumers are less likely to be skeptical of the alliance and are more likely to purchase the CRM products.

CRM is a relatively new phenomenon in China. Yet, a study by Xin Chen found that 74.8% of respondents had made at least one previous purchase of a cause-related product. The study also found that brand-cause fit was a less important factor in Chinese consumers determining to make CRM purchases compared to Canadians. Chen claimed that the collectivist culture of China places a higher priority on community needs. Therefore, the Chinese are more open to CRM campaigns than their Canadian counterparts regardless of brand-cause fit. However, even though brand-cause fit was of less importance to the Chinese than the altruistic nature of CRM it does still play a significant role in the Chinese consumers’ brand choice.

Product-Category Fit

Product-category fit represents whether or not consumers believe that the business’ product and the category of the non-profit organization’s cause are a reasonable affiliation. Consumers should be able to recognize a “complementary relationship between goods and/or services. This is crucial to the success of cause-related marketing (Lafferty et al., 2004). Product-category fit can be difficult for consumers to assess since some causes fall into broader categories, such as human services. It may be difficult for consumers to make a connection between the American Red Cross and canned soup. On the other hand, Avon sells women’s cosmetics and has a cause-brand alliance with Susan G. Komen which is logical due to women’s concerns about breast cancer.

A poor example of product-category fit is the cause-brand alliance between Susan G. Komen and KFC. Hutchison (2010) described the “Buckets for the Cure” campaign as raising a lot of negative attention to the Komen Foundation and KFC. This was due to the fact that the majority of KFC’s products are high-calorie fatty foods, and there is an established connection that digesting these forms of food can increase the risk of breast cancer (Hutchison, 2010). This CRM campaign may be undermining the breast cancer cause, and consumers are less likely to support it. Yet, the campaign raised $2 million in its first week. However, when the donation period ended the Komen Foundation did end the alliance due to the bad publicity (Komen.org)

Awareness of the Cause

Familiarity with the cause may be deemed more important than awareness of the business’s brand. The name of the cause alone may instill positive attitudes towards the product and brand. Familiar brands that forge an alliance with a familiar cause are more likely to be successful (Lafferty et al., 2004). In 1992, Barnes contended that “consumers are more likely to buy cause-related marketing products if they are familiar with the product while familiarity with the charity is less important.” More current research disputes this argument. In 2009, Lafferty and Edmondson performed a study which found that familiarity with the brand had more influence on consumers than familiarity with the cause. The cause they selected had low familiarity. The study exhibited that consumers who are more aware of the cause are more likely to purchase CRM products, whereas, lesser known causes have a lower likely hood of being supported (Lafferty et al., 2009).

According to O’Brien (2004), familiarity with a cause isn’t the only form of cause awareness. Consumers may also have a vested interest in a cause which may increase their chances of purchasing a CRM product associated with that cause. For instance, if a consumer has ever received assistance from American Red Cross in the past or if they know someone who has, the consumer may be more willing to purchase a CRM product from a business aligned with the American Red Cross. This vested interest may be based upon a consumer’s personal values as well. The consumer may simply have faith in the importance or relevance of the cause. Consumer value of a certain cause can be a significant variable in the success of a CRM campaign. That being the case, it is important for the cause-brand alliance to be aware of the values of their consumer base.

Transparency of Business’s Donations

Consumers are often skeptical of CRM campaigns, because donation sizes are stated ambiguously. Barnes (1992) argued that “more information about the dissemination of profits needs to be communicated to allay consumer concerns about the charitable organization realizing their fair share of benefits.”

According to Kim and Lee (2009), donation sizes must be stated in “a verifiable manner” to overcome consumer skepticism. Obfuscating donation sizes are all too common in the world of CRM. Donation claims are often stated as percent-of-profit or percent-of-price. However, many consumers find this format confusing or interpret it differently. They often believe that the business is donating more than they really are or distrust the company actually donating as much as promised. This reduces the objectivity of the claim (Kim et al, 2009).

A study by Webb and Mohr (1998) reflected the attitudes of different consumers on CRM. The majority of consumers were skeptics who had little faith or none in CRM campaigns. One study participant stated, “You show me something that shows exactly what people give and where it goes to” and then they will consider purchasing CRM products. Another participant stated, “I’ll set my suspicions aside ‘cause I think it’s {CRM} good.” As a socially-concerned individual, this participant was a minority in the study who was willing to look past donation transparency to the believed benefits reaped by non-profit organizations.

Due to the recent natural disasters in Japan, many businesses have organized CRM relief efforts. The retailer, Cash For Gold USA, which purchases gold jewelry from consumers has promised to donate 10% of its profits for Japanese relief, and urges Americans and Canadians to cash in their jewelry (Steel, 2011). This donation claim may be considered one of the many ambiguous claims since it does not state if the proceeds are from the retailer’s total profits or profits raised for the relief fund. The U.S. “sushi chain SushiSamba said that through the end of March it will give 100% of the proceeds of a special $12 sushi roll to relief efforts” (Steel, 2011). Yet, these efforts raise another important issue about transparency. Many consumers are not aware of or misunderstand campaign deadlines and donation caps. SushiSamba has provided a dinstinct deadline and clear donation amount while Cash For Gold USA has not. Brϕnn et al. explain that businesses should be open and honest about the results of a campaign as well (2003).

Globally, consumers are concerned about donation transparency. According to a study by Langen, Grebitus, and Hartmann (2010), German consumers desire CRM campaigns to provide transparency through product labeling. CRM has not been very successful in South Africa. Yet, South African consumers have said that exceptionally large donation claims are suspicious leaving them fearful of being exploited. Also, consumers preferred to be given actual-donation-amounts over percentage-of-profit or percentage-of-price donation claims (Human and Terblanche, 2009). In 2008, Farache, Perks, Wanderly, & de Sousa Filho conducted a study which revealed that Brazilian consumers shared the same concerns as South Africans. They also were concerned about confusing voucher schemes, leading to Farache et al. to conclude that CRM voucher programs need to inform consumers as to “how many are necessary for the benefits to be received (2008). Obviously, the majority of consumers are concerned with business donation transparency regardless of consumer nationality.

Finally, the need for donation transparency is necessary since continued consumer skepticism could lead to consumer cynicism of CRM campaigns in general, or policy makers fearful of deception may establish complex regulations. If consumers lose all trust in CRM practices they will no longer purchase CRM products

Conclusion

This examination reveals that for cause-related marketing to be fully successful businesses and non-profit organizations must take into account consumers’ perceptions of brand-cause fit, product-category fit, awareness of the cause, and transparency of the business’s donations. For CRM to be successful consumers must recognize a positive correlation between brand-cause and product-category fits. Consumers must also be familiar with the cause that the cause-brand alliance is promoting products for. Causes with lower consumer familiarity shall not be as successful as causes with high consumer familiarity. Finally, to ensure the successful continuation of cause-related marketing businesses need to provide objective, valid, and verifiable information about donation amounts to reduce consumer skepticism or policy-maker interactions.

Suggestions for Future Research

During the course of this study it was recognized that there is little research concerning cause-related marketing and ethnocentric consumerism. While studies were found which confront the issue of ethnocentric consumers, no studies applied this information to study its affects on cause-related marketing. There is a study by Demetriou, Papasolomous, and Vrontis which concentrated on citizens in Cyprus preferring a more local approach to CSR and CRM. It would be interesting for researchers to delve into this area more and theorize the topic. Are consumers more supportive of CRM campaigns which support local causes, distant causes, or global causes?

It would also be pertinent for researchers to evaluate effects that business’s marketing power has on raising awareness for causes. How much awareness can be derived for lesser known causes through CRM? This is one of the benefits for non-profits which businesses often spout concerning CRM. Yet, minimal research has been conducted on this topic.

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