Academic journal article The Journal of Consumer Affairs

The Effects of Corporate Social Responsibility and Price on Consumer Responses

Academic journal article The Journal of Consumer Affairs

The Effects of Corporate Social Responsibility and Price on Consumer Responses

Article excerpt

This experiment examined the influence of corporate social responsibility and price on consumer responses. Scenarios were created to manipulate corporate social responsibility and price across two domains (environment and philanthropy). Results from a national sample of adults indicate that corporate social responsibility in both domains had a positive impact on evaluation of the company and purchase intent. Furthermore, in the environmental domain corporate social responsibility affected purchase intent more strongly than price did.

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Even before the problems of Enron became headline news, there was evidence of a growing discontent among the American public about the way companies conduct business. A BusinessWeek (Bernstein 2000) cover story describes Americans as "uneasy about Big Business" (145). Their BusinessWeek/Harris Poll found that 72% of Americans say they believe that business has too much power over American life. Furthermore, 66% of those polled agree that companies care more about making large profits than about selling safe, reliable, quality products. At the same time, pressure for companies to take on more responsibilities in their communities seems to be rising. In 1999, a worldwide survey found that two-thirds of consumers surveyed wanted companies to contribute to broader societal goals (Isa 2003). The Cone Corporate Citizenship Study (2002) found 89% of Americans agreeing that, following the recent corporate scandals, "it is more important than ever for companies to be socially responsible."

Many companies appear to have responded, as evidenced by a Cone/ Roper (1999) poll finding that nearly 50% of large corporations have programs associated with a social issue. Based on eight years of research, Cone (2002) concluded that cause marketing has grown to become a widely accepted business practice as it has simultaneously evolved from a short-term sales-enhancement tactic to a means for improving brand equity and corporate image.

Corporations often struggle, however, in deciding how to reconcile these social demands with those of shareholders for profit maximization. Although the majority of studies on the topic have found a significant positive relationship between corporate social responsibility (CSR) and financial performance (see, for example, Margolis and Walsh's [2001] review of 95 studies), the payoff from socially responsible programs is not guaranteed and may take time. For this reason, many managers still view CSR as an expense rather than an investment. If increased CSR were demonstrated to lead to increased sales, however, companies would be encouraged to become more socially responsible. To the extent that increased CSR results in improved communities, consumers who live in those communities would clearly benefit.

Two research questions guided this study: (1) Does a company's social responsibility record matter to consumers? and (2) If socially responsible companies charge higher prices for their products, will consumers still buy them? To investigate these issues, we designed experimental scenarios, which we mailed, along with questionnaires, to a random sample of American adults.

BACKGROUND

Mohr, Webb, and Harris (2001, 47) define CSR as "a company's commitment to minimizing or eliminating any harmful effects and maximizing its long-run beneficial impact on society." Socially responsible behavior, then, includes a broad array of actions such as behaving ethically, supporting the work of nonprofit organizations, treating employees fairly, and minimizing damage to the environment. The definition implies that a socially responsible company considers the effects of its actions on everyone, whether directly related to the company or not. Socially responsible companies, therefore, must be managed according to stakeholder theory.

There are many debates in the academic community over whether companies should be managed using a stakeholder or a shareholder theory. …

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