Academic journal article The South East Asian Journal of Management

The Influence of Corporate Social Responsibility Activity toward Customer Loyalty through Improvement of Quality of Life in Urban Area

Academic journal article The South East Asian Journal of Management

The Influence of Corporate Social Responsibility Activity toward Customer Loyalty through Improvement of Quality of Life in Urban Area

Article excerpt

Introduction

Recently, Corporate Social Responsibility (CSR) constitution discussed by various components of society. This case becomes interesting, since Government Law No.40/2007 section 74 clause 1 states "Firms whose operating connected to natural resources must do social and natural responsibility". Clause 3 states if rms do not fulll their responsibility, as stated in clause 1, they will get sanctions based on the regulation. The form of the sanctions is not clear yet, but rms had reacted with objection to that responsibilities, because in their perception, this obligation will increase their operational cost. These objections do not make government decrease their commitment to sustainability of the rms that used natural resources, and community well being.

In marketing, CSR concepts constitute one of social marketing. Social marketing has three major components: proactive, communicate charity activities, and other activities that have social purpose, and motivate other party to support charity regarding to community well being and environment. Similar to commercial sector where marketer sell products and services, social marketers want to influence target markets to (1) accept new behavior; (2) reject unwanted behavior; (3) modify existing behavior; and (4) omit unwanted old behavior (Kotler and Lee, 2008). Interestingly, changing behavior done voluntarily could increase satisfaction and better quality of life. Social marketing must focus on Quality of Life (QOL) that enhance long term satisfaction of society.

This research uses customer loyalty and advocacy as the ultimate dependent variables to determine the return of CSR activities that measured by CSR awareness. By using QOL and Company Reputation as mediating variables, authors aim to show that CSR activities, that has ultimate result to customers, has also an impact to society and gaining competitive advantage through Company Reputation.

The main purpose of this study is to evaluate the relationship between CSR activities and customer loyalty toward brands or rms. There is a proposition that CSR activities will influence loyalty through mediating variables. If this study could show that CSR activities influence loyalty, it means that CSR is not just an activity that creates sunk cost, but it can be considered as a rm's investment, because in the future CSR could create value for the rm. Persuant to the main purpose, this research will attempt to achieve the following objectives:

1. To investigate the effects of CSR Awareness on the belief that CSR truely implemented by the rm (CSR Belief) and the belief regarding the ability of the rm to produce and deliver product and/ or service (Company Ability Belief);

2. To investigate the effects of CSR Belief and CA Belief on the Society QOL where CSR activities were implemented (QOL);

3. To investigate the effects of QOL on Company Reputation;

4. To investigate the effect of QOL and Company Reputation on Loyalty;

5. To investigate the effects of Company Reputation and Loyalty on customer's supports to the rm or brand (Advocacy).

Literature Review

Definitions and types of corporate social responsibility

Kotler and Lee (2005) dene Corporate Social Responsibility (CSR) as commitment to improve community well-being through discretionary business practices and of corporate resources. There are several forms of social initiatives that show main activities to support social reason and to conrm the commitment to do CSR. The six social initiatives explored are as follows:

1. Cause promotions: a corporation provides fund, contributions, or other corporate resources to increase awareness and concern about a social cause or to support fundraising, participation, or volunteer for a cause;

2. Cause-related marketing: a corporation commits to make a contribution or donate a percentage of revenue to a specic cause based on product sales;

3. Corporate social marketing: a corporation supports the development and implementation of a behavior change campaign intended to improve public health, safety, environment, or community well-being;

4. …

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