Cause Related Marketing

TABLE OF CONTENTS

II. Table of Charts

III. Table of Figures

IV. Table of Abbreveations

1. Introduction

2. Background
2.1. Definition of Cause-Related Marketing
2.2. Definition of Fit in Cause-Related Marketing
2.3. Conceptual Framework
2.3.1. Overview
2.3.2. Fit in Cause-Related Marketing
2.3.3. Success Effects of Cause-Related Marketing Campaigns
2.3.4. Moderators

3. Methodology of the Empirical Studies

4. Results of the Empirical Studies
4.1. Effects of Fit on Cause-Related Marketing Success
4.1.1. Influences of Fit on Cognitive Success
4.1.2. Influences of Fit on Affective Success
4.1.3. Influences of Fit on Conative Success
4.1.4. Summary of the Influences of Fit
4.2. Moderating Effects
4.2.1. Brand-related Moderating Effects
4.2.2. Cause-related Moderating Effects
4.2.3. Consumer-related Moderating Effects
4.2.4. Campaign-Related Moderating Effects
4.2.5. Summary of the Influences of Moderating Effects

5. Implications
5.1. Managerial Implications
5.2. Research Implications

6. Summary

V. Affirmation

VI. Bibliography

II. TABLE OF CHARTS

Chart 1: Broad and Narrow Definition of CRM

Chart 2: Methodology of Empirical Studies

Chart 3: Overview of the Results of the Empirical Studies

Chart 4: Summary of the Influences of Fit on the Success of Cause-Related Marketing

Chart 5: Summary of the Influences of Moderating Effects on Fit

III. TABLE OF FIGURES

Figure 1: Conceptual Framework

IV. TABLE OF ABBREVEATIONS

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1. INTRODUCTION

In the opening chapter, the introduction to cause-related marketing (CRM) and the topic’s concern is initiated. The chapter concludes by allocating the aims and structure of this work after having explaining the evolvement of CRM and its broader context within marketing.

The combination of efforts of Profit-Organizations (POs)¹ and Non-Profit-Organizations (NPOs)² to benefit from a collaboration has gained increased attention throughout the last couple of years (Belch & Belch, 2004). Events such as the BP³ oil leak in the Gulf of Mexico, the Enron scandal⁴ or the fraudulent participation of investment banks in the most recent financial crisis⁵ have fueled the discussion of ethical codes of conduct for corporations, their social responsibility in society and thus their social commitment (Kotler & Lee, 2005), (Hess, Rogovsky, & Dunfee, 2002), (Horrigan, 2010).

The contribution of business entities in social causes made them consider their possibilities to not only act socially responsible, but profitable at the same time (Zdravkovic, Magnusson, & Stanley, 2010). This called marketers to action, designing strategies that would highlight a company’s willingness to do good, advance the company’s reputable image, enhance customer retention and increase sales (ib.).The success of this new and uprising type of marketing, CRM, is determined by many factors, one of them being the fit of the collaborating partners (Fries, 2010).

The aim of this work is the presentation of the current state of research on the impact of fit on the success of CRM. The work focuses on the fit between cause and/or NPO on the one hand and brand and/or PO on the other. A further objective of this thesis is the systematic elaboration of empirical studies to identify interactions on the fit and draw conclusions about possible effects on the success of CRM campaigns.

Insight of the influence of fit on the success of CRM can help companies in answering marketing policy issues and help in marketing resource allocation. For example, companies are enabled to plan and execute customer-specific marketing strategies by incorporating the effects of fit in their techniques and therefore avoid unnecessary money spending. High levels of fit among two partners are more harmonious than a low suitability. Using fit in CRM as a deliberate marketing tool can e.g. increase customers purchase intentions and change company perception in the aspired direction. Consequently, the identification of influence of fit on the success of CRM and interactions on the fit are of central importance to marketing decisions.

The present work is divided into six chapters. Following this introductory section, the basics of CRM and fit are explained in 2.1 and 2.2. For the further development of fit in CRM, a conceptual framework is compiled in 2.3. In 2.3. the impact of fit on the suc- cess of CRM is illustrated, taking moderating, intervening effects into consideration. Chapter 3 contains the methodological exemplification of the empirical studies used to examine the effects of fit on the success of CRM. The results of the empirical studies are separated into direct and biased effects of fit on the success of CRM in chapter 4. Chapter 5 offers practical as well as research oriented implications. Finally, in chapter 6, findings are summarized and in regard to the research objectives critically reviewed.

2. BACKGROUND

An introduction to CRM is provided by defining the term and distinguishing it from similar marketing concepts, taking several dimensions of fit into consideration. Afterwards, the conceptual framework is presented by introducing independent and dependent variables as well as moderating effects on fit in CRM.

2.1. DEFINITION OF CAUSE-RELATED MARKETING

Since discussions erupted that there is a need for companies to act socially responsible, as mentioned in the introductory chapter, organizations gave not only in to the demand, but created a business strategy, Corporate Social Responsibility (CSR)⁶, to distinguish themselves from competitors (Werther & Chandler, 2011). Acting socially responsible has become an increasingly important goal of companies to add value to organizations besides monetary intentions (Fries & Müller, 2011). Integrating CSR into the organiza- tion’s external communication is called CRM (ib.). CRM brings social issues to atten- tion and links them to a product or service (Andreasen, 2006). In short, CRM is the tie of a social cause to a product or service, which are then promoted together (Kurtz, 2008) for multilateral benefit (Adkins, 1999). Customers benefit from the satisfactory feeling of acting socially responsible, the “warm glow”⁷ (Arora & Henderson, 2007). POs profit from image enhancement through associations to a socially responsible cause, brand awareness and brand credibility (Zdravkovic, Magnusson, & Stanley, 2010), (Keller, Apéria, & Georgson, 2008) as well as brand loyalty and increasing sales (Lafferty, 2009). NPOs gain advantages from the attention drawn to them and the finan- cial support (Oloko, 2011). Still, there is no agreed definition for CRM and many re- searchers use different classifications. Two main categorizations can be identified when looking for a CRM definition: A broad or a narrow approach (Oloko, 2011).

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Chart 1: Broad and Narrow Definition of CRM (Oloko, 2011, p. 38)

Researchers favoring a broad outline, such as Kurtz (2008) and Adkins (1999), relate social marketing activities to the seven types of Business-Nonprofit Alliances as shown in Chart 1. This definition consists of Joint Ventures, philanthropic involvement, foun- dations and sponsorships as well as Transaction-Based Promotions, Joint Issue Promo- tions and Licensing. Following a more narrow approach, Andreasen (2006) clearly differentiates CRM from sponsoring or philanthropic activities by getting involved in a partnership rather than donating money.

In accordance with Andreasen (2006), Wymer and Samu (2003) separate CRM into three types, Joint Issue Promotions, Licensing and Transaction-Based Promotions as illustrated in Chart 1. Joint Issue Promotions refer to the cooperation of a PO and NPO to increase awareness of social ills (Oloko, 2011), which is often accomplished by non- monetary support (Fries & Müller, 2011). Licensing gives POs the possibility to use logos or brands of a NPO in return for licensing fees or shares of sales (Geißel, 2011). Andreasen and Kotler (2008) refer to CRM as sales-related promotion. Thus, they em- phasize that a certain amount of the PO’s sales is donated to a designated cause (ib.). This type of CRM campaign is also called Transaction-Based Promotion, emphasiz- ing the PO’s additional contribution, depending on consumer consumption levels (Wymer & Samu, 2003).

The most widely accepted definition of CRM has been developed by Varadarajan and Menon (1988). They define CRM in accordance with Andreasen, Kotler (2008) and Wymer, Samu (2003) as “The process of formulating and implementing marketing ac- tivities that are characterized by an offer from the firm to contribute a specified amount to a designated cause when customers engage in revenue-providing exchanges that sat- isfy organizational and individual objectives.” (Varadarajan & Menon, 1988, p. 60).

In the following parts of this thesis the term initiated by Varadarajan and Menon (1988) will serve as definition of CRM to insure cohesiveness and comparability.

2.2. DEFINITION OF FIT IN CAUSE-RELATED MARKETING

Fit is often not specified in marketing literature and simply considered as “perceived similarity of the brand and other entity” (Keller, 2003, p. 599). The roots of fit in marketing evolve from brand extensions, which consider the perceived fit by customers, between allying or transferring brands (Schaffmeister, 2008). This level of relatedness is synonymously called congruence, match and similarity (Trimble & Rifon, 2006), (Cornwell, Pruitt, & van Ness, 2001).

Huber, Regier and Rinino (2008) characterize fit as perceived similarity and thus subjective suitability of two entities. The concept of fit has been transferred to CRM, evaluating the relatedness of e.g. cause and brand.

Due to the extensiveness of the term fit, Trimble and Rifon (2006) divided the expres- sion into image-based fit and functional fit, calling the overall fit ‘global fit’. Image orientated fit is the perceived value of PO and NPO, whereas functional fit is the con- textual compliance of product features or business model and the cause (ib.). According to Koolman (2006) fit is a crucial success factor in the accomplishment of a CRM cam- paign.

Various theories on how fit is determined by customers have been introduced (Mangold, 2007), (Geißel, 2011). According to Keller, Apéria and Georgson (2008), fit is per- ceived via attributes or benefits. Two popular models are congruence and consistency theories. Congruence theory proposes that stowing and remembering information is related to the similarity of information observed and recalled (Cornwell, Weeks, & Roy, 2007). Therefore, people memorize anticipated information more easily (Lynch & Srull, 1982). Heider (1958) takes this concept further in the balance theory, where he claims that individuals attempt cognitive consistency and avoid seeming inconsistency. Thus, people try to adapt inconsistent observations to make them fit and create a tension-free cognizance (Mangold, 2007). Contrarily, Hastie (1980) suggests that due to complexity in processing data, individuals retrieve incongruent information more effectively and hence consider unlikely combinations to be more proactive.

Besides cognitive factors, perceived fit is determined by customer’s emotions (Koolman, 2006). Emotions are triggered and aroused by precedent cognitive processes (ib.). All in all fit is very complex and depended on the eye of the beholder.

2.3. CONCEPTUAL FRAMEWORK

The conceptual framework clearly outlines the potential courses of action of fit on the success of CRM. It connects all current empirical findings of the impact of fit on the success of CRM considering interacting influences on the fit as shown in Figure 1.

2.3.1. OVERVIEW

As shown in Figure 1, the fit, being the independent variable, directly influences the dependent variable, the success of CRM. Fit has been measured threefold: Brand-cause fit, PO-NPO fit and PO-cause fit. The independent variable is further biased by moder- ating effects, which can enhance or diminish the effects of fit on its own. These modera- tors are categorized by their interaction characteristics into brand, cause, consumer and campaign-related moderators. The dependent variable of success is further split into cognitive, affective and conative effects. Supplementary details in regard to the compo- sition of the conceptual framework and its components are elaborated in the following chapters.

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Figure 1: Conceptual Framework (own figure)

2.3.2. FIT IN CAUSE-RELATED MARKETING

An independent variable is directly causing or affecting the result of a research study (Hall, 2008). Hence, the fit directly influences the outcome on how successful a CRM campaign is.

Due to time restrictions, this thesis highlights the influences of fit on the success of CRM campaigns only. Even though, further factors besides fit affect the success of a CRM campaign such as cause, product, company and consumer characteristics, design elements and the NPO (Fries, 2010).

The fit in CRM is one success factor that determines the success of CRM campaigns directly (Fries, 2010). Kotler and Lee (2005) even describe fit as one of the most important keys to success in CRM. Generally speaking, high fit results in positive effects of consumer attitude towards the PO or brand (Aaker & Keller, 1990). Consequently, low fit leads to low brand or PO perception, which then triggers diminished consumer reaction (Simmons & Becker-Olsen, 2006).

Fit can take various dimensions in a CRM context, namely brand-cause fit, PO-NPO fit as well as PO-cause fit. Further relations of fit are not taken into consideration as the mentioned dimensions offer the broadest research background. Researchers mainly fo- cus on the brand-cause fit. Brand-cause fit describes the suitability of a brand and/or product and a social cause based on the consumer’s opinion (Lafferty & Goldsmith, 2005). It includes two aspects of fit, functional fit and image fit (Trimble & Rifon, 2006). Functional fit is the comparison of product functions to a brand, which is then paralleled to a cause (Bigné-Alcañiz, Currás-Pérez, & Sánchez-García, 2009). Image fit relies on similar image and positioning features of a brand and a cause (ib.). High fit occurs when the PO’s core consumer values are integrated in the brand and cause (Trimble & Rifon, 2006). A popular example is the Volvic campaign where one liter of Volvic bottled water helps to build a water well in Ethiopia and thus provides 10 liters of drinking water in Africa (Blumberg & Conrad, 2006). 94,7 percent of participants in a German survey considered the fit of Volvic and the correlating water aid campaign to be of high fit (ib.).

The fit of PO and cause describes a suitable association between the PO’s image, posi- tioning and target market on the one hand and the cause’s reputation and clientele on the other (Varadarajan & Menon, 1988). Gürhan-Canli and Fries (2010) describe the fit of PO and cause as the match of the PO’s characteristics, including all business activities with a social cause. Hereby, the fit of the company instead of a brand or product with a cause is displayed. Again taking the Volvic campaign into consideration, it would be altered to Danone⁸ as promoted partner to the water aid campaign instead of the bottled water brand itself. Even though, a product might highly fit the cause, the PO does not necessarily follow the pattern as the Volvic example illustrates. A conglomerate like Danone does not solely stand for water or social responsibility. Since conglomerates hold numbers of brands, the PO’s image consist of fractures of their brand’s images. Thus, POs that only contribute to a cause with one of their many brands might not en- hance their entire corporate image. Gupta and Pirsch (2006) therefore suggest that the cause should be harmonious with the PO’s identity and main recipient.

PO-NPO fit refers to the relevance of sponsor and the sponsored (Geißel, 2011). Using the Volvic case as example, the fit of Danone, as PO, and the United Nations Children's Fund (UNICEF)⁹, as NPO, would be compared. To generate a high fit, the PO’s core values should be parallel to the NPO’s.

2.3.3. SUCCESS EFFECTS OF CAUSE-RELATED MARKETING CAMPAIGNS

The major incentive to form a marketable collaboration of a PO and NPO are beneficial advantages from the partnership to vend an image and a product (Adkins, 1999). Thus, organizations opt for monetary goals, such as profit maximization, on the one hand and the achievement of non-monetary goals, such as catering to the cause, on the other hand to achieve success in CRM. Whereas financial ambitions are considered to be short- lived, altruistic motives are long-term orientated. Acquisition of new customers as well as sales increase through CRM sales promotions are short-term goals (Fries & Müller, Konsumentenbezogene Wirkungen von Cause-Related Brands, 2011). Long-term goals are meant to enhance the PO’s and brand’s image, increase customer loyalty and the PO’s credibility (Lafferty, 2009), (Zdravkovic, Magnusson, & Stanley, 2010).

As mentioned in 2.3.2, the fit determines the success of a CRM campaign intensely and its outcome cannot only be displayed in short and long-term success, but further divided into the consumer’s affective, cognitive and behavioral reactions as displayed in Figure 1. In this thesis, the effects of success are sorted according to the AIDA concept (Atten- tion, Interest, Desire, Action)¹⁰, which describes consumer reactions from initial contact with a product to a triggered response (Hackley, 2010). This can be understood in three steps of consumer involvement: the cognitive, the affective and the behavioral, respectively conative stage (Lamb, Hair, & McDaniel, 2008).

Cognitive effects

Achieving cognitive effects is a long-term oriented goal, that a company seeks to achieve (Kotler & Armstrong, 2010). The favorable relation of consumer and brand, caused by high consumer familiarity and recognition with the brand (Keller, Apéria, & Georgson, 2008) is referred to as brand awareness. It influences consumer emotions, associations and actions towards a brand and occurs in the consumer’s mind (Kotler et al., 2009).

Affective effects

Affective effects are strongly embedded emotional elements of the customer’s brand knowledge (Kotler & Armstrong, 2010). Boundaries between cognitive and affective effects often overlap due to combined factors of emotional as well as mental details in one marketing concept (Oloko, 2011). Cognitive effects can be preceded and vitiated by affections (Lafferty, 2007). For instance, brand perception is mentally activated by attributes and emotionally caused by associations.

Consumer perception is actively shaped by the acquisition and assignment of meaning to a stimulus (Hawkins, Mothersbaugh, & Best, 2007). The consumer’s perception of the PO is affectively shaped by brand associations (Keller, Apéria, & Georgson, 2008). Positive associations are evoked when the consumer believes that the PO offers products with qualities and benefits that meet their needs and wants (ib.). Hence, the corporate image of a PO benefits or detriments depending on the consumer’s associations towards the PO’s involvement in CRM.

Besides PO perception, brand perception is the image a consumer forms of a brand (Kotler et al., 2009). It is caused by exposure, attention and physical characteristics of the product, which evoke emotions in the consumer and induce brand value (Hawkins, Mothersbaugh, & Best, 2007).

Brand value can be examined in a twofold way. On the one hand brand value is reflect- ed financially, on the other hand it can be measured non-monetary (Wymer & Samu, 2009). In financial terms, the brand value accounts for the company’s added value ob- tained through advantages over competitors (Kotler et al., 2009). The financial benefit can be described as the customer’s willingness to pay more for a product, which is com- bined with a cause.

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¹ A business or organization with the goal to increase profits. Usually owned by private investors, who benefit from rising profits.

² Exists to provide a service, which is unbiased by profits. Owned by the public, often voluntarily without direct, monetary benefits for participants.

³ International oil and gas company, formerly known as British Petroleum (BP). The spill of an oil rig in 2010 in the Gulf of Mexico was the largest marine accident in the petroleum industry with approximately 4,9 barrels of crude oil being spilled into the sea. The spill led to disastrous circumstances for aquatic flora and fauna. For further information refer to The Telegraph (2010).

⁴ American energy company, which deliberately and systematically applied accounting fraud to retain high market value. It filed for bankruptcy in 2001, causing the biggest corporate scandal in the US economy to date. For further information refer to Healy and Palepu (2003).

⁵ During the financial crisis of 2007 to 2010, mortgage and securities fraud has been quoted as reason for the financial meltdown. For further information refer to Hutton (2010).

⁶ The European Commission defines CSR as voluntary concept, which embeds social and ecological features in an entity’s operations and relations to stakeholders (Commission of the European Communities, 2001).

⁷ The feeling, which is aroused in a customer by purchasing moral satisfaction. For further information refer to Andreoni (1990).

⁸ Danone is a multinational consumer goods corporation and the world leader in fresh dairy products and bottled water. It’s leading brand for bottled water is Volvic.

⁹ NPO, created by the United Nations to help children in need in terms of healthcare and wellbeing.

¹⁰ Model for achieving promotional goals. For further explanations on the principles of the AIDA model and its origin, refer to Hackley (2010) and Strong (1925).