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Volkswagen’s 2015 crisis. A new challenge for CSR and excuse for consumers’ scepticism

Communication and actions that could reduce consumers’ scepticism

Essay 2016 16 Pages

Business economics - Marketing, Corporate Communication, CRM, Market Research, Social Media

Excerpt

Index

1. Introduction

2. Perception of corporate social responsibility by consumers and why are consumers sceptical about CSR?

3. Corporate misbehaviour. Communication and actions that could reduce consumers’ scepticism.

4. Volkswagen’s 2015 Crisis. A new challenge for CSR and excuse for consumers’ scepticism.

5. Conclusion

1. Introduction

The public, government, local authorities and other participants of society are substantially interested in the positive input corporations should make to humankind, and because of this corporate social responsibility (CSR) actions have become a priority for many companies. Moreover, the onus is on companies not only to implement CSR strategies, but that to ensure that their CSR efforts and results are being delivered and heard in a way consumers understand.

Whereas, the more companies are trying to show their involvement in social responsibility issues via active communication with people, the more sceptical the overall public becomes.

The aim of this paper is to discuss some reasons why consumers remain sceptical about corporate social responsibility actions and motives, and how to diminish scepticism towards a company and its CSR actions. Moreover, based on the example of Volkswagen’s ongoing crisis there is a new challenge for CSR and many companies.

This paper will be divided into three parts. The first part gives a brief overview of CSR and illustrates the attention of consumers to it and explains why they are sceptical towards corporate social responsibility and certain inner motives of profit-based organisations. The second part highlights evidence about the types of communication that could be effective in reducing scepticism and stresses how people react to companies’ misbehaviour. The third part emphasizes a brief summary regarding the outcome of Volkswagen’s 2015 crisis, and highlights the new demands of consumers and society towards companies and their CSR.

2. Perception of corporate social responsibility by consumers and why are consumers sceptical about CSR?

Vanhamme et al. (2009) and Maignan et al. (1999) explain CSR as the feature to which companies meet the legal, economic, ethical, and abstract obligations placed on them by different shareholders.

According to Lewis (2003), Schlegelmilch and Pollach (2005) the last decade has seen many scandals related to environmental problems, the black market, and the introduction of dangerous goods that influenced both the public and corporations to pay attention to ethical issues.

Hutton et al. stress that many corporations respond to the challenge by implementing different ethical programs such as CSR and have started to tailor their new ethical approach to their target audiences. Moreover, certain research has pointed out that expenses for CSR rank among the top three budgeted items of corporations. In addition, Fombrun (1996) emphasises that a given company’s CSR policies could help to prevent customer dissatisfaction, as well as employee turnover. Furthermore, it could inspire new clients and lead to well-qualified personnel.

Although customers around the world pay much attention to social and ecological issues, many companies find it difficult to promote and advertise their positive approaches to CSR, as the public relations benefits may not outweigh the costs involved. However, more than half of all customers state that they notice a company’s CSR actions if a company is doing something extraordinary and different from others. Henceforth, slightly more than half of respondents in Global CSR Study 2015 stress they presume a company is socially responsible only after they hear information about its CSR. Moreover, companies are responsible not only for implementation of CSR, but also for making sure that consumers understand the companies’ CSR strategies. According to data more than 80 percent of respondents rely on a company’s own reports regarding their efforts in CSR. In addition, almost 90 percent of questioners believe companies should do a better job showing how their social efforts are appropriate. Besides, more than 60 percent of respondents are going to dismiss a company’s CSR actions if they do not understand the company’s messages (Cone Communications, 2015).

Yet another point is that the public be able to rely on what a company reports about its involvement in CSR. At the same time, companies should not rely solely on reports to declare information, as only 25 percent of global respondents have read such corporate reports in the past year (Cone Communications, 2015).

Further, people claim that statistics, figures and stories about CSR actions could persuade them. They want to see CSR statistics and information in the form of summaries, interactive websites, videos and infographics. Global CSR Study 2015 hints at ways in which how we access information and communicate with one another are changing: if before consumers preferred a couple of traditional means of communicating, now consumers all around the world are getting information from different and completely new means, such as product packaging (19 percent), stories or interviews in media (15 percent), print, broadcast or online advertising (14 percent), social media (13 percent), and via mobile devices (5 percent). Hence, among all communication sources the usage of only social media (Facebook, Twitter) and mobile channels increased and almost doubled in 2015 compared with previous years. The popularity of other channels compared with previous years slightly decreased (Cone Communications, 2015).

Whether a company is “socially responsible” depends on numerous factors, including internal culture and values of the company. In addition, we might consider CSR as a possibility to give its employees the chance to improve their knowledge and to grow professionally. However, there is no doubt that corporate social responsibility certainly benefits society (Elving, 2013).

According to a number of surveys (Xueming and Bhattacharya, 2006; Hill & Knowlton/Harris Interactive poll, 2001; Cone Communications Corporate Citizenship poll, 2002) CSR increases customer satisfaction and leads to additional profits and higher market returns. In addition, much research proves that the public is substantially interested in CSR (Berens et al., 2005; Öberseder et al., 2013). Most consumers feel that firms and corporations should be involved in social activities, and they are sure that companies gain only advantages from these activities (Nielsen, 2008; Öberseder et al., 2014).

More than half of all online customers worldwide stress they are ready to spend more money for goods and services if they come from a socially responsible company. According to Nielsen report (2014) more than 60 percent of respondents in the Asia-Pacific region (64%), Latin America (63%) and the Middle East (63%) are willing to follow a social responsible company. In addition, less than half of respondents in North America (42%) and Europe (40%) are willing to pay more. Additionally, many consumers believe that corporate communication about social responsibility could help a company put together a strong reputation and image that will protect a company against negative external influences (Vanhamme et al., 2009).

According to Cone Communications (2013) customers are willing to prize organisations for their positive impact on society. Almost every respondent in Global CSR Study 2013 study stresses that when companies implement CSR strategies a more positive perception of the company’s overall image is formed. In addition, people would tend to better rely on and be more loyal to a company that is socially responsible. However, in those cases when companies suggest outdated or poor-quality products CSR could even diminish a company’s market return (Xueming and Bhattacharya, 2006).

Bhattacharya and Sen Sankar (2004) argue that buyer responses to CSR are not honest. Moreover, there are a lot of factors that influence purchase behavior. In fact, CSR strategy could have an impact on purchase behavior in the case of high-quality product lines, and when consumers genuinely support the initiatives of the company as well as when a consumer decides not to invest additional expenses.

CSR might have a unintended “backward” outcome: that is, if profit does not increase at once, CSR could help reduce the risk of harm to a brand in crisis, or in circumstances of negative image (Klein and Dawar, 2004).

Epstein-Reeves (2010) stresses that almost ninety percent of potential customers believe that companies should not only meet their business goals; they should also enhance the environment as well as society, in general. Moreover, slightly more than eighty percent of buyers believe that business should donate to charities and non-profit organisations. However, corporate social responsibility communication could cause a reaction of annoyance if stakeholders distrust inner motives in companies’ social actions. Therefore, a vital issue of CSR is to cope with stakeholder and consumer scepticism, as well as effecting well-balanced CSR attributions.

According to the Oxford Dictionary scepticism or a sceptical attitude is when people feel uncertainty about something, and whether or not it is trustworthy. Generally, sceptical people tend to hesitate (Forehand and Grier, 2003). “Scepticism” comes from the Greek “skeptomai,” which means consider, study and presume (Skarmeas and Leonidou, 2013).

Elving (2013), Forehand and Grier (2003) claim that scepticism appears when customers believe that an organisation and its CSR initiative was implemented and guided by inner motives of the company rather than for the value of society. As far as a target audience understands that a firm is realising CSR strategy to recover or develop its image or resolve internal issues, the consumer is likely to be sceptical.

Additionally, more restricted form of CSR is cause-related marketing (CRM), when a company solicits contributions to an unprofitable organization if consumers buy its goods or use its services (Nan and Heo, 2007).

An effective CRM activity positively enhances the image of the company, increases participation of staff and has an impact on the purchase behaviour of consumers (Brønn and Vrioni, 2001). Whereas, according to Pirsch et al. (2006) CRM is one of the most dangerous forms of CSR in the context of “consumer criticism.” Dean (2004) agrees and claims that CRM could be perceived by the public as a promotional or commercial form of CSR, as a company might act rather on behalf of its own interest and profit, rather than be guided by altruism or generosity.

Scepticism about organisations’ real motivation for CSR arises in numerous investigations (Vanhamme et al., 2013). Webb and Mohr (1998) discover that people are more sceptical about the cause-related marketing attempts of profitable organisations than of unprofitable organizations due to identifying profitable organisations’ drive forces as primarily insincere. Generally, the public fears that CSR is just something that is intended to impress and interest it but is really not at all useful and that companies use CSR to influence public opinion. As a result, people think negatively toward such companies (Webb and Mohr, 1998). Forehand and Grier (2003) indicate that customers respond negatively to CSR communications when they think they are being cheated.

In the case when the key element of a given company’s CSR is the company itself or goods/services of the company--but not social problems--the public tends to distrust much more the internal motives of the company (Friestad and Wright, 1994).

CSR actions are complicated, and customers probably observe balanced objective causal inferences for corporate social involvement (Öberseder, Schlegelmilch and Gruber, 2011) (Figure 1).

Do certain companies ever seemingly exhibit arrogance through use of CSR actions? Consumers perceive CSR actions of profitable companies as an attempt to manipulate and deceive them. People believe there are ulterior motives behind a corporation’s socially responsible actions due to a preoccupation with company’s own motives (Skarmeas and Leonidou, 2013; Vlachos et al., 2009).

What about values-driven motives? Customers believe that organisations implement CSR strategies and actions due to high moral and ethical standards and high public principles (Ellen et al., 2000). Customers can infer that an organisation implements social responsibility due to a real obligation to society, as well as concerns about social challenges (Skarmeas and Leonidou, 2013).

Are strategic-driven motives also behind a company’s CSR strategy? In this case, a given company’s CSR strategy could be a part of the whole strategy of the company. A company can implement CSR not because of the high ethical motives, but to create situation in which both the company and society benefit. Customers could accept the position of the company, understanding that it should be profitable and earn money (Ellen et al., 2006).

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Details

Pages
16
Year
2016
ISBN (eBook)
9783668375772
ISBN (Book)
9783668375789
File size
588 KB
Language
English
Catalog Number
v349994
Institution / College
University of Brighton – Business School
Grade
72
Tags
SCR consumers’ scepticism Volkswagen’s 2015 Crisis

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Title: Volkswagen’s 2015 crisis. A new challenge for CSR and excuse for consumers’ scepticism