(Illustration by Ben Wiseman)
Corporate leaders generally understand that corporate social responsibility (CSR) activities can improve their company’s public image. But do those activities make sense from a financial perspective?
Alexander Chernev, a professor of marketing at the Kellogg School of Management at Northwestern University, and Sean Blair, a doctoral candidate in marketing at Kellogg, set out to answer that question. “The first impact [of CSR] is on a company’s reputation and brand,” says Chernev. “We ask if there’s another kind of impact. Specifically, can investing in socially responsible activities change people’s perception of the performance and quality of a product?” In theory, a shift of perception would lead to increased sales and would therefore justify the costs of CSR activities. To investigate this question, Chernev and Blair conducted a series of four experiments.
In one experiment, the researchers asked two groups of participants to sample the same wine and to evaluate its taste on a scale of 1 to 9. They told one group—but not the other—that the winery that made this product donated 10 percent of its profits to the American Heart Association. (In fact, the scenario was entirely fictional.) The researchers also asked participants to rate their wine expertise on a nine-point scale. Among participants who were told about the charitable donation, those who rated themselves lower on the expertise scale tended to rate the wine more highly than those who gave themselves a higher expertise rating. “In general, the less info you have to evaluate product performance, the more likely you are to rely on external cues such as donations to charity,” says Chernev.
In a second experiment, Chernev and Blair divided participants into two groups and asked them to rate the efficacy of a tooth-whitening product after viewing “before” and “after” photos of people who used it. Participants in both groups also learned that the manufacturer of the product had donated money to UNICEF. (Again, the scenario was fictional.) The researchers told one group that an independent news article had reported the company’s donation, whereas they told the second group that a company advertisement was responsible for distributing that information. Chernev and Blair found that participants in the first group were more likely than those in the second group to rate the tooth-whitening product as performing well. In the first instance, according to the researchers, people viewed the company as having a benevolent motive; in the second, they viewed the company as acting out of self-interest.
The conclusion that Chernev and Blair drew from the full set of their experiments was that CSR initiatives do influence how consumers perceive a company’s products. “There is an effect,” Chernev says. “We don’t argue that it is a huge effect, as we don’t have a way to measure the magnitude.”
Another scholar who studies CSR, C. B. Battacharya, suggests that most companies that engage in CSR activities do so for reasons that are neither entirely benevolent nor entirely based on self-interest. “They want to make a difference to a cause, but they also want to boost their brand performance or market share,” says Battacharya, a professor who holds the Pietro Ferrero Chair in Sustainability at the European School of Management and Technology in Berlin.
In his own research, Battacharya has studied real-world CSR initiatives undertaken by companies such as Procter & Gamble. Consumers, he has found, are tolerant—and even supportive—of efforts that reflect a company’s self-interest as long as the company can also demonstrate that it has genuine concern for a given cause. That finding has two important implications, Battacharya says: “First, there are no shortcuts, and firms must sincerely engage with the cause. But second, as long as they do care, they do not need to hide their market motives.”
Alexander Chernev and Sean Blair, “Doing Well by Doing Good: The Benevolent Halo of Corporate Social Responsibility,” Journal of Consumer Research, 41, April 2015.
Read more stories by Kristine Wong.