business communication

IMPORTANCE OF COMPANY’S

CSR ACTIVITIES IN INDIA

IT’S EFFECT ON CONSUMER BUYING BEHAVIOUR

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Research Report within Business Research Methods

Title: Importance of Company’s CSR Activities in India: It’s Effect on

Consumer Buying Behaviour

Submitted to:

Author:

Date: 10th March 2010

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Dear Maam,

Enclosed is a copy of “Importance of Company’s CSR Activities in India: It’s Effect on Consumer Buying Behaviour.” This report is a summary of my findings from the work that I completed during second trimester of my PGDM course 2009-11 at IMT, Ghaziabad. It will aid in understanding effect of CSR activities on consumer buying behaviour and their brand preferences. I completed the report on schedule and met all my proposed objectives.

As promised in my proposal, this report includes information on the effect of CSR activities on consumer buying behaviour and their brand preferences in India. This report also includes current buying habits of Indian consumers based on their opinion. Through this research, I found that while consumers pay attention to product quality before buying but CSR activities of company also plays vital role in final consumer decision. This report also outlines recommendations for company on improving their CSR activities.

If you have any questions and/or comments regarding the interpretation of this report please contact me at the addresses or phone number above. Thank you for your guidance for this project, and I look forward to working with you again soon.

Sincerely,

Enclosure: Final Report

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Acknowledgement

It is my heartfelt pleasure and deepest sense of gratitude to offer our humble and sincere thanks towards our project guide. Her precious suggestions, academic excellence, incisive criticism, ineffable faith in me motivated me to work towards my goal. I would also like to thank all our friends and survey respondents, whose help and support made this research project come to life.

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Abstract:Problem: CSR is today a frequently used concept, as companies to a larger extent are held accountable for what is happening in the society. The company shouldalso inform the stakeholders about their CSR activities in an appropriateway, in order to capitalise from all possible benefits. In order to make a trustworthy impression and gain the most benefits, the choice of CSR activity and way of communication is crucial for the company, and therefore the perceptions of the consumers are very important to know more about and understand. Little research has been done about the consumers’ perception of CSR.Purpose: The purpose of this thesis is to find out how Indian consumers’ perceptions and behaviour towards a company are influenced by communicationof specific CSR activities.Method: The data collection was done through a questionnaire that was completedonline by 102 respondents. The respondents were asked to answer howtheir view of the company and willingness to buy from a company waschanged by each the six specified CSR initiatives, as well as how they wouldprefer to get information about a company’s CSR activities. Their responseswere analysed with help from consumer behaviour and promotion theories.Conclusions: All the initiatives gave a positive influence on the respondents’ perceptions, but the ones resulting in the most positive changes of the perceptions and willingness to buy were social responsible business practises, cause-relatedmarketing and corporate philanthropy, which are initiatives where the companyare doing the largest effort instead of just encouraging others to make an effort. The respondents answered that they trust the companies’ information about CSR to some extent, but also think a third party should scrutinise the companies’ activities and inform. The most favourable channel for CSR information was in the store and on packages, from environmental organisations and the company’s webpage. Therefore it seems like the respondents value that the companies provide information, but are not too forward and pushing the information on them by for example advertisements.

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TABLE OF CONTENTS

Acknowledgement.........................................................................................................................iii

Abstract:........................................................................................................................................iv

Introduction:..................................................................................................................................1

Theoretical Framework:.................................................................................................................1

Types of CSR Activities:......................................................................................................................1

Marketing Strategy:...........................................................................................................................2

Literature Review:.............................................................................................................................2

Research Gaps:..................................................................................................................................2

Objective:..........................................................................................................................................3

Research questions:...........................................................................................................................3

Research Hypothesis:........................................................................................................................3

Methodology:................................................................................................................................3

Results and Analysis:......................................................................................................................4

Alternative 1 – Cause promotion.......................................................................................................4

Alternative 2 – Cause-related marketing...........................................................................................6

Alternative 3 – Corporate social marketing.......................................................................................8

Alternative 4 – Corporate philanthropy.............................................................................................9

Conclusion:...................................................................................................................................11

Discussion....................................................................................................................................12

Contribution and limitations............................................................................................................12

Suggestions for further research.....................................................................................................12

Appendix - Questionnaire.............................................................................................................13

Bibliography:................................................................................................................................18

References...................................................................................................................................19

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Introduction:CSR is today a frequently used concept, as companies to a larger extent are held accountable for what is happening in the society. The company should also inform the stakeholders about their CSR activities in an appropriate way, in order to capitalise from all possible benefits. In order to make a trustworthy impression and gain the most benefits, the choice of CSR activity and way of communication is crucial for the company, and therefore the perceptions of the consumers are very important to know more about and understand.

In the last decade tendencies towards a more social aware community have been strong. In itself these trends are nothing that is particularly new. People have always preached for problems like public health, wildlife protection, prevention of child labor etc. What is different now is that companies to a larger extent are held accountable for what is happening in our society.

Companies that engage in CSR activities are likely to have different motives for doing so.

Many researches claim that corporate social responsibility originally consists of activities that a company performs out of commitment and duty. However, there are also commercial motives for CSR activities. For example CSR activities may result in advantages when it comes to receiving funding, recruiting new employees, cost reductions etc. To capitalise from all possible advantages it is crucial for the company to communicate their CSR work in an appropriate way.

Theoretical Framework:Types of CSR Activities:

a) Cause promotion

Cause promotion is often done in the way that the company provide funds, contribute financially or with any other resource, with the objective to increase awareness, support fundraising or participation, or to recruit volunteers for a specific cause. In this initiative persuasive communications are important, to create concern and to persuade people to contribute or participate to support the cause. In successful campaigns use of motivating messages and the choice of effective media channels are crucial. They also make use of publicity, printed materials, special events, web sites, advertising, featuring the logo and key message of the company and those who represent the cause. Further methods are employee involvement, messages on product labelling and to provide store space for promotions.

Many of the potential benefits are marketing related, like strengthened brand positioning and preference, increased traffic and consumer loyalty. Other benefits are that it gives customers and employees an easy way of contributing, along with new and strong partnerships.

b) Cause-related marketing

Cause Related Marketing (CRM) is defined as “a strategic positioning and marketing tool which links a company or brand to a relevant social cause or issue, for mutual benefit”. When using cause-

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related marketing the company decides to donate a specific percentage of the revenues or sales to a cause. The offer is often for a specific product and time period. Cause-related marketing is seen by many as a win-win situation, in which the company benefits and the consumer can contribute to charity without any extra cost. There are different types of agreements varying from a contribution per product sold or as a percentage of the company’s profits. It might also be for one specific product or a whole product range, and be for a brief time period or open-ended.

Marketing Strategy:If a CSR activity is meant to influence consumers in any way it has to be promoted to them. According to Peter and Olson (2008), the purpose of promotion is to communicate information about products as well as convince consumers to buy them. There are four major type of promotion: advertising, sales promotion, personal selling and publicity. To link the promotion strategies to the previously mentioned theories in this thesis one can say that promotions are experienced by the consumers in the social and physical environment and may cause affective and cognitive responses. Further, the consumers’ behaviour can be strongly influenced by promotion.

Literature Review:According to Johan Classon & Johan Dahlström(2006) CSR can influence company performance. Moreover, a research problem and a purpose are presented in order to paint a clear picture of what is to be researched. It has also been explained why this topic is of importance to the researchers. On positive side Research tries to cover topics not covered by few of previous research papers and also Proposed new model for CSR-Performance chain after studying Value linking chain but some lacking points are that Research is concentrated on single industry – Clothing Industry and also Conclusion is on perceptions of consumers about company and not on effect on sales.

Percy Marquina(2007) assesses the influence of CSR product features on consumers’ behaviour in Peru. The study will involve investigating Peruvian consumers’ preferences, using stated preferences elicited in response to hypothetical choices under controlled experimental conditions. Noteworthy points being that the research methodology will include stated preference discrete choice modeling (SPDCM) and Research throws light on relation between CSR and consumer social responsibility (CnSR). But on other side research Does not study effectiveness of marketing strategies for CSR awareness. And also Research does not establish direct link between CSR initiatives and sales of company.

ShelleyWigley(2008) assessed the impact of knowledge of a company’s corporate social responsibility efforts on both attitude and purchase intent. Results indicate that participants exposed to information about a company’s CSR activities are more knowledgeable about those activities and that increased knowledge positively impacts attitudes and purchase intentions. Pros of research can be that it proposes innovative way of measuring CSR communication effectiveness as well as it relates CSR communication effectiveness to sales. But some cons can be that it does not throw light on category of CSR activities responsible for influencing sales and does not study if consumer is willing to buy more for supporting company’s CSR activity.

Research Gaps:Delimitations: CSR include a wide variety of causes that companies can focus on, as for example the environment and social problems such as diseases working conditions etc. When performing our

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data collection including all different aspects of CSR in one survey would result in big problems. Since respondents are likely to grade the importance of the diverse issues in very different way this would most probably reflect in the results of the thesis. To solve this problem we have considered two solutions. The first one, including the same questions about all of the different CSR aspects, was quickly disregarded since it would put too much strain on the respondents a mean that the scope of the theses would end up way to wide. Therefore the research in this project has been focusing on environmental issues only, in more specific the global warming. The environment is an issue with increasing importance as it is becoming clearer how serious the state of the global environment is today.

Objective: The purpose of this project work is to find out how consumers’ perceptions and behaviour towards a company are influenced by communication of specific CSR activities.

Research questions:1. How is marketing of CSR by a company perceived by consumers?

2. How are the different CSR-strategies perceived by consumers and how might this affect their behaviour?

3. How would the consumers prefer to get information about a company’s CSR activities?

Research Hypothesis:1. CSR activities effects consumers perception of brand image2. CSR activities creates favourable buying behaviour3. Consumer perceives promotion of CSR activities in a positive sense4. Consumer believes the message conveyed by firms regarding CSR activities5. Consumer believes that CSR activities are selfless work being done by firms

Methodology:

The analysis is done using averages and correlation of variables. For presenting the results bar charts have been used to each question and statement. Bar charts are a good way to show the frequency of occurrences, so that highest and lowest are clear, and also to easily get an overview of the trend and proportions of the occurrences of values. The result of the analysis will then be summarized in the conclusion, in order to answer the three research questions that were set in the beginning of the thesis.

The variables selected are

1) Consumers perception of brand image as effect of CSR activities2) Consumers willingness to purchase as effect of CSR activities

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Secondary data is collected if various sources on internet. Ten papers on the related topic were reviewed as detailed in Literature Review section. Also study of models of consumer’s perception and buying behaviour is done using some available books of marketing as detailed in Bibliography.

Results and Analysis: The total number of respondents was 87 persons. The gender distribution was slightly uneven, with 27 women (which is equal to 31 per cent) and 60 men (69 per cent).

31%

69%

Female Male

Alternative 1 – Cause promotionIn alternative 1 the explanation was: “The company informs the consumers about global warming and encourage them to donate money directly to research about the issue” .This is an example of cause promotion.

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Alternative 1: This information would influence my perception of the company positively.

The result on the first question, if this information would give the respondent a more positive view of the company, is that 60 per cent answered that they strongly agree or agree, and 18.4 per cent answered that they do not agree at all or only agree little. The rest 22% of the sample population remained indifferent to the cause-related promotion of the company. The trend is therefore that cause promotion gives to some extent a more positive view of the company.

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Alternative 1: This information would increase my willingness to buy from the company.

For the second question, if the cause promotion would make the respondents more willing to buy from the company, the result is a bit less positive than to the first question. For this question 45 per cent answered that they strongly agree or agree much, 23.1 per cent answered that they disagree or strongly disagree. Another difference is that more respondents answered that they would not be affected at all by this information, 31.0 per cent.

Column 1 Column 2Column 1 1Column 2 0.620369 1

The correlation between the perception of the consumers and their willingness to buy indicates a positive relationship. It implies that the cause-related promotion can be used as a tool to increase sales. However, the mean of the responses for the two questions works out to 3.55 and 3.22 which are just a shade over the point of indifference i.e. 3. One possible reason for this is that in cause promotion the company say that they care about a specific cause; however they do not show that they are actually doing something for the cause, except telling the consumers to act. This alternative demonstrates a sense of care for a cause, which make the respondents more positive towards the company. What could make the consumers a bit sceptical though, and not make them even more willing to buy from the company, is that the company is not doing more themselves, and instead encouraging consumers to take action.

Alternative 2 – Cause-related marketing

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In alternative 2 the text was “The Company donates 3% from the profit per product from a certain product range directly to research about global warming”, which is an example of cause-related marketing.


Cause-related marketing evidently give a more positive view of the company, according to our respondents. As much as 87.3 per cent answered that they strongly agree or agree and the most frequent answer was agree with 60.9 per cent. Only 4.6 per cent answered that they disagree while no one strongly disagreed.


The answers to the question if cause-related marketing would make them more willing to buy from the company, the answers are still quite positive. 67.8 per cent answered that they agree strongly or agree. Only 9.1 per cent answered that they do disagree or strongly disagree. 23 per cent mean that they are not at all affected by this information.

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The mean of the responses to the two questions works out to be 4.1 and 3.8 which is a significant improvement from the levels seen in alternative 1. Hence, Cause-related marketing clearly gives our respondents a more positive view of the company. The majority of the respondents would also be more willing to buy from the company after the cause-related marketing. In cause-related marketing the company actually gives away a part of the profits from the sales of products to a good cause, and this seems to be appealing to the respondents. A great majority answered that they got a more positive view of the company and the majority would also be more willing to buy from the company. Even though the correlation is relatively low between the changed perception and willingness to buy, the fact that the opinions of a lot of people have changed would augur well for the company in the future.

Alternative 3 – Corporate social marketingIn the third alternative, which is an example of corporate social marketing, “The company informs about global warming and encourage the consumers to act environmentally friendly by giving them tips on how to easily decrease their environmental impact at home”.


Cause-related marketing evidently give a more positive view of the company, according to our respondents. As much as 86.2 per cent answered that they strongly agree or agree. Only 3.4 per cent answered that they disagree while no one strongly disagreed.

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On the second question 60.9 per cent answered that they strongly agree or agree and 23.5 per cent answered do not agree at all or agree little. Only 8% disagreed. However, 31% of the sample population remained neutral implying that their buying decision wouldn’t be affected.


Social marketing made the majority perceive the company more positively, but the increase in willingness to buy was not really as high. This is also indicated in the correlation results shown above. Hence, the mean for the two questions also showed some deviation with change in perception gathering a mean 4.15 while the willingness to buy recorded a mean of 3.69 only.

Corporate social marketing, like cause promotion, is a type of marketing that tries to make the customers aware and change their behaviour by informing them, and the company makes no other effort that is evidence of their support for the cause. Therefore it could make the customers a bit sceptical about how good the incentive really is, because of the relatively “low” effort from the company. This scepticism can be the reason why the respondents do not to a larger extent have a higher willingness to buy from the company after a social marketing campaign.

Alternative 4 – Corporate philanthropy

The fourth alternative presented to our respondents is an example of Corporate philanthropy. The alternative in the questionnaire read: The company donates the money directly to research regarding global warming.

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On the first question regarding this alternative, namely if the respondents would generally be more positive regarding the company after having received such information our research shows rather clearly that the answer to that question is yes. A cumulative percentage of 82% of our respondents answered that they either agree either a lot or completely to the statement. Only 1 respondent disagreed.


For the second question, however, most respondents, 52.1 per cent, agree much or completely with the statement indicating that this would in fact increase the willingness of them buying from the company. A rather large group of respondents, 27.6 per cent, answered that this kind of message would not at all affect their purchase decision in any way. While only 10.3% disagreed.

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When looking at the overall picture of Corporate philanthropy it can be seen that this type of information obviously has a positive effect on how customers feel about the company in general. Our results show that even though the actions taken in this type of method has no direct connection to product sales, it might influence consumers’ purchase intentions in one way or another. To sum it up, our results tells us that Corporate philanthropy is indeed a good method to use when the primary target is to improve the company image and reputation. All though the results are slightly less positive when it comes to purchase intentions is seems like Corporate Philanthropy might have a good influence on that notion also.

Conclusion:The first research question stated was: How is marketing of CSR by a company perceived by consumers? The answer to this question is a resounding yes. The consumers are interested in knowing about a company's CSR activities before they make the all-important purchase decision. The second research question was stated as follows: How are the different CSR-strategies perceived by consumers and how might this affect their behaviour? The Cause promotion strategy was found to be the least effective among all the strategies employed. However, corporate philanthropy and cause promotion were the strategies that relatively didn’t increase the consumer’s willingness to buy. For all the alternatives the perception was much more changed to the positive than the willingness to buy. This implies that information about CSR initiatives have a greater impact on the respondents’ perception of the company than the purchase intentions. Thus, it seems that this type of marketing strategy trigger affective and cognitive processes more than the overt consumer behaviour is affected. The third research question stated were: How would the consumers prefer to get information about a company’s CSR activities? The answer to this is the consumers want the information but from third party credible resources.

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Discussion

Contribution and limitationsThe contributions done by this paper is likely to be seen as valuable from the point of view of companies, environmental organisations, governmental organisations etc. It provides information that would help these institutions to make good decision regarding how they should use CSR as a marketing tool and in what way they can communicate their initiatives to the consumers.Regarding limitations of the research there are a few that has limited our results. First, the age of the respondents were not very equally distributed. The most part of the respondents were in the age span of 20-25 years old. This limits the ability to make generalisations to the whole population. However, as discussed in the method section, theoretical generalisations are justified and in this case satisfactory.Further, the fact that not any qualitative research is included in this thesis might be seen as a weakness.

Suggestions for further researchWhen reviewing what has been the results of this thesis a lot of new and other interesting is realised. First of all, it might be important to include more qualitative ingredients in this type of research. This would enable the researcher to gain a deeper knowledge about the consumers’ opinions. The results from such research could easily be combined with the results from this thesis and other research.Further, we think it would be interesting to examine how the consumer would like to receive this kind of information. So more research should be done on what channel

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Appendix - QuestionnaireEffect of CSR on sales of a company

Thank you for taking this questionnaire.It will take only 2-3 minutes to complete. We appreciate your time. Your opinions are highly valuable to us.

All your answers will be kept confidential.

1. Age

2. Gender

Male Female

Here we present a fictitious company that wants to increase its involvement in environmental issues. For each of the following questions we would like to know how would you be affected by the actions of the company.

3.The company informs the consumers about global warming and encourage them to donate money directly to research about the issue

Strongly

agreeAgree

Neither agree Nor disagree

DisagreeStrongly Disagree

This information would influence my perception of the company positively.

This information would increase my willingness to buy from the company.

4.The company donates 3% from the profit per product from a certain product range directly to research about global warming.

Strongly

agreeAgree




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Strongly

agreeAgree




5.The company informs about global warming and encourage the consumers to act environmentally friendly by giving them tips on how to easily decrease their environmental impact at home.

Strongly

agreeAgree





6.The company donates the money directly to research regarding global warming.

Strongly

agreeAgree





7.The company arrange a day when the employees, instead of their regular job tasks, on working hours gets the opportunity to make an effort for the environment by planting trees.

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Strongly

agreeAgree





8.How do you think that companies should inform their customers about their environment related CSR performance?

Strongly

agreeAgree



I think that companies should market their CSR work actively to me as a consumer through for example promotions in media.

I think companies should only supply information about their CSR work that consumers can get when needed or interested.

9. If suppose some allegations are made concerning the disclosure of company's CSR performance what would be your stance.

Strongly

agreeAgree


DisagreeStrongly disagree

I think it is important that companies inform their customers

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Strongly

agreeAgree


DisagreeStrongly disagree

about what they are doing for the environment.

I think it is important that independent organizations scrutinize companies’ work for the environment and inform the consumers about it.

I trust the information companies publish in their marketing about their environmental work.

I trust the information a third party (for example media, governmental organizations and environmental organizations) publish about a company’s environmental work.

10.How would you like to get information about companies’ environment related CSR activities?

Advertisements paid by the company (e.g. in TV, radio and newspapers)

From employees (sellers etc.)

In the store, on packages etc.

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From environmental organisations

From governmental organisations

Through media (not paid by the company, e.g. articles and news)

The company's webpage

Finished? Submit your Survey

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Bibliography:Aaker, D. A., Kumar, V., & Day, G. S. (2003). Marketing Research. Hoboken, New Jersey: John Wiley & Sons

Barakat, A. & Tarestad, M. (2006). Help yourself by helping others: a study of CSR engagement in Swedish companies. Jönköping: Jönköping University

Etang, J.L. (1995). Ethical corporate social responsibility: A framework for managers. Journal of business ethics, 14(2), 125-132

Gorard, S. (2003). Quantitative Methods in Social Science: The role of numbers made easy. London:Continuum

Hague, P. (2006). Introduction to Market and Social Research. London: Kogan PageHoward, J. A. (1989). Consumer Behaviour in Marketing Strategy. New Jersey: Prentice-Hall, Inc

Malmsten, M. & Zetterberg, F. (2005). Socialt ansvarstagande företag: - en attitydundersökning bland svenska konsumenter. Stockholm: Stockholms Universitet

Molander A. M. (1998). The Household Decision Making Process in Replacement of Durable Goods. Umeå: Umeå University

Saunders, M., Lewis, P., & Thornhill, A. (2003). Research Methods for Business Students. (3rd ed.). Harlow : Pearson Education

Weinberg (2002). America's most generous corporations. Forbes Inc. Retrieved April 17,2008, from http://moneycentral.msn.com/content/invest/forbes/P64835.asp?Printer

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References1. Johan Classon, Johan Dahlström (2006.) How can CSR affect company performance,

Karlstads University2. Percy Marquina(2007). Measuring the Impact of Corporate Social Responsibility on

Consumer Behavior, Florida International University, Miami3. ShelleyWigley(2008). Gauging consumers’ responses to CSR activities: Does increased

awareness make cents? , University of Texas at Arlington4. Kristin Haugland Smith, Oystein Nystad(2006). Is the motivation for CSR profit or ethics? ,

Bodo Graduate School of Business, Norway5. Mohammad M. Rahman(2007). Linking CSR and Financial Performance through Branding,

School of Business - North South University6. A Fleishman-Hillard(2007). Rethinking Corporate Social Responsibility, National Consumers

League Research7. BORBÉLY Emese(2008). Corporate Social Responsibility: Business Future or Future

Business? , Vienna University of Business Administration8. Gilbert Tan, Raj Komaran(2006). Perceptions of Corporate Social Responsibility, Singapore

Management University9. Richard Peters, Michael R. Mullen(2006). Evidence of the Effects of CSR on Financial

Performance , Global Business Research10. Matthew Brine, Rebecca Brown(2007). Corporate social responsibility and financial

performance, , Melbourne Business school11. Haugland, Kristin S. & Nystad, Oystein (2006). Is the motivation for CSR profit or ethics?

Bodo Graduate School of Business12. Crawford, David (2005). The Balanced Scorecard and Corporate Social Responsibility:Aligning

Values for Profit. Source CMA Management. URL: http://www.greenbiz.com/news/news_third.cfm?NewsID=28999&CFID=7949425&CFTOKEN=51255524

13. Glachant, Matthieu (2008). Corporate Social Responsibility and Profits: Friends or Foes? Mines ParisTech, Cerna.

14. Mohammad M. Rahman. Linking CSR and Financial Performance through Branding. School of Business, North South University.

15. Marquina, Percy (2007). Measuring the Impact of Corporate Social Responsibility on Consumer Behavior: The Case of Peruvian Consumers. Centrum/ Maastricht School of Management, Perú.

16. Wigley, Shelley (2008). Gauging consumers’ responses to CSR activities: Does increased awareness make cents? University of Texas.

17. Barakat, A. & Tarestad, M. (2006). Help yourself by helping others: a study of CSR engagement in Swedish companies. Jönköping: Jönköping University

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19. Cramer, J. (2002). From financial to sustainable profit. Corporate Social Responsibility and Environmental Management, 9(2), 99-106

http://www.greenbiz.com/news/news_third.cfm?NewsID=28999&CFID=7949425&CFTOKEN=51255524

http://www.greenbiz.com/news/news_third.cfm?NewsID=28999&CFID=7949425&CFTOKEN=51255524

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20. Crane, A., Matten, D., & Spencer, L. J. (2008). Corporate Social Responsibility – readings and cases in a global context. Oxon: Routledge

21. Easterby-Smith, M., Thorpe, R., & Lowe, A. (2002). Management Research: An introduction. (2nd ed.). London: Sage Publications

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