The impact of perceived CSR initiatives on consumer’s buying behaviour: An empirical study Abu Bashar, Assistant Professor, Institute of Management Studies, Dehradun. ABSTRACT Although research into CSR and consumer behavior is still relatively young, there exists a growing interest in studying the links between CSR and marketing. The Indian consumers are now well aware that, in pursuing their business endeavors, companies now have to show more responsibility towards society and the environment where they are operating and at the same time do managers increasingly see CSR as a marketing tool to help create a competitive advantage.
But what is the actual impact of companies’ engagement in CSR on consumer behavior? The consumers are getting more aware of the corporation involved in corporate social responsibility (CSR) through better education and the increased influence of the media. The companies up to a certain extent has already been realized that their socially responsible behaviour have a direct impact on the consumer buying behaviour. In this research paper effort has been employed to investigate that how consumers are considering corporation’s CSR initiatives at the time of deciding on their purchase decision of products and services.
For measuring CSR economic, legal, ethical and philanthropic variables have been considered from Carroll’s definition. A random stratified sample of 250 respondents have been considered, the data have been collected with the help of structured questionnaire. After the data collection appropriate statistical data analysis was performed in the software program SPSS. Results confirm a positive relationship between perceived CSR activities and consumer buying behaviour. Keywords: corporate social responsibility, consumer behaviour, Philanthropy, Consumer buying behaviour. 1. Introduction
More specifically, the responsibility of corporations includes the integration of social, environmental and ethical issues as well as human rights and consumer concerns, into their business operations and core strategy in close collaboration with their stakeholders. In research literature, CSR is defined as “a business organization’s configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm’s societal relationships” (Wood, 1991:693).
In their opinion, the free market in that sense contributes to society by realizing this prosperity and therefore does not have any other obligations in that matter. However, on the other side of the spectrum the free market is viewed as inhibiting human freedom (e. g. through child labor) and as the root cause of economic and cultural imperialism in many developing countries. CSR is also seen as a way to attempt to be one step ahead of governmental interference, in order to avoid any kind of legislative restrictions or reprimands.
Additionally, CSR is regarded as being used merely as a marketing tool, which introduces concerns about hypocrisy. As with many ethical issues, a great amount of organizations operate in the broad space in between these extremes, and the topic remains subject to continuous discussion (Friedman, 1970). One of the most important stakeholder groups is the consumer, and as Creyer and Ross (1997) confirmed; customers do indeed expect socially responsible behavior from companies. More interestingly, customers are willing to reward this behavior.
It is no surprise that a steadily growing group of consumers pro-actively look for companies with ‘sustainable’ products and production methods. This new type of consumer is subject to an increasing amount of research by social and economic scientists, and characterized as ‘sophisticated’ and ‘environmentally and socially conscious’ (Forster, 2007). Corporations that do not equip themselves with CSR activities will often be left behind with the increasing global competition and borderless markets, and international corporations with sound CSR activities grow stronger (Altman, 2007).
As the education level increases, consumers are made more aware of the need for pro social corporate behaviour. A lot of work has been done in Western countries to identify an organization’s behaviour regarding consumer purchasing decisions. However, not many studies have been conducted in emerging markets, such as India. CSR activities should enhance a corporation’s image. This paper aims to examine the influence of perceived CSR initiatives on the buying behaviour of Indian consumers.
We are interested in exploring whether consumers in India consider organisations’ CSR issues before associating themselves with organisations’ products and services. Apart from that, this study also aims to identify the awareness level of Indian consumers towards CSR. The results of this study will also be useful for business organisations in understanding the consumers’ priority for the CSR activities that they should be engaging in, and it will contribute to the existing literature. The remainder of this paper is structured as follows.
The next section will discuss the literature review. The third section will explain on the methodology used. The findings and discussion will be presented in the fourth section and will be followed by conclusions and implications in the final section. 2. Scope of the study The scope of the study has been limited to CSR initiatives of corporate and consumer buying behaviour only. The study has been confined to Delhi & NCR region as this area has greater number of top notch corporations 3. Objectives 1. To study and analyze the current CSR practices being employed by corporations in India. . To find out the level of awareness of consumer about CSR 3. To find out the relation and impact of corporation’s CSR initiatives on consumer buying decisions 4. Research Methodology The study is based on descriptive research design. A structured questionnaire has been designed, to know the level of awareness and impact of corporation’s CSR initiatives on their buying decisions. The questionnaire consists of three major sections. The first section gathers information on consumers’ awareness towards corporate social responsibility (CSR).
This section covers some general questions to obtain the respondent’s understanding of the term CSR, which indicates the ability of the respondent to complete the rest of the questionnaire. The respondents who indicated having no knowledge in CSR were not included in the data analysis. Second section covers questions on consumer buying behaviour towards CSR initiatives by the business organisations. The statements were divided into four subsections based on Carroll’s pyramid of CSR, which include economic, legal, ethical and philanthropic responsibilities.
While third section designed to gather demographic information of the respondents such as gender, age, education level and monthly income level. Section A and Section C were designed using nominal scales, whereas Section B was designed using a five-point Likert scale ranging from “1” for “strongly disagree” to “5” for “strongly agree”. Cronbach’s Alpha coefficient was used to evaluate the reliability of the measures. The Cronbach’s Alpha coefficient for the four independent variables and one dependent variable was 0. 59. The survey was conducted in Delhi & NCR; responses of 250 respondents were collected. We targeted respondents who are seems to be conscious buyer and hence the sampling technique is non-probability convenience sampling. For visual representation of finding and results bar charts, pie charts and tables etc. ahs been used. 5. Review of literature During the 21th century, the focus of the environmental aspect of CSR grew even stronger and society’s increased interest regarding environmental issues put new light on CSR.
Hence, even higher pressure was put on corporations and their initiatives for support of the environment. This can be seen in the European Commission’s CSR-report from 2002, in which CSR is described to have a close relationship between companies and societies to tackle both social and environmental concerns: “CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.
In their latest definition, the European Commission (2011) explains CSR as “the responsibility of enterprises for their impacts on society”. Another trend emerging in the 21th century was the focus of CSR from a consumer perspective. The fact that corporations started to work and participate actively in projects regarding CSR predictably woke up an interest also among consumers. Researchers were then eager to find out whether CSR activities had any influence on consumers or not, and if so, in what way and to what extent. In 2001, Mohr et al. tudied the relationship between CSR and consumers’ buying behavior. The results of the study showed that the majority of the respondents were in general positively disposed towards social responsible firms and moreover expected firms to be highly active within CSR. Furthermore, the results revealed that a small majority of the respondents did not really think about basing their purchase behavior on CSR or did it only sometimes, even if CSR as a buying criterion didn’t play much of a role in the decision processes or purchase behavior.
However, 39% of the respondents were basing some or much of their purchasing on CSR (Mohr et al. , 2001). In 2005, Becker-Olsen and Hill contributed with two studies investigating the role of perceived fit (e. g. Similarity between corporate mission and social initiative), perceived corporate motive (other-centered versus profit-centered), and timing of an announcement (reactive versus proactive) on consumers’ responses to corporate social initiatives. The aim of the study was to explore the impact of perceived CSR on consumer behavior.
The results of the study demonstrated that an overwhelming majority of the respondents believed that firms should engage in social initiatives and 76% thought that those initiatives would benefit the firms. About half of the respondents stated that they would boycott firms that acted irresponsibly, if reasonable alternatives were available (Becker-Olsen & Hill, 2005). Finally, another relatively new trend within CSR developed in the 21th century is to view and utilize the whole concept as a competitive advantage.
In 2006, the marketing and strategy guru Michael Porter wrote an article together with Mark R. Kramer, in which they introduced a framework that organizations can use to identify the impact they have on society, determine which effects to address and then suggest effective ways to do so. The authors propose that when looking at CSR from a strategically perspective it can become a source of remarkable social progress, since corporations apply their resources, expertise, and insights to activities that benefit society as a whole (Porter & Kramer, 2006).
In carrying out their economic responsibility, corporations are expected work within the framework of laws and regulations as a partial fulfillment of the “social contract” between corporations and society. Carroll (1991) stated that it is important for legal responsibility to be performed in a manner that is consistent with the expectations of governments and laws complying with the various federal, state and local regulations. A successful corporation should be recognised as one that fulfils its legal obligations.
Conchius (2006), on the other hand, stated that legal responsibility includes abiding by consumer and product laws, environmental laws and employment laws while also adhering to laws and regulations governing competition in the marketplace. However, legal responsibilities do not embrace the full range of behaviours expected of corporations by society. Laws are important, but they are often inadequate. First, they cannot possibly address all of the issues or areas that a corporation may face.
Second, laws often lag behind more recent concepts of what is considered right behaviour, and third, laws may represent the personal interests and political motivations of legislators (Carroll, 1998). Although economic and legal responsibilities represent ethical standards concerning fairness and justice, ethical responsibility encompasses those activities and practices expected or prohibited by society that expand beyond the limitations of legal responsibilities.
Ethical responsibility embodies those standards and expectations that reflect a concern for what consumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of stakeholders’ moral rights (Carroll, 1979). According to Carroll (1991), business performance can be determined by the corporation’s consistency in promoting moral and ethical standards. If a corporation practises good corporate citizenship, the activities of the corporation are trusted.
Ethical responsibility also recognises that corporate integrity and ethical behaviour should go beyond the requirements of laws and regulations. Balancing economic, legal and ethical responsibilities is important. If the corporation does something that is appropriately economic and legal, it must also be appropriately ethical. Philanthropic responsibility refers to corporate actions that are in response to society’s expectations of good corporate citizens. Corporate philanthropy is likely to enhance the image of corporations especially those that have high public visibility.
Corporate philanthropy should also increase employee loyalty and improve customer ties. Philanthropic activities include business contributions in terms of financial resources or executive time, such as contributions to the arts, education, or communities. The distinguishing characteristic between philanthropic and ethical responsibilities is that philanthropic responsibilities are not expected in an ethical or moral sense. Philanthropy is located at the most voluntary and discretionary dimension of corporate responsibility and has not always been linked to profits or the ethical culture of the firm (Ferrell, 2004).
Although society wishes corporations to be philanthropic, it is voluntary on the part of corporations (Carroll, 1991). According to Fombrun, Gardberg and Barnett (2000), the case for philanthropy comes from two different sources; strategic philanthropists argue that, although philanthropy may not generate direct economic returns, it will enhance the firm’s long-term competitive position through intangible gains in reputation, legitimacy or employee loyalty. Consumer Behaviour towards CSR This paper aims to examine consumers’ buying behaviour as a result of corporate CSR initiatives.
We are interested in examining that whether the purchase decisions of the products and services of consumers in India are based on corporation’s CSR initiatives or not. In addition, we also seek to identify which type of CSR component based on Carroll’s pyramid of CSR will have significant impact on consumers’ buying behaviour. Several studies have suggested that there is a positive relationship between a corporation’s CSR activities and consumers’ attitudes towards that corporation and its products (Brown & Dacin, 1997; Creyer Ross, 1997; Ellen, Webb, & Mohr, 2000).
Mohr, Webb and Harris (2001) examined and their finding indicated a significant relationship between CSR and consumer responses. Sen and Bhattacharya (2001) research on reaction of consumers to CSR shows that CSR will directly affect consumers’ intentions to purchase corporation’s products. As cited in Pomering and Dolnicar (2008), marketplace polls reported that consumers expect corporations to provide information about what they do, and they will support those corporations that pursue CSR initiatives.
Environics International Ltd. (Environics, 1999) conducted a survey regarding consumer responses towards corporate social responsibility. The result of the survey indicated that Australians have the highest CSR consumer expectations from businesses. A total of 86% of US respondents in the survey of Cone Inc. (2004) said that corporations should provide information on how they support social issues. 6. Research Results and Discussions Table 1: Gender of respondents | |Gender | | | | | | | | | | | | | | | |Model |R |R Square |Adjusted R Square |Std. Error of the Estimate | |CSR-CB |. 573a |. 329 |. 315 |. 36483 | |a. Predictors 🙁 Constants) CSR: corporate social responsibility components which include ethical, economic, philanthropic, | |legal. CB-Consumer Behaviour | The R square (coefficient of determination) is a portion of the total variation in the dependent variable that is explained by the variation in the independent variables. According to the model summary, R square is equal to 0. 329, which is less than 1.
This indicates that there is a weak linear relationship between CSR activities and consumers’ buying behaviour. Approximately 32. 7% of variance in all the CSR components can significantly explain consumers’ buying behaviour. An analysis of variance (ANOVA) has been preformed to test whether there is a statistical significant linear relationship between the combination of the four CSR components (Economic, legal, Ethical and philanthropic) and consumers’ buying behaviour exists or not. According to Table 9, the p-value is . 000, indicating that the four CSR components significantly influence consumers’ buying behaviour. Table 9: ANOVA of Multiple Regressions ANOVAb | |Model |Sum of Squares| |bDependent Variable (CB): consumer behaviour | | | | A coefficient table is very much helpful in explaining the relationship between the four CSR components and consumers’ buying behaviour. Based on the calculated significances in Significance (Sig. ) column of Table 10, the p-value for each CSR component is less than 0. 05, which indicates that all the CSR components have a statistically significant relationship with consumers’ buying behaviour. Table 10: Coefficients of Multiple Regressions Coefficientsa | |Model |Unstandardized Coefficients |Standardized |t |Sig. | | | |Coefficients | | | | |B |Std. Error |Beta | | In Table 10, the unstandardised beta coefficient is used for the values of the numbers in the linear regression equation.
Theory explains that a higher beta value indicates a greater impact of the independent variable on the dependent variable. The independent variable (CSR components) can be ranked according to the magnitude of the beta coefficient to determine which component has the most significant impact on consumers’ buying behaviour. The regression model relates Y (the dependent variable) to a function of X (the independent variable) and ? (the unknown parameter). It is formulated as Y ? f(X, ? ). The multiple regression analyses performed in this study are modeled as follows: Yi = ? 1xi1 + ? 2xi2 + ? 3xi3 + ? 4xi4 Therefore, the multiple regressions line equation for this current study is: Consumer Behaviour = 1. 286 + 0. 59 Economic Responsibility + 0. 168 Philanthropic Responsibility + 0. 166 Ethical Responsibility + 0. 112 Legal Responsibility. The results explicitly defines that the economic responsibility attribute has the most significant impact on consumers’ buying behaviour, as it has the highest beta value, followed by philanthropic responsibility, ethical responsibility and, finally, legal responsibility. Indian consumers seem to view CSR priority differently from other nations. Economic responsibility was still the basic utmost priority preferred. However, they ranked philanthropic responsibility as the second most important responsibility compared with legal responsibility.
It is not surprising that Indian consumers see corporations’ philanthropic responsibility as being more important than their legal responsibility. Consumers want corporations to contribute their money, facilities and employees’ time to humanitarian programs or purposes. Indians have been known as one of the most generous nations in the world. For example, the country’s rate of donation and participation in helping the victims of natural disasters in the world has always been very encouraging. In addition, we have always heard that the generous Indians have made financial pledges and contributions to help those in need, they be orphaned children, the poor, accident victims and so on.
Although the Indian consumers themselves have been very generous, the expectation for business institutions to do the same is unquestionable. As for complying with rules and regulations, it is not surprising that Indian consumers ranked legal responsibility last compared with Carroll’s pyramid, which suggested that legal responsibility is the next most important responsibility Compared with those in developed nations, Indians regard rules lightly, to a certain extent, as we have always heard from the news about how Indians bend and ignore stipulated rules and regulations. Among the most common examples are the bending of traffic rules and regulations promoting environmental protection. 7. CONCLUSION AND IMPLICATIONS
For academicians, this research makes a contribution to the understanding the underlying dynamics of the role of corporate social responsibility in consumers’ buying behaviour. The result of this study indicates that all of the CSR components have a significant relationship with consumers’ buying behaviour. However, the limitations of this study must also be considered. The major limitation relates to the sample. With only 250 usable respondents, this sample size might limit the external validity of the findings. Managers should note that this research supports previous results reported in the literature, suggesting that a substantial, viable and identifiable consumer group exists that considers a company’s level of social responsibility in its purchase decisions.
Manufacturers and retailers have an opportunity to appeal to this group while simultaneously meeting their business objectives and make contributions to society. The type of CSR activities that should be engaged by the corporations should preferably be based on the priority indicated in the finding of this study, where the economic responsibility attribute has the most significant impact on consumers’ buying behaviour, followed by philanthropic responsibility, ethical responsibility and finally, legal responsibility. However, companies that promote themselves as socially responsible need to be prepared to deal with criticisms of any irresponsible behaviour they are seen as committing, as information travels within seconds in this information technology era.
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