Cause Related Marketing. A substitute for direct donations?

Contents:

1. Introduction

2. Literature Review
2.1 Traditional Marketing
2.1.1 Definitions of Traditional Marketing
2.1.2 Concepts of Traditional Marketing
2.1.3 Summary Traditional Marketing
2.2 Cause-Related Marketing.
2.2.1 Definitions of Cause-Related Marketing
2.2.2 Concepts of Cause-Related Marketing
2.2.3 Benefits and Risks of Cause Related Marketing
2.2.4 Summary Cause-Related Marketing
2.3 Cause Affinity..
2.3.1 Customer Behaviour.
2.3.2 Definitions of Cause Affinity
2.3.3 Concepts of Cause Affinity
2.3.4 Summary Cause Affinity

3. Methodology..
3.1 Summary.
3.2 Business Research Strategies
3.2.1 Reliability, Replication, Validity
3.2.2 Secondary Research & Primary Research
3.3 The Self-Completion Questionnaire..
3.3.1 The Approach
3.3.2 The Likert Scale.
3.4 Population, Sample and Common Errors
3.4.1 Description of Population and Sample
3.4.2 Common Sampling Errors
3.5 Ethical considerations

4. Statistics.
4.1 General Donation Behaviour
4.1.1 Have you ever donated money, time or goods for charity purposes or charity organisations?
4.1.2 How did you mostly get involved with charity organisations?
4.1.3 How often do you get involved for a charity organisation?
4.1.4 What is your preferred geographic context of involvement?
4.1.5 I do not donate for the reason(s) of:
4.2 Distribution of Responsibility & Attitude towards Cause-Marketed Products
4.2.1 Companies have a social responsibility
4.2.2 Consumers have a social responsibility
4.2.3 A consumer can remedy shortcomings with his buying behaviour..
4.2.4 The disposition of products which support a charitable cause is part of a corporation’s responsibility
4.2.5 The purchase of products which support a charitable cause is part of a consumer’s responsibility
4.2.6 I specifically purchase products which support a charitable cause
4.2.7 If I purchase a product which supports charitable causes I want to engage nationally/internationally
4.2.8 I would pay a higher price for products, which support a charitable cause
4.2.9 I perceive donating as more convenient when I buy products which support charitable causes
4.2.10 If I were to specifically buy products which support a charitable cause, I would be less engaged in charitable organisations...
4.2.11 Which of the following statements describes you the most?
4.2.12 I wish more companies would support a charitable cause
4.2.13 Which NATIONAL charitable cause would you prefer to support when purchasing a product which supports a charitable cause?...
4.2.14 Which INTERNATIONAL charitable cause would you prefer to support when purchasing a product which supports a charitable cause?
4.3 Summary Statistics

5. Analysis.
5.1 Aim of the Study.
5.2 Statistical Analysis
5.3 Distribution of Responsibility & Attitude towards Cause-Marketed Products.
5.4 Assessing the Preferred Causes
5.5 Implication for Literature
5.6 Summary Analysis

6. Recommendations

7. References

8. Appendix
8.1 Appendix Methodology
8.1.1 Epistemological Considerations
8.1.2 Ontological Considerations
8.1.3 Quantitative vs. Qualitative
8.1.4 Longitudinal vs. Cross-Sectional
8.2 Ethical Considerations
8.2.1 Harm to Participants
8.2.2 Lack of Informed Consent
8.2.3 Invasion of Privacy
8.2.4 Involvement of Deception
8.2.5 Data Management
8.3 Porter’s Value Chain
8.4 The Questionnaire

Acknowledgments

I am sincerely and heartily grateful to my advisor, Dr. Rehan ul-Haq, for the support and guidance he showed me throughout my dissertation writing. I am sure it would not have been possible without his help.

I owe sincere and earnest thanks to my parents for their support throughout my studies. I am sure it would also not have been possible without their help.

I would also like to show my gratitude to Ulf Bamberg for providing me with great impulses.

Figures:

Figure 1 - Traditional approach of generating a strong fit (Siebert, 2012)

Figure 2 - The 4-Ps and 4-Cs around the CSR aspect (Siebert, 2012)..

Figure 3 - Apple Inc.’s 4-Ps Marketing-Mix Strategy (Siebert, 2012)

Figure 4 - Contemporary Marketing Approach (Siebert, 2012).

Figure 5 - Profit-Cause relation of popular CSR instruments (Siebert, 2012)

Figure 6 - Influential factors of a CRM campaign (5 C's) (Siebert, 2012)

Figure 7 - Maslow's Pyramid of Needs (Maslow, 1943)

Figure 8 - Strong-fit diagram (Siebert, 2012)

Figure 9 - Donations from private households 2006 & 2011 (Deutscher Spendenrat, 2011)

Figure 10 - Official development assistance in 2009 in billion $ (OECD.org, 2009)

Figure 11 - The direct donation decision-making process (Siebert, 2012)

Figure 12 - The cause-marketed products decision making process (Siebert, 2012) . 29 Figure 13 - Choosing the correct research strategy and the correct research design (Siebert, 2012)

Figure 14 - Deductive vs. inductive principles (Siebert, 2012)

Figure 15 - The process of deduction (Bryman & Bell, 2011)

Figure 16 - Distribution process of the questionnaire (Siebert, 2012)

Figure 17 - Questionnaire structure (Siebert, 2012)

Figure 18 - Hoffmann-La-Roche company structure (Siebert, 2012)

Figure 19 - Selective question to separate donators and non-donators (Siebert, 2012)

Figure 20 - Preferred mode of donation (Siebert, 2012)

Figure 21 - Number of involvements during a year for a charitable organisation (Siebert, 2012)

Figure 22 - Geographic preference of donators (Siebert, 2012).

Figure 23 - Reasons for not donating (Siebert, 2012)

Figure 24 - Corporations social responsibility (Siebert, 2012).

Figure 25 - Consumers Social responsibility (Siebert, 2012)

Figure 26 - Consumers buying behaviour can positively influence remedies (Siebert, 2012)

Figure 27 - Cause-marketed products are part of the CSR (Siebert, 2012)

Figure 28 - Cause-marketed products are part of the consumer’s responsibility (Siebert, 2012)

Figure 29 - Personal engagement in cause-marketed products (Siebert, 2012).

Figure 30 - Geographical context of cause-marketed products (Siebert, 2012)

Figure 31 - Price elasticity of cause-marketed products (Siebert, 2012)

Figure 32 - Is donating via cause-marketed products less complicated? (Siebert, 2012)

Figure 33 - Cause-marketed products as a substitute for direct donations (Siebert, 2012)

Figure 34 - Reasons to neglect cause-marketed products (Siebert, 2012)

Figure 35 - Consumers demand more engagement from companies (Siebert, 2012)

Figure 36 - Most important national causes (Siebert, 2012)

Figure 37 - National preference of causes in Germany by distance (Siebert, 2012)

Figure 38 - Most important international causes (Siebert, 2012)

Figure 39 - International preference of causes in Germany by distance (Siebert, 2012)

Figure 40 - Differences between direct donations and cause-marketed products (Siebert, 2012)

Figure 41 - Perception of corporations' and consumers' responsibility is equal (Siebert, 2012)

Figure 42 - Reasons to neglect CRM products (Siebert, 2012)

Figure 43 - Reasons to neglect direct donations (Siebert, 2012)

Figure 44 - Preferred geographic context in terms of donation modus (Siebert, 2012) . 86 Figure 45 - Preferred causes: international CRM, national CRM and direct donations (Siebert, 2012)

Figure 46 - Relative distance comparison. Ranking: 5 being the most important cause (Siebert, 2012)

Figure 47 - Complexity of a simplified donation process (Siebert, 2012)

Figure 48 - Environmental Performance Impact developed from the “Triple-Bottom- Line” by Ambec & Lanole (2011)

Figure 49 - Virgin's Value Chain in accordance to Porter (Siebert, 2011)

Abstract

Despite the vast research on Cause-Related Marketing, little is known about the instrument’s potential to substitute direct donations. A company engages in CauseRelated Marketing when it teams up with a cause supporting charity organisation. The similarity with direct donations suggests that cause-marketed products bear the potential to tap the donation market.

The present investigation extends prior research by identifying key drivers for purchasing cause-marketed products and its potential to gain access to the market of direct donations (Hypothesis 1). Second, the work tries to assess the geographic implications of a Cause-Related Marketing campaign (Hypothesis 2).

The results of Hypothesis 1 indicate that cause-marketed products bear a potential to substitute direct donations. Findings of Hypothesis 2 show that the geographical context of a CRM campaign has implications on the cause supported by a nongovernmental organisation.

Keywords: Cause-related marketing, direct donations, geographical context,

1. Introduction

In the new global economy, marketing has become a central issue for increasing the market share in many saturated, hypercompetitive markets. The oversupply of goods and their providers forces organisations to distinguish themselves from each other as much as possible with many different marketing instruments. The more saturated a market is, the higher are the costs of gaining market share via the use of a marketing instrument (Cooper & Kaplan, 1988). New marketing methods and instruments have thus been increasingly researched and implemented over the last decades. Up-to- date marketing instruments hence can provide a price worthy and effective tool to increase market share if implemented quickly and executed correctly.

One of the newest marketing tools is called Cause-Related Marketing. It implies that a profit-oriented company teams-up with a non-governmental organisation (NGO) to project the positive perception of the NGO by customers upon the brand image of the profit-oriented organisation (Varadarajan & Menon, 1988). If a company now openly communicates the partnership in order to create a better image which ultimately should lead to higher sales figures, it is engaging in Cause Related Marketing (CRM) (Adkins, 1999). CRM is considered as one of the most important marketing tools in terms of companies influencing potential customers (Barone, et al., 2010), but is also considered to be the most sensitive in terms of campaign failure (Pracejus & Douglas Olsen, 2004). It is further argued that it has been one of the fastest-growing marketing instruments worldwide (Independent Evaluation Group, 2009).

The saturated markets, high competition and the need for new marketing instruments show the relevance of CRM as one of the big contemporary marketing approaches. However, not all possibilities and risks have been assessed. So far, no research has surveyed the probabilities and the hence inherited potential of CRM as a substitute for direct donations. Previous studies were focused on the cultural differences of certain geographic regions and its impact on the perception of CRM campaigns. The generalisability of this published research on this issue is problematic since even the smallest areas have a distinct perception based on the cultural diversity. The geographical placement of this study is South Germany, the Free State of Bavaria.

Hence, this dissertation will examine two hypotheses (H):

Hypothesis 1: German customers who buy cause-marketed products perceive the purchase as equal to a donation in the form of money, goods or time.
Hypothesis 2: German customers expect companies to support the same causes that they donate to themselves and do not expect them to support different causes (Cause Affinity).

The approach to empirical research adopted for this study was one of a quantitative, self-completion questionnaire methodology.

Due to practical constraints, this paper cannot provide an in-depth view on more than one geographical area. It is further beyond the scope of this study to examine solutions for the indentified risks and obstacles to implement CRM as a substitute for direct donations.

My main reason for choosing this topic is personal interest. The obvious trend towards cause-marketed products can be seen in supermarkets, DIY-stores and petrol stations and the customers’ demand for more engagement in Corporate Social Responsibility (CSR) (Siebert, 2012). It was my own ambition to research the topic and add to its understanding.

The overall structure of the study takes the form of six chapters, including this introductory chapter. Chapter two begins by laying out the theoretical dimensions of both, the traditional and the contemporary marketing approaches, and what extent CRM is connected to direct donations. The third chapter is concerned with the methodology used for this study. The fourth chapter presents the findings of the research, and chapter five focuses on the interpretation of the findings in respect of statistics and literature. Finally, the conclusion gives a brief summary and critique of the findings, and includes a discussion of the implication of the findings to future research of this idea.

Throughout this paper the terms B2B and B2C will be used to refer to Business to Business (B2B) and Business to Customer (B2C). CSR will refer to Corporate Social Responsibility and CRM to Cause-Related Marketing.

2. Literature Review

Marketing is omnipresent in today’s world. If we switch on the TV, go to the cinema or enter a store, we are permanently confronted and surrounded with slogans, price reductions, new offers and “vital” innovations. For a company, marketing is important to differentiate themselves from competitors and to create awareness of a product or brand between potential customers, whether it is a B2B or a B2C market (Varadarajan & Menon, 1988). Furthermore, the financial success of a company and its products strongly depends on its marketing ability (Lilien & Rajdeep, 2012).

2.1 Traditional Marketing

The first TV advertisement was aired in the 1950s. This was the first step into a new, more scientific era of marketing. It was the birth hour of the traditional marketing approach. The two dimensions of the early marketing era, in which the capitalistic world has not yet reached the state of globalisation, are the customer and the company.

2.1.1 Definitions of Traditional Marketing

Philip Kotler defined marketing as three different steps which, all together, give a holistic impression about what marketing is. This definition is widely regarded as the most comprehensive basic marketing definition available.

1) Marketing is the process by which an organisation relates creatively, productively and profitably to the marketplace;
2) Marketing is the art of creating and satisfying customers at a profit;
3) Marketing is getting the right goods and services to the right people at the right places at the right time at the right price with the right communications and promotions (Kotler, 1991)

He therefore limits marketing solely to the fact that a company must pursue a consumer to buy its product by promising a satisfying effect after the purchase. The positive effect of the purchase should tie a customer to a certain brand or product.

Another definition is stated by the American Marketing Association (AMA). They define marketing as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large (American Marketing Association, 2007). The AMA hereby adds certain stakeholders besides the customer, like partners and even society. This gives a more contemporary point of view and already gives an impression of the difference between traditional marketing and contemporary marketing.

As one can see from those two very general and widely recognised definitions, marketing seems to be about mastering certain aspects of interaction between company and customer. Those aspects are called the Marketing-Mix or the 4-Ps Strategy.

2.1.2 Concepts of Traditional Marketing

The Marketing-Mix Strategy therefore includes in its basic form Product, Price, Place and Promotion (McCarthy, 1960), while in the extended 7-Ps Strategy three further factors are added, namely People, Processes and Physical evidence. A marketer therefore takes various success factors into consideration and merges them into a “marketing mix”. Actually it is nothing more than a list of marketing factors that need to be considered for an almost collectively exhaustive and mutually exclusive marketing strategy. According to Grönroos, the adding of more dimensions actually negates the exhaustiveness of the paradigm (Grönroos, 1994).

Furthermore, Van Waterschoot and Van den Bulte did find evidence to support Grönroos arguments. They found three flaws in the 4-Ps Marketing Mix Paradigm:

a) “The properties of characteristics that are the basis for classification have not been identified”
b) “The categories are not mutually exclusive”
c) “There is a catch-all subcategory that is continually growing” (van Waterschoot & Van den Bulte, 1992)

Further dimensions like politics, the strategic role of marketing and the aspects of service marketing, as well as interactions in industrial networks, are not considered in the Marketing-Mix framework (Grönroos, 1994). Grönroos also mentions the factorial limits of the traditional marketing approach which uses basically only the Marketing- Mix to establish a strong fit between company-brand and potential customer. The Marketing-Mix is therefore an active approach to target influenceable aspects of an individual (Figure 1).

He argues as early as 1994 that there must be not only a positive perception established, but a real relationship. But a relationship consists of common interests and maybe even a common background. He therefore defines marketing as: “Marketing is to establish, maintain, and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by mutual exchange and fulfilment of promises.” He argues further that the fulfilment of promises is strongly related to trust (Grönroos, 1994).

A company which runs its business according to ethical norms is more likely to be trusted than others (Castaldo, et al., 2009) or, “A merchant will do well if he has a friend in every town”. (Grönroos, 1994). Grönroos and Castaldo therefore refer to the later established “Triple Bottom Line” concept¹ of J. Elkington (Elkington, 1998).

Trust is only gained by repetitive positive actions, for example treating the stakeholder nicely or the keeping of advertised promises. Also the perceived quality of a product is important for the image, since the customer trusts a product with the money he spends on it. More and more customers nowadays are interested in the sourcing of a product, the sustainability and the environmental impact. Hence, a company has to act responsibly towards all stakeholders in order to ensure a strong trustful relationship with the involved parties. Empirical evidence suggests that the greater a firm’s contribution to social welfare, the better the reputation (Bronn & Vrioni, 2001). This is called Corporate Social Responsibility². CSR is understood as the wide range of methods that a company possesses to act with its stakeholders and its environment in a sustainable way (Edacott, 2004). Nevertheless, besides the mentioned flaws of the concept, the paradigm still persists, especially since the basic categories also define marketing events itself. Another implication of the 4-Ps theory is the 4-Cs theory. The 4-Cs is the opposing factor, from the point of view of a customer: Choice, Cost, Convenience and Communication. Schullz states that a customer rather looks for a dialogue with the brand instead of just being pushed to purchase a product (Schullz, et al., 1993). The product itself is a very important communication tool (El Houssi, et al., 2004). Unlike advertisements for example on the radio, which is solely based on audio receptions, a product is something tangible. Potential customers will always want to grab it, feel the quality, read the messages written on it, take a product of a competitor and compare it. The stronger the arguments on one product, the more likely it will be that the customer chooses it over another one. Based on this example we can assume that the product is a very important communicator. According to Grönroos, this product now must transport a message to start a dialogue with the customer to establish a relationship. As mentioned above, a relationship is always based on trust (CSR). Hence, a company must use its products to communicate and advertise the CSR in order to establish a strong and sustaining relationship with its customers.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1 - Traditional approach of generating a strong fit (Siebert, 2012)

No efforts of CSR generate benefits for a company if it is not communicated well. Communication is the organisational counterpart of promotion (Figure 2), or in other words: marketers want to promote, customers want to communicate. Promotion thus simply tries to shed light on the positive success factors of a product, whereas marketing communication tries to establish a two-way dialogue between organisation and customer (Grönroos, 2004).

Shimp stated, based on his interviews conducted within several companies, that marketing communication is one of the critical aspects of a company’s overall marketing performance, as well as a major determinant of the strategies’ success (Shimp, 2011). The objective of marketing communication is to create the final intention to buy the product by provoking a certain brand association. Recent studies show that it is the marketing communication tool which achieves this certain goal (Adkins, 1999). The instrument is used to provoke a certain feeling within the customer which makes him feel comfortable, responsible and satisfied when putting the product into his basket. The aim is to create a strong fit between the brand and the customer. This link can be supported by certain individualisations according to the target group (Kotler & Keller, 2005). The process of creating a certain image follows a strict sequence: creating awareness, knowledge, preference, conviction and finally the purchase of the product (Lavidge & Steiner, 1961).

A very contemporary form of marketing communication is Cause-Related Marketing (CRM) (Samu, 2008). This form of marketing communication addresses one specific need of the customer, self-actualisation. It tries to link a certain cause, whether social, environmental or other, to the customer. It therefore adds another dimension of passively influencing the customer and of provoking a positive buying behaviour towards a certain product or brand. Further insight into CRM will be provided in Chapter 2.2 (Cause-Related Marketing).

Abbildung in dieser Leseprobe nicht enthalten

Figure 2 - The 4-Ps and 4-Cs around the CSR aspect (Siebert, 2012)

2.1.3 Summary Traditional Marketing

As one could understand by now, the traditional marketing consists more of a onedimensional approach. It tries to establish a consumer brand image by using certain instruments and tools (4-Ps, 4-Cs). Not all dimensions are thus included within this approach and hence generate only one part of possible positive influences on the buying behaviour of customers (Figure 1).

Besides all new approaches, some companies still manage to be very successful with just using the traditional approach. Apple Inc. could serve as a good example here. Apple Inc. relies almost solely on the traditional marketing approach (Figure 3) and success proves Apple Inc. right. Even reports about supplier employees committing suicide because of the horrible work environment do not seem to have any impact on the sales figures (Moore, 2012) (Satariano, 2012).Apple Inc. is now the most valuable company in the world (Keall, 2012).

Research shows that the traditional approach is simply not sufficient anymore. Too many forms of differentiation are possible and are in use. New forms of marketing are therefore necessary to gain further market share in already saturated markets.

Figure 3 - Apple Inc.’s 4-Ps Marketing-Mix Strategy (Siebert, 2012)

Abbildung in dieser Leseprobe nicht enthalten

2.2 Cause-Related Marketing

This chapter will focus on Cause Related Marketing as a marketing communication instrument. First, the heterogeneity of definitions of CSR and the concepts used in this field are overlapping and thus will be abstracted. (Antonio Argandona, 2009). Several forms of CRM tools are established in the market place and influence the consumer’s attitude towards a brand or product in different ways.

2.2.1 Definitions of Cause-Related Marketing

The actual, contemporary and accepted definitions of CSR include those of Carroll and Van Marrewijk. Each researcher used different methodologies to create his definition.

Carroll based the definition of CSR on the definition of Bowen’s book in which he interviewed several managers in the United States (Bowen, 1953) (Carroll, 1999). As in 1953, the environmental impact of an organisation on its environment was not part of that time’s contemporary thinking; the environmental aspect was not included within the definition.

“ The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that society has of organisations at a given point in time. ”

- Carroll (1999)

Van Marrewijk tried to merge philosophy altogether with up-to-date literature in order to construct a more holistic form of definition (Marrewijk, 2003). His definition includes Voluntariness, Stakeholders, Social, Environmental and Economic aspects of the business. The environmental aspect is here already included.

The current European policy on CSR states that to fully meet their social responsibility, enterprises...

“ ...should have in place a process to integrate social, environmental, ethical, and human rights concerns into their business operations and core strategy in close collaboration with their stakeholders. ” (European Commission, 2011).

Time does have an impact and there are many factors included in the contemporary definitions. Nevertheless, it has never been mentioned that an organisation should also aim to improve the CSR methods in the future.

Cause-Related Marketing is defined as a process that “formulates and implements marketing activities that are characterised by an offer from the firm to contribute a specified amount to a designated cause when consumers engage in revenue- providing exchanges that satisfy organisational and individual objectives” (Varadarajan, et al., 1988). The recipient of the donation is mostly a non- governmental organisation (NGO) which serves a well-known and popular cause, locally or global. Hence, an NGO and a profit-oriented organisation form a symbiotic relationship. The NGO will be provided with financial or other help, whereas the profit-oriented organisation benefits from being related to the NGO. From a company point of view, CRM is solely used to generate awareness with “relating” the brand to an ethical cause. Creating a positive attitude towards the cause is therefore a side product (Berglind & Nakata, 2005).

However, the definition of Menon and Varadarajan (1988) is limited. It excludes every non-transaction-based contribution from CRM. Sue Adkins argues in her 1999 book “Cause-related marketing: who cares wins”, that Varadarajan and Menon’s definition is only a small aspect of CRM. Adkins explains that CRM establishes a win-win situation between a profit-oriented organisation and a non-profit organisation.

2.2.2 Concepts of Cause-Related Marketing

Many international organisations agree that CRM campaigns influence their reputation and hence their profitability in a positive way (Mullen, 1997). While the world is flooded with advertisements, innovations and brands, companies start to seek a long-term relationship with the customer to find a constant factor they can rely on. The ethical perception of causes is unlikely to diminish or change, so creating a strong fit through a cause helps create such a long-term relationship (Peters, et al., 2007). Thus, contrary to the traditional marketing approach, Cause-Related Marketing reacts onto the perceptions of causes of customers, rather than influencing them. This makes CRM a reactive approach towards a non-influential opinion of the customer (Figure 4).

Figure 4 - Contemporary Marketing Approach (Siebert, 2012)

Abbildung in dieser Leseprobe nicht enthalten

After a profit-oriented corporation has teamed up with an NGO of their choice, a winwin-win situation can be established. The consumer does not only consume in a selfish manner, the NGO profits from more donations and the corporation gains reputation (Andreasen, 1996).

Berglind and Nakata, on the other hand, found that a huge part of CRM campaigns are actually not what they seem to be. They base their findings on the watchdog group “Think Before You Pink” (TBYP) (Think Before You Pink, 2012) and criticise several CRM campaigns of multiple companies. TBYP asks the same questions customers would ask and hence conclude on their findings. According to Berglind and Nakata, most of the CRM campaigns are nothing but “[...] a clever manipulation to enrich a corporation’s coffers”. They point out the Yoplait Inc. (Yogurt) campaign “Save Lids to Save Lives”:

“A woman would have to eat three containers of Yoplait every day during the fourmonth campaign to raise $36 for the cause [...]” (Think Before You Pink, 2012).

CRM campaigns thus have to be seen from a critical vantage point. The following paragraph abstracts related concepts to provide a clear understanding of CRM (Figure 5).

Social Marketing is regarded as the sum of marketing instruments which are used to reach social objectives (e.g. Marketing-Mix). Usually used by non-governmental organisations or social departments of profit-oriented organisations (Business Dictionary, 2012).

Corporate Philanthropy, rarely called “strategic philanthropy”, relates to all good deeds of a company towards a cause. As Porter states, it is not always an altruistic approach and widely used as a tool to reach corporate objectives (Porter & Kramer, 2002).

Sponsorship is, as Cornwell and Coote state, “an investment, in cash or kind, in an activity, in return for access to the exploitable commercial potential associated with that activity” (Cornwell, et al., 2008). This is not an altruistic relationship, but usually for both sides an anticipated business enabler. The FIFA World Championship of Football is a profit-oriented organisation which provides its sponsors with entry to their customers and clients in exchange for a mostly monetary transaction.

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Figure 5 - Profit-Cause relation of popular CSR instruments (Siebert, 2012)

Cause-Related Marketing can be carried out in many ways. The first four can be directly related to the traditional marketing approach:

Advertising: A company aligns itself with a fitting cause of a fitting non-profit organisation (NPO) and uses its own advertisements to communicate the cause’s message. Fiat advertises the cause of Nobel laureate Aung San Suu Kyi and in exchange gets free publicity on European TV (Farsetta, 2009).

Public Relations: A company uses press and public attention to communicate their partnership with an NPO. Krombacher beer engages actively in press conferences and in congresses in Germany to advertise their own foundation to preserve the rainforest (Krombacher GmbH, 2012).

Sponsorship: A business helps a particular programme or event. Hoffmann-La- Roche Ltd. sponsors AIDS-walks worldwide and doubles up the donations gathered by employees (Hoffmann-La-Roche Ltd., 2012). Microsoft and its former CEO and philanthropist Bill supports any NGOs which fulfil certain requirements with free software solutions (Microsoft Corporation, 2012).

Licensing: A business or organisation pays licensing fees to an NPO to use their logo on their advertisements or products. Spanish football team F.C. Barcelona used to pay €1.5 million to UNICEF to wear their logo on their jersey (Alonso, 2012).

Co-branding: Corporation and NPO try to raise funds together to build brand awareness. Coca-Cola Ltd. uses the WWF logo on its products (WWF Canada, 2011).

Facilitated Giving:An organisation facilitates customer donations to causes. TESCO Plc. provides donation boxes where people can donate their change (TESCO Plc, 2012).

Purchase-Triggered Donations: A transaction-triggered donation takes place if a customer uses his credit-card or buys a product. Whenever a user of American Express uses his credit card, a donation will be transferred to one of the card owner’s pre-selected causes (American Express, 2012).

2.2.3 Benefits and Risks of Cause Related Marketing

Profit oriented organisations have a reason to engage in Cause-Related Marketing. They benefit from an improved employee productivity and enhanced employee morale and loyalty. As already mentioned it helps to boost the company’s public image and distinguishes it from competitors. And finally, Cause Related Marketing can directly enhance sponsored sales and the brand (Till & Nowak, 2000).

On the other hand, a company is forced to take risks when engaging in CRM. Evidence points out the difficulty of overcoming impediments while trying to merge social and commercial objectives (Polonsky, 2001). Roy William John Edacott (2004) found that citizens of different countries respond differently to the same cause. Hence, the cultural background of the targeted group, as well as the right fit between corporation, cause and the customer, can be obstacles and failure in one factor potentially leads to failure of the whole campaign (Deborah J. Webb, 1998).

Cause-Related Marketing only works if the customer perceives the connection between cause and company as trustworthy. He therefore will evaluate the fit by comparing the image of the company and the cause provided by the NPO. If a strong fit is given, the customer then might choose the product. If he perceives the combination as a weak fit, and thinks the company is exploiting the good cause for marketing and profit purposes, he might develops a negative attitude towards the brand (Meffert & Holzberg, 2009). A pharmaceutical company can hardly support a cause against animals being used in experiments. But the company might teams up with a cause that supports disabled children.

Evidence found showed that the attitude towards PepsiCo worsened in Spain after being acquainted with the contents of a cause marketing campaign. PepsiCo teamed-up with Médicos sin Fronteras (MSF)³. PepsiCo offered to donate 1% of its net sales of one month to MSF, sent out flyers and Christmas cards, founded an activist group and told its employees to spread the word. The campaign backfired since Spanish customers felt over-customisation and perceived the slogan “1% RIGHT NOW” would be a sidekick to the 0.7% Platform⁴ (García, et al., 2003).

The corporation must also be aware that CRM is a long-term strategy and it can be costly in terms of negative publicity and image damage if it pulls out of the partnership too early (King, 2004). Hence, a strong fit between the business of the company and the cause of the NPO must be given.

The synthesis of this chapter shows the interlink-age of several terms that play a role in a successful CRM campaign. If one of the terms is less taken care of, the failure of the campaign is almost inevitable. Figure 6 shows the important factors of an effective CRM strategy as mentioned in this chapter: Culture, Company, Cause and Customer.

2.2.4 Summary Cause-Related Marketing

The definitions of cause-related marketing show how the topic evolved over recent years. New approaches of CRM have been included within the definition and show that more tools are used to approach customers. These instruments are advertising, PR, sponsorship, licensing, co-branding, facilitated giving and transaction-based donations. But besides the estimated benefits like customer loyalty and increased sales, a company must be aware of the inherited risks. Since CRM is a very new approach, not all negative aspects have been discovered yet. On the other hand, we have not mentioned the “feel” that customers can emphasise towards a cause they like to support (Steve Worthington, 1998). A major flaw is the impact of the cultural background on the buying behaviour and perception of causes by the customer. The next chapter will shed more light on the decision process and the impact of culture.

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Figure 6 - Influential factors of a CRM campaign (5 C's) (Siebert, 2012)

2.3 Cause Affinity

A customer goes through a decision-making process before he chooses a certain product. Within the different stages in this process he evaluates all sorts of connections between brand, image, quality and so on. The customers therefore will also analyse the fit of a company and its cause. Also, a good cause is also not always a good cause, since in certain regions a cause might have less or even a negative impact on the majority of people. This chapter will analyse the most important steps within the decision-making process and analyse the cultural influence on the perception of a brand. The attitude and perception of a cause is called “Cause Affinity” (CA). In this chapter we will first analyse customer behaviour and then turn to Cause Affinity.

2.3.1 Customer Behaviour

A customer entering a store undergoes a certain process in which he evaluates certain aspects to find the most fitting product with the highest value added. The different behaviour towards the products is categorised into four different customer types:

Rational customer: Gathers information before acquiring the product Unconscious customer: Already has an affinity towards a brand or product (e.g. favourite car brand) Learned customer: Decisions are based on habits (e. g. cigarette brands) Social consumer: Considers social issues like status, lifestyle and beliefs (fashion brand) (Hamlin & Wilson, 2004)

Hamlin states that the customers, according to their type, allow causes to influence their decision to different extents. The rational customer perceives brands as luxury goods and a certain cause is not a trigger at all. It therefore would not prevent the buyer from switching to another brand/product. The unconscious and conditioned (learned) customer is not influenced by causes since his decision is made before he enters the store (Hamlin & Wilson, 2004). This leaves the social consumer as the only option which can be influenced by a cause. The social consumer is status focused and his lifestyle is a predominant trigger. The social consumer engages strongly in self actualisation and is ready to pay a premium price for the product of his choice. Not only cause-marketed products are considered a lifestyle product, but also premium-priced Apple Inc. products (Figure 3) (Yalch & Brunel, 1996).

Abraham Maslow, one of the most important researchers in the field of humanistic psychology, created a ranking of human needs based on the importance of fulfilling these needs (Figure 7) (Maslow, 1943). According to Maslow, self-actualisation is the least important need of a human being. Only if all other basic needs are fulfilled, does self-actualisation gain importance. Hence, time for social engagement and the right spending power are necessary. Without the financial background to pay a premium price for lifestyle, CRM products rely solely on the idealism of a few. This assumption is supported by a surveys conducted in the U.S., U.K. and Germany in 1980 which shows that self-actualisation has increased as a result of economic prosperity (Plummer, 1989). Generally speaking, CRM is more profitable in wealthier regions, since enough spending power is available.

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Figure 7 - Maslow's Pyramid of Needs (Maslow, 1943)

Maslow’s theory is based on the western, capitalistic culture. Regions with different needs and values embedded in their culture do perceive self-actualisation differently. Nevis found that self-actualisation in China is by far not as important as it is in the western hemisphere. The theory of Maslow therefore shows limit of the pyramid and has to be used with caution (Nevis, 1983). Since it fits in the regional background of this work, the pyramid of needs is considered appropriate.

Finally, the available spending power does not yet determine the affinity toward a certain cause.

2.3.2 Definitions of Cause Affinity

The Oxford Dictionary defines “affinity” as “a natural liking for and understanding of someone or something” (Oxford Dictionaries, 2012). Exchanging “someone or something” with “cause” directly hands the definition of CA.

2.3.3 Concepts of Cause Affinity

Cause affinity was first mentioned when American Express and the World Wildlife Fund (WWF) teamed up and announced a WWF “affinity card” (Aster Mekonnen, 2008).

The natural liking for a cause can be influenced by two factors. The personal and family background of a person The cultural background of a person Personality is defined as “the combination of characteristics or qualities that form an individual’s distinctive character” (Oxford Dictionaries, 2012). Finding out all the possible combinations of all characteristics for each potential individual is not efficient.

Undifferentiated marketing⁵ focuses on the broadest and best analysed target group to create a dialogue with as many people as possible (Brooksbank, 1999). Too many unknown variables are given which finally shape the personal perception of a cause. This leaves companies with evaluating and researching the cultural backgrounds.

The cultural perception of a region is much easier to predict than the personal affinity. Culture is defined as “the ideas, customs, and social behaviour of a particular people or society” (Oxford Dictionaries, 2012). Companies therefore focus on analysing the people’s perception on causes in order to maintain a bigger and homogenous target group.

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Figure 8 - Strong-fit diagram (Siebert, 2012)

For example, Shriners⁶ perceived a travel brochure with an endorsement by their religious leader as more positive (Macchiette & Roy, 1992). This shows a homogenous target grouped addressed with a common affinity and its positive effect.

A negative aspect of focusing on the cultural background is the fact that the personal experience is predominant. For example, Bavarians are famous for their beer and beer-loving mentality, but a person who had negative experiences with alcohol in the past will still not respond to advertisements or will even perceive them as negative. In contrast to that, a person with such an unfavourable background related to alcohol might support an alcoholic cause even more strongly. The relatedness of cultural and personal background is shown in Figure 8.

As mentioned before, the cultural background still defines the biggest homogenous target group and even the lifestyle decisions are influenced by that. Endacott (2004) found that citizens of different countries respond differently to the same cause. His evidence shows that a person chooses the cause of his credit card according to geographic factors. These factors depend on mostly social injustices within the region. Citizens of the United Kingdom perceive the help of children worldwide, the fight against cancer and the preservation of art as their most important causes (The Guardian.co.uk, 2010). In the USA, national welfare organisations like United Way, Salvation Army, AmeriCares or America’s Second Harvest (Barrett, 2012) predominate. A Ukrainian customer perceives a cause helping orphanages and street children education as important (EveryChild.org.uk, 2011). This can be an indicator of the cause affinity, since Germany is a country with fewer internal social problems than for example the USA (The Economist online, 2011). German citizens might look to help outside the national borders. The German organisation “Spendenrat” analyses each year all donations made to German charity organisations (Figure 9). In 2011 over 74% of all donations were donated to causes with humanitarian aims (e.g. natural disasters), whereas in 2006 the figure was over 80%. The trend further shows an increase in animal welfare (e.g. WWF) donations (2011: 5.2%) as well as culture-related (monument protection) donations (7.5%) (Deutscher Spendenrat e. V., 2011). The figures show that there is a change in trends in the preferences of donations. Hence, companies might need to adapt to changes that take place.

Donations in Germany are broadly stricken but do focus on humanitarian help like natural disasters. The affinity towards the same causes should hence be reflected by the perception of what causes corporations should support.

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Figure 9 - Donations from private households 2006 & 2011 (Deutscher Spendenrat, 2011)

Some notable facts do exist about the German donation market. German citizens do not donate privately as much as citizens of other European countries (Charity Aid Foundation, 2011). The responsibility of financial aid in Germany lies, according to studies, mostly in the hand of big corporations. Further, Germans prefer to donate their time, in the form of charitable work, rather than their money (Antonio Argandona, 2009). The German citizen also “donates” via the governmental development aid programme, which is financed by taxes. The German government donated $11.98 billion (bn) in 2009, which is the third highest figure worldwide as shown in Figure 10 (USA $28.67 bn; France $12.43 bn).

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Figure 10 - Official development assistance in 2009 in billion $ (OECD.org, 2009)

Further, all the influences, whether personal or cultural, also influence the decisionmaking process. The basic process can be considered as:

1) The desire to help
2) Monetary or timely considerations to evaluate if donations are possible in the first place
3) Cause-related considerations to evaluate which cause a person wants to support
4) Organisation related considerations to evaluate which organisation serves the donator best
5) Donation-related considerations to assess finally how much a person wants to contribute, how a person wants to
contribute and how often a person wants to contribute.

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Figure 11 - The direct donation decision-making process (Siebert, 2012)

All of the mentioned steps (Figure 11) inherit obstacles and hurdles like the obtaining of information, financial assessment and planning, research on organisations and so on. Many of the steps could pose such a barrier that people, in one phase or the other, would back up and decide not to donate. Dawson states that when a purchase is considered, one of the biggest influences is how convenient a product or process is (Dawson & Kim, 2009). Thus, the easier it is to donate, the more convenient it gets, and the more likely it might be to donate toward that certain cause.

Cause-Related Marketing therefore offers a convenient substitute to direct donations. The decision-making process for cause-marketed products is much shorted and hence only includes:

1) The desire to help
2) Monetary considerations to evaluate how much money can be devoted to a cause
3) Assessment of the strong-fit diagram to evaluate the strengths of the fits (Figure 8)
4) Purchase of cause-marketed product
A few assumptions have to be made to support the argumentation:
a) The customer has established a strong-fit with a brand due to former purchasing experiences
b) The cause offered has at least a weak fit with the customer

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Figure 12 - The cause-marketed products decision making process (Siebert, 2012)

Based on that assumption, purchase-related considerations can be diminished. The process is automatised and the decision making process is eased by former established strong fits with the brand of choice. This makes the purchase much more intuitive and thus far more convenient than direct donation. CRM hence gives customers the option to decide between donations or cause-marketed products.

From what we know, the German population expects their employing firms and other companies to engage in and live CSR. We also know the causes which are supported by the German population by donating money, goods, or time. It is also known that the Germans do spend less than other countries due to the fact that they are involved in outward governmental aid as well as non-monetary donations. But it is not known if the privately donated causes are expected to be equal with those of companies and we don’t know if the engagement of customers in cause-marketed products will decrease monetary donations even further. Based on those gaps two hypotheses can be formulated.

Furthermore, it is hard to gain more market share in almost completely saturated markets. The cost per new customer tends to be immense (Reicheld & Schefter, 2000) and as Cooper and Kaplan state, the marketing costs rise directly proportional to the saturation of the market (Cooper & Kaplan, 1988). A new marketing tool could be a distinct capability to survive in a hyper competitive market.

Hypothesis 1: German customers who buy cause-marketed products perceive the purchase as equal to a donation in the form of money, goods or time.

As we saw above, German society easily changes the donation behaviour. Hypothesis 1 could be an indicator of whether Germans would donate even less than they already do, since cause-marketed products could serve as a substitute for existing donation methods. This could have future implications for companies. If customers choose cause-marketed products as their way to contribute to charity, CRM would be a much more powerful marketing tool than expected today.

Hypothesis 2: German customers expect companies to support the same causes that they donate to themselves and do not expect them to support different causes (Cause Affinity).

If German consumers expect companies to support their own causes, then companies would have to refer to the “Spendenrat” website (or similar institutions for countries other than Germany) to gather information about changing trends in charity.

This would help non-profit and profit-oriented organisations to increase their benefits from the campaign. Otherwise, if the study indicates that German customers expect companies to provide help for different causes, companies would be forced to intensify their market research in the future.

2.3.4 Summary Cause Affinity

Cause-related marketing is an important part of the modern marketing approach. Globalisation, fast changing trends and emerging countries are creating many obstacles for a good marketing strategy. The conceptual framework (Figure 8) shows the relation between the traditional marketing approach (Figure 1) and the contemporary one. The fast-changing environment makes it hard for companies to anticipate trends based on the strong fit of customer and company. Here, the shopping decision of a customer almost solely relies on the “feel” towards a brand or company. To differentiate their products from each other, companies choose to differentiate themselves. CEO’s try to act responsibly as a company and therefore make it easier for potential customers to identify themselves with the organisation. Culture has a huge impact on how people perceive Corporate Social Responsibility and thus the right way of communication must be chosen, and the responsibilities have to be in alignment with the cultural background of a certain region. If a company chooses to market their causes that are part of the CSR, they engage in Cause- Related Marketing. In-depth knowledge of the cultural background is important and a lack of insight potentially leads to the failure of the campaign (e. g. PepsiCo.). Since customers have a different perception of causes according to the local problems and historical background, analysing the Cause Affinity is crucial for the success of the cause marketing campaign. Cause Affinity is partly influenced by the personal background (family, friends, personal circle), as well as by the perception of the

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¹ Elkingtons Triple-Bottom-Line states that a company which performs well not only in an economic way, but also in a social, environmental and sustainable way, will always get financial benefits and higher profits in return (Elkington, 1998).

² Responsibility is defined as “ the state or fact of having a duty to deal with something or having control over someone ” (Oxford University Press, 2012).

³ MSF is the Spanish subdivision of Médecins Sans Frontiéres (Doctors Without Borders). The organisation provides medical assistance to poverty stricken regions (Médecins Sans Frontiéres, 2012).

⁴ “The so-called 0.7 question is a much extended grievance within the non-profit organisations in Spain. It demands that the Public Administration sets aside 0.7% of its overall budget to support development-related projects in Third-World countries.” (García, et al., 2003)

⁵

“Sales-growth strategy, that ignores market segment differences and attempts to appeal to all

prospective customers with a single, basic product line through mass advertising and distribution” (Business Dictionary, 2012).

⁶ Shriners are a part of the freemasonry movement with over 340.000 members. The organisation is headquartered in Tampa, Florida (Shriners International, 2012).