Impact Of Corporate Citizenship On Consumer Decision Making
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Impact Of Corporate Citizenship On Consumer Decision Making
Introduction
Corporate citizenship may be defined as moral and personal beliefs that affect the way people make decisions. The concept involves integrating ethical and social responsibility into business or any other area under study. Corporate citizenship has been raising a lot of eyebrows lately because there are plenty of socially responsible consumers out there who would like to see that these elements are part of the products or services they purchase (UDEL, 2007)
During the year 2006, there was one of the most serious attempts to include corporate responsibility into consumers’ decisions. There was a campaign dubbed ‘product red’ whose purpose was to sell some products like American Express, Giorgio Armani and Gap clothing. All the proceeds got from the campaign were to be sent to the Global Fund which uses its revenue
to tackle problems facing the world’s poorest countries like tuberculosis, malaria etc. There were very noble intentions behind the idea; consumers would benefit by purchasing designer items at affordable prices while the community at large would also benefit through aid. But the results were a contradiction to al the heavy expectations held. There were no profits recorded as sales registered were quite low. It seems that the companies were missing something because it was clear from the results that the consumers could not care less about their noble coz even despite the fact that one of the most well known rock artists had been invited to perform there; Bon Jovi of the U2 band.
This revelation has shown that there are some underlying issues that need to be addressed by companies when considering corporate citizenship as an aspect that influences buyer behaviour. When
consumers are asked about their opinion concerning corporate citizenship, they quite easily assert their commitment to the purchase of goods or services that are socially responsible. However, practically, this is not what happens, most attempts by companies to engage consumers have failed miserably. So one needs to address the issue of whether consumers really value corporate citizenship and if so, how can this be incorporated into the day to day decisions of various Companies.
How corporate citizenship and decision making can be merged
Corporate citizenship among consumers is usually displayed in two distinctive ways;
through opinions
through behaviour
Opinions are usually the preferences that consumers claim to have when asked about their sentiments towards corporate social responsibility, while behaviour is measured by the outcome of
this opinion. Activity which is synonymous with behaviour is usually lower than opinions expressed.
There were numerous instances of these differences recorded over the past few years. For example Starbucks Corporation introduced a new brand of coffee for fair trade in 2001 but this brand has registered very low performance. Such indications are usually topped up by the low percentages that socially responsible brands in most markets have. Research has shown that majority of the products that integrate ethical and social standards usually represent about 1-2% of the total market share as consumers are usually reluctant to purchase them. (Grant, 2005)
Corporate citizenship has also shown few practical results through some of the Statistics registered in the past. Consumers disregard ethical rules when they buy counterfeit goods. During the year 2006, the
economist showed that China has made close to three billion dollars through the sale of pirated DVDs yet at the same time only two hundred and seventy million dollars had been made for the purchase of genuine movies. If those same consumers held the belief that there should be corporate citizenship, then they would have had the respect for personal ownership and would not have bought counterfeits.
Plenty of surveys have been conducted and they indicate the opposite. During the year 2005, there was a survey done by the Global Markets Institute where they discovered that three elements of corporate citizenship receive attention from fifty four percent of the consumers were. Some of these include;
fair trade products
organic products
environmentally friendly products
The polls were carried out in many parts of the world like the US, UK, Australia and in parts of
Asia. Another opinion poll conducted by Market and Opinion Research revealed that close to thirty percent of consumers in the United Kingdom would like to see more ethical aspects included in the manufacture and sale of products or services. (McGahan, 2004)
The numbers show that consumers are saying one thing and doing the other. As the phrase goes; they are not willing to put their money where their mouth is. Most consumers will view advertisements about some irresponsible behaviour and vow not to use the product, but when they go to shopping malls or stores, they still end up buying those items. The truth of the matter is consumers will always settle for the cheaper item. Most of these products or services that have ethical connotations to them usually cost more than the other alternatives. So there is a need to address the underlying issues behind this behaviour.
Two reasons could be the cause of these distinct differences between word of mouth and practical behaviour. Consumers need to be more knowledgeable about the importance of corporate citizenship. On top of that, businesses need to incorporate approaches to corporate citizenship that will yield results
Studies have been done to measure the effect of corporate citizenship on consumer purchases. One such Company chose six countries to investigate. They dealt with two aspects of corporate citizenship, that is the environmental aspect and the manufacturing aspect. The Company measured consumer behaviour in relation to mercury batteries and athletic shoes. The latter was centred on the environment while athletic shoes centred on manufacturing practices since they had been made by child labour in a far off country. It was found that when consumers were given all the relevant
information about the two products, that is their features, functions and socially responsible features associated with them, only a small percent could recall issues related to corporate responsibility. Most of the consumers could remember what functional features the products had for example how the athletic shoes had been made with an absorbent interior lining for comfort and absorption purposes. But most of them could not remember that the athletic shoes had been made by child labourers. This indicates that even when consumers had been made socially aware, they simply chose to ignore the facts and went ahead to purchase the items. Prices, brands and features were the important things that those consumers considered. Some of the features incorporated during these research included; (UDEL, 2007)
Athletic shoes
AA batteries
Social attributes
Was
there child labour while manufacturing the shoes?
Are there some recyclable materials in the battery?
Did the workers get minimum wage for their work?
Do the batteries have mercury-cadmium?
Are conditions at the industry acceptable?
Are the packages recyclable?
Do the workers belong to a union?
Do the batteries create hazardous waste in the process of production?
Is there information about safety during disposal?
Functional attributes
Shock absorption properties
Storage life
Ankle support
Useful life
weight
Price
Sole durability
Brand
Fabrication material
Rechargeable
price
Money back guarantee
Shoe’s brand
Expiry date
Ventilation
Tester
Country of origin
Country of origin
Similarly,
research was done by Amnesty International in Hong Kong and Australia. They asked students to recall elements of corporate citizenship about certain products and only five percent were able to do this. The rest simply focused on functional features that could directly benefit them. The findings indicate that even when consumers have sufficient information to follow corporate citizenship principles, they still did not pursue that line. They neglect those facts and continue to purchase products that may be deemed corporately irresponsible. (McGahan, 2004)
Relevance of corporate citizenship
One must ask themselves does corporate citizenship have any part to play in the decision making process of consumers and if so what can be done. A research was conducted by the Corporate Social Responsibility Group. They did the research through Discrete Choice
Model. Here, consumer behaviour is measured by actions rather than opinions. They measured the number of people who purchased items that were deemed as socially responsible. It was achieved through informing the consumers about all the aspects associated with certain products, the effect of this information is then measured through purchases. It was found that there are some consumers that take corporate citizenship very seriously. But their numbers are minimal and it is difficult to predict what kind of demographic group they come form. There are socially responsible members among the Koreans, Australians, Spaniards and people in Turkey. The elements cut across age, gender or education status. Many surveys done previously indicate the opposite, they highlight corporate citizenship as a very big factor in consumer decision making but these are not the same results obtained
when practical purchases rather than opinions are measured.
The group doing the research created products that had different levels of certain important features. Some products had good functional attributes but very low social attributes while others had the opposite. It was found that only ten percent of the people under research purchased the items with good social attributes but poor functional attributes. At the same time, it was found that about fifty percent of the purchases went to items that had poor social attributes but good functional features. (Grant, 2005)
However, even those ones which were considered as socially responsible only put that quality second. In real life scenarios, consumers who value corporate citizenship will first consider usability of the product, then if that has been taken care of, they can choose a product that had been made
using socially responsible methods if there is a choice between the latter and one that does not have those qualities. Therefore, we can say that it is difficult to find a consumer who will consider corporate citizenship as the only element in the purchase of the products. This will only be considered ion combination with product quality.
Corporate citizenship among people of the world
A research that interviewed people about the kind of perceptions they had towards corporate citizenship in the world classified different countries into three dissimilar areas
developmental realism
social dependency
economic rationalism
It was found that most people coming form China, Turkey and other parts of Asia attributed their lack of concern for corporate citizenship to economic developmental goals. (Developmental realism) There was a Turk who was
quoted saying that he did not care about adhering to strict labour laws because all that mattered to him was that he made money for his boss and that his boss gave him some of those profits. Most people in Asian countries argue that they are too poor to prioritise issues like ethical and social responsibility of companies. They are simply looking for a way to make money and to purchase items at an affordable price. (UDEL, 2007)
People in the United States, Australia and some parts of Spain were mostly found to posses the economic rationalism quality. Most of them argued that the reason why they did not prioritise corporate citizenship during their purchases was because they felt that all the items which they purchase should be bargains. They believe that no matter how strong one’s sentiments were about corporate citizenship and ethical issues; it was not worth paying
more for it during purchases. There was one consumer who claimed that he was aware that some employees in Nike were working under poor labour laws. But this American confessed that all other companies are doing the same and it was not worth it for him to sacrifice a perfectly good shoe for that coz. He believed that Nike was just trying to withstand pressures within the shoe manufacturing industry because if they did not incorporate that aspect into their manufacture then most people would have to pay more for their products and they would be out-competed by rivals.
Swedes and Germans were seen to depict elements of social dependency. Most of them felt that corporate citizenship did not affect them directly. Instead, they lay the blame on their governments. One respondent was reported saying that he is not in the position to do anything about it so why should he
consider it as a priority. Most of those people believe that the government should be the one to tackle issues of ethics during the manufacture and sale of products. They believe that their responsibility is simply too cater for their own needs while the government takes care of the rest.
What companies can do to incorporate these findings
The researches and findings demonstrated above can be used by managers to take proactive roles and approaches in promotion of consumer behaviour. There are five things that need to be done by these managers;
choose social issues wisely
don’t rely on surveys alone
merge social responsibility with function
communicate issues of social responsibility to consumers well
maker the consumer willing to change
Choosing social issues wisely
Most managers simply do not do their homework
when it comes to selection of corporate responsibility issues to be incorporated into their products and services. Issues chosen should have close resemblance or linkages to the product on offer. One should also deal with one issue at a time for example offering recyclable packages only or offering part of the proceeds gained from the sale of a product to only one charitable coz. (McGahan, 2004)
an example of a campaign that did not adhere to these principles was the live 8 concert. It was held in order to help those who may be suffering from AIDS, poverty and Global debt. This campaign did not do very well because there was little if any relation of the issues being addressed to music. On top of that, they wanted to tackle too many problems at the same time and this backfired.
Don’t rely on surveys alone
It is quite crucial for managers
and other company stakeholders to make sure that the kind of corporate citizenship modes chosen will yield results. Contrary to what people think, consumer surveys may not always depict the truth. It does not cost the consumer anything to lie. Most of them may claim to care about their environment or about a certain charitable coz but these answers seem socially responsible to consumers; they may not necessarily be the truth of the matter. (Grant, 2005)
Companies should instead measure consumer preference for corporate responsible goods practically. One Company that implemented this strategy was the Home Depot Company- it sells timber. The Company informed its consumers that part of the timber it was selling had been certified by the Forest Stewardship Council. They ascertained that the timber was not from Forests that have old growth. They raised the price of that
timber by two percent and found positive responses to it. About thirty four percent of the consumers felt that this was socially responsible and went ahead to purchase the item. Home Depot used those results to extent that aspect of corporate responsibility to other stores under their ownership.
Merge social responsibility with function
Managers should always remember that most consumers purchase items in order to fulfil a certain need or want. The aspect of corporate citizenship only comes in when the customer feels that the good to be purchased will meet their needs. In this sense, social responsibility will merely be useful as a bonus to a well made out product. Companies should make sure that they merge the two concepts. Corporate citizenship will only work for a Company when they show clear links between the two. For example the ‘Product
red’ campaign mentioned earlier did not do very well because people were unable to see the connection between Giorgio Armani’s suits and conquering AIDS. (McGahan, 2004)
A Company that effectively merged these two concepts was Body Shop; they were trying to spearhead a campaign against animal testing through the illustration of beauty as a vain endeavour. This project was successful because there was a clear link between the two aspects of social responsibility and function.
Communicate issues of social responsibility to consumers well
Companies must understand that consumers have little knowledge about corporate citizenship. It is up to them to tell clients about these issues in languages that relate to them. People will acquire knowledge and interpret it depending on their cultural institutions. Companies should only deal with corporate
citizenship issues that will be understood by consumers of a particular area. For example, in countries where there is a lot of concern for child labour, managers should pick this issue up. They should not try to address matters concerning labour rights, wages and unionisation when the most pressing issue is child labour.
Since China is notorious for counterfeits, a campaign done in this country should be totally different from one done in a country like the US or in Europe. Corporate responsibility aspects should befit that location. (Grant, 2005)
Make the consumer willing to change
Companies should put in mind that it is not their responsibility to make the consumer concerned about charity and social issues. They should market the product in such away as to depict the benefits of the product and then bring in social elements s an
afterthought. For example in the sale of energy meters, consumers were informed about the technological benefits that the energy meters would bring and then afterwards they were told abut the effect of such purchases to the environment and overall energy consumption in the country. In this sense, consumers were convinced that this product would help them while at the same time have some environmental benefits.
Conclusion
Corporate citizenship is a concept that may be common in some members of society while it may be absent in others. It is up to Companies to make sure that they asses the motivating factors behind corporate citizenship. They should realise that mass surveys do not always depict the truth. It is crucial for a given Company to relate opinions of consumers to behaviours then come up with a strategy to capture those sales. Corporate
citizenship brings out the best results when it has been tied up with functional value for the customer. No matter how much a consumer feels they value corporate citizenship, they will not sacrifice this for a substandard good that will not fulfil their needs. (UDEL, 2007)
Reference
UDEL (2007): Understanding consumer behaviour; Retrieved from http://www.udel.edu/alex/chapt6.html accessed on 7th December 2007
Grant, R.M. (2005): Marketing Analysis and marketing strategy; Blackwell Publishing Ltd., Oxford (U.K.)
McGahan, A. (2004): How Industries Evolve – Principles for Achieving and Sustaining Superior Performance”. Harvard Business School Press, Boston,
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