1 COPENHAGEN BUSINESS SCHOOL M.SC. IN BUSINESS, LANGUAGE AND CULTURE Making more of your Cause Related Marketing Developing a Strategic, Integrated Approach A MASTER THESIS BY ANNA KATRINE LAUTROP STOLFER OCTOBER 2008 TAPS: 181,383 SUPERVISOR: KARIN TOLLIN
2 EXECUTIVE SUMMARY Based on an extensive literature review of the concept of Cause Related Marketing (CRM) and preliminary research with a multinational company operating in Denmark, the need for a more strategic and consumer oriented approach to CRM was identified. This thesis examines how Danish companies can develop and utilise strategic and sustainable CRM to optimise both consumer and company benefits. The thesis takes a dual perspective and tries to answer the main research question by answering three sub-questions from both a consumer and a company perspective: What CRM is; how to engage in it; and why to do so. Qualitative empirical data was collected according to the Means-End Chain theory in order to reveal consumers motivations for engaging in CRM. It was found that consumers engage themselves in CRM to obtain one or more of eight different values. The values are either internally oriented and related to the consumer s own gain, identity and appearance or externally oriented and related to the cause, society and its norms. Further, a clear distinction can be made between CRM positive and CRM negative consumers. It is suggested that companies should focus on the CRM positive consumers in their CRM efforts as negative consumers are opposed to the very core of CRM, the combination of charity and consumption. Further, it was found that consumers are very focused on corporate social responsibility (CSR) as a necessary fundament for CRM. CRM without CSR provided little value to the consumers, and companies are not recommended to pursue this approach. Additionally, consumers also value the company s honesty and integrity highly, and it can be determining for CRM success. Seen from a company perspective, CRM can provide several benefits, e.g. increased sales, stronger brand, motivation and attraction of employees, and enhanced corporate image and clout. Furthermore, this thesis proposes a strategic choice of CRM cause, so the success of the cause will contribute to the success of the company and thereby reinforce the benefits for both parties. Finally, the thesis operationalises the integrated and strategic approach to CRM, it suggests. Based on the framework of Smith and Colgate (2007), it is suggested that companies should support the consumer s value creation in relation to CRM. This can be done trough e.g. information, the actual product, and the purchasing and consumption environment. The approach suggests that different types of consumer values require different types of support. The thesis concludes that CRM can provide both companies and consumers with great benefits. It is, however, crucial for companies to approach the concept in a holistic and integrated manner to achieve strategic, sustainable gains.
3 TABLE OF CONTENTS TABLE OF CONTENTS 1. Introduction Defining Cause Related Marketing Research Question Delimitations Knowledge of Science and Methodology Purpose of the Thesis Reasoning Approach Research Design The Documentary Method The Questioning Method Structure of the Thesis Literature Review Consumers in CRM Characteristics and Involvement Products and Donations Ethical Concerns The Cause Companies in CRM Objectives Strategic versus Tactical CRM Developing a CRM Campaign The Right Cause Summing up Theoretical Framework Means-End Chain Theory The Use of MEC Theory The Laddering Technique Analyzing MEC Data Critique of the MEC Theory Values in a Branding Context Summing up Cause Related Marketing in a Consumer Perspective Methodological Considerations Reliability and Validity Findings of the Interviews Value Analysis Externally Oriented Values Internally Oriented Values Positive versus Negative Respondents Negative Group Positive Group Hierarchical Value Maps for the Groups Summing up...43 i
4 TABLE OF CONTENTS 6. Cause Related Marketing in a Company Perspective Targeting CRM CRM in a CSR Context Corporate Motivations for CSR Involvement Increased Sales and Market Share Increased Ability to Attract, Motivate and Retain Employees Strengthened Brand Positioning Enhanced Corporate Image and Clout Strategic CSR and CRM Succeeding with CRM Information Products Interactions with Employees and Systems Purchasing and Consumption Environment Ownership/Possession Transfer Summing up Discussion of Findings An Integrated Approach to CRM The Integrated Approach compared to Existing Literature An Expert s Evaluation of the Findings Pilgrim and Médecines Sans Frontières Summing Up Conclusion Further Research Bibliography Literature Internet Resources Overview of Appendices ii
5 TABLE OF CONTENTS OVERVIEW OF FIGURES Figure 1: Structure of the Thesis...10 Figure 2: Means-End Chain Theory...19 Figure 3: Example of Means-End Ladder...21 Figure 4: Hierarchical Value Map...32 Figure 5: Four-Part Model of CSR...47 OVERVIEW OF TABLES Table 1: Objectives for a CRM campaign...14 Table 2: Most Common CRM Frameworks...15 Table 3: Summary of Academic Literature...17 Table 4: Overview of Respondents...26 Table 5: Structure of Interviews...27 Table 6: Overview of the Negative and Positive Groups...40 Table 7: Consumer Value Creation Matrix for CRM...59 iii
6 INTRODUCTION 1. INTRODUCTION The concept of Corporate Social Responsibility (CSR) started in USA about half a century ago. The basic idea is that companies have moral obligations that go beyond their legal obligation to the shareholders, and there is thus a clear link to stakeholder theory (Brønn and Vrioni 2000). CSR has increased its importance significantly in the recent years, and consumers are increasingly expecting and demanding that companies focus on other issues than the financial bottom-line. Consumers make their statement through the increased consumption of e.g. organic and fair-trade products, and this change towards more ethical consumption has been called the biggest change in consumer habits ever (Jeng 2008). It is no longer discussed, whether companies have a social responsibility, but only to which extent they have it (Teilmann and Olesen 2003). CSR can be seen as a core value, and it raises ethical, environmental and social issues (www.csrkompasset.dk). This means that almost all processes in the company can be affected by the values of CSR (see appendix 1). Cause related marketing (CRM) is a specific approach to marketing within the umbrella of CSR. It has gradually become more common in Denmark to see CRM attached to different types of consumer products. The Danish Consumer Council is highly concerned about this development as a statement by head of department, Villy Dyhr, suggests: If companies want to support e.g. Save the Children, they should just send a part of the profits and not brag about it. Consumers should buy what they need and not a product where they think they also buy a little bit better conscience. It moves the focus from a product s price and quality (own translation, Straarup 2004). Despite The Danish Consumer Council s negative evaluation, companies seem to embrace the concept of CRM, and they continuously launch new campaigns. During the writing process of this thesis, there were several current examples of CRM campaigns in Danish stores. The Body Shop and MTV are supporting HIV/AIDS through the sales of a lip balm, Pilgrim sells CRM jewellery to support Médecines Sans Frontières, and Cult has lunched a provocative CRM campaign to support breast cancer research (www.thebodyshop.co.uk, To improve the author s knowledge about CRM, how it works in practice and to find inspiration for a research area within the field of CRM, preliminary research was done in relation to a CRM campaign that IKEA ran in November and December The simple campaign concept was a 1 donation to UNICEF and Save the Children for each sold teddy bear. A brief survey among 32 customers showed that more than 70 percent found that the teddy bear campaign was positive or very positive. Nevertheless, 60 percent of the respondents 1
7 INTRODUCTION said that a CRM campaign had no influence on their purchasing decision. To see the campaign from the company s perspective, a short, informal interview was conducted with IKEA s communications responsible, Thomas Uhd. The interview revealed that the teddy bear campaign had been carried out for several years in the months before Christmas, and it was expected to continue in the future. Nonetheless, IKEA had no idea of customers satisfaction with the campaign. There was no specific target group for the campaign, according to Uhd, but the kick-off events were oriented towards children. Further, no research had been conducted to see how the campaign influenced the employees. Generally, it seemed that the cause was important for IKEA. In relation to the company s production in Southeast Asia, it was important to have good relations to the non-governmental organisations (NGO) and make a proactive effort to create better conditions for their suppliers employees. It did, however, seem like there was only little consumer focus in the actual CRM part of IKEA s CSR 1. The research in IKEA raised relevant issues for further exploration. Most noteworthy was that consumers were generally positive, but at the same time stated that they were not influenced by CRM. Further, the company did not seem very strategic in their CRM efforts. It had not integrated the consumer in the campaign as there was no defined target group and no focus on customer satisfaction and involvement. Customer satisfaction was basically measured in terms of sales, but since the CRM products were standard products and ideal for Christmas presents, it makes little sense to use sales as the only indicator for success. Based on brief review of other CRM campaigns in Denmark (Junge 2004), it is assumed that IKEA is not unique in this approach to CRM, and the preliminary findings suggest a need to look at CRM in a more strategic manner to increase company benefits. Consumers are considered a crucial aspect in CRM as the donation is dependent on the consumer s purchase. It is therefore interesting to see how companies can develop more strategic and successful CRM with a stronger focus on and integration of the consumer and her involvement. With a generally positive consumer attitude, it is intriguing that most consumers state that CRM is not influential in a purchasing situation. It is thus interesting to examine what companies can do to make CRM more appealing to consumers, so that it to a greater extent creates benefits for both the company and the consumer. 1 Further information about the preliminary research, the consumer survey and the transcribed interview with Thomas Uhd can be obtained from the author upon request. 2
8 INTRODUCTION 1.1. DEFINING CAUSE RELATED MARKETING Cause Related Marketing (CRM) is in some contexts also referred to as Cause Marketing or Corporate Societal Marketing. There are many definitions of CRM in the literature, and the differences have significant importance and implications for discussions and conclusions. The main difference lies within the perceived broadness of the concept. Adkins (1999) and others (File and Prince 1998; Till and Nowak 2000; Junge 2004) define CRM rather broadly. Adkins (1999) suggests that CRM can take many different guises, and e.g. sponsorship can be classified as CRM when the supported event is a good cause, and the sponsorship is used to promote the company. In the seminal paper on CRM by Varadarajan and Menon (1988), it was proposed that the distinct feature of CRM is that the company s contribution to a cause is linked to the customers engagement in revenue-producing transactions with the company (Varadarajan and Menon 1988:60). This very narrow understanding of CRM is shared by Kotler and Lee (2005) and others (Lavack and Kropp 2003; Polonsky and Speed 2001; Pracejus and Olsen 2004). A narrow definition of the concept of CRM allows a more comprehensive and thus useful terminology to develop around the concept. Kotler and Lee (2005) suggest a total of six options for doing good, i.e. cause promotions, CRM, corporate social marketing, corporate philanthropy, community volunteering and socially responsible business practices. Only few authors have tried to provide a narrow, complete definition of the concept, and many simply refer to the definition proposed by Varadarajan and Menon in 1988: Cause-related marketing is the process of formulating and implementing marketing activities that are characterised by an offer from the firm to contribute a specified amount to a designated cause when customers engage in revenue-providing exchanges that satisfy organisational and individual objectives (Varadarajan and Menon 1988:60). Both Pringle and Thompson (1999) and Adkins (2000) propose their own definitions of CRM, but they both have the weakness that they do not specify the criterion of customer transaction in CRM. They do, nevertheless, contribute with an important point as both stress the mutual benefit for the company and the cause. Further, Pringle and Thompson (1999) also emphasise the strategic character of CRM. 3
9 INTRODUCTION This paper will use the combination of the literature s definitions, which seems the most appropriate: Cause related marketing is a strategic marketing and positioning activity that is characterised by an offer from the firm to contribute a specified amount to a designated cause when customers engage in revenue-providing exchanges that satisfy the company s, the cause s and the customer s objectives. This definition acknowledges that the key players in a CRM transaction will always be the company, the cause and the customer. Shareholders, employees and other stakeholders are secondary, but, nevertheless, an important part of the whole picture RESEARCH QUESTION Based on the preliminary field research and a review of existing CRM literature, the research question was developed. It is a fundamental assumption in this thesis that companies need to keep a strong consumer focus in CRM and that consumers play a crucial role in the success of CRM. It was decided to take a dual perspective to get a more complete picture of the topic and its implications. The purpose of this thesis is thus to answer the following main research question through a number of sub-questions: How can companies develop and utilise strategic and sustainable CRM to optimise both consumer and company benefits? 1. What is CRM in a company and consumer perspective? 2. Why engage in CRM in a company and consumer perspective? 3. How to engage in CRM in a company and consumer perspective? The term strategic refers to an approach to CRM, which is well considered and sophisticated. The term sustainable refers to an approach to CRM, which focuses on long-term gains that are durable. The findings of the thesis could be valuable to top-management and marketing managers. The preliminary research suggested that Danish companies are not reaping the full benefits of their CRM activities. This thesis aims at providing companies with a simple, yet rewarding approach to CRM DELIMITATIONS This thesis will primarily focus on the company and consumer relationship and perspectives in CRM. This and other decisions imply that several other interesting areas will not be analysed thoroughly. 4
10 INTRODUCTION Most significantly, the cause perspective in CRM will not be examined. According to Adkins (2000), CRM can create, what she names, win-win-win advantages. Besides from providing companies and consumers with advantages, CRM can also be of significant importance to NGO s and their causes. This thesis will leave the benefits for the cause more or less untouched, while it is still acknowledged that the cause plays a crucial role in a company s success with CRM. This thesis is written in a Danish context, and this will influence the findings. CRM is traditionally an Anglo-American concept, and several researchers have found that culture influences CRM (e.g. Brønn 2006; Struck 2007). However, the cultural aspect of CRM is not treated specifically in the thesis. CRM is in this thesis analysed in a business-to-consumer context. CRM is, however, also becoming an increasingly important factor in business-to-business marketing. This will, nevertheless, not be analysed in present thesis. 5
11 KNOWLEDGE OF SCIENCE AND METHODOLOGY 2. KNOWLEDGE OF SCIENCE AND METHODOLOGY This section will introduce the methodological considerations that lie behind this thesis. The purpose of the thesis is, as should be clear from the research question, to examine how companies can optimise CRM efforts to increase both consumer and company benefits. The following will present the methodological choices and considerations that the author has faced during the research and writing process and the implications hereof. Scientific approach, research design, data gathering, and empirical research will all be considered. The scientific paradigm that a researcher adopts is highly influential on the way her research is conducted and thus also the findings and results. A single definition of the term scientific paradigm does not exist, but Guba (1990:17) suggest the following: A basic set of beliefs that guide action, whether of the everyday garden variety or action taken in connection with a disciplined inquiry. The chosen paradigm will influence what is observed and examined, which questions are asked and probed, how questions are structured, and how results are interpreted (Kuhn 1996). Gummesson (2000) identifies the two main paradigms that a researcher can rely upon, the positivistic paradigm and the hermeneutic paradigm (Gummesson 2000:178). The positivistic paradigm is often used in natural sciences. It focuses on description and explanation within well-defined frames and is primarily driven by a deductive approach. Objectivity and logic are high priorities, and quantitative data is central in the positivistic paradigm (Gummesson 2000:178). The hermeneutic paradigm is more focused on understanding and interpretation. Research often concentrates on the specific and concrete, but still aims at making generalisations. The approach is often inductive and driven by the empirical data, which is primarily qualitative. Subjectivity is recognised and accepted (Gummesson 2000:178). This thesis uses a hermeneutic paradigm as a starting point. It was decided that this approach would be superior in revealing the underlying motivations of consumers and their reasoning in relation to CRM. The research question of this thesis could also be answered with a positivistic paradigm, but it is likely that the conclusions would look very differently. This choice of paradigm naturally has consequences for the methodology of the thesis as will be seen in the following PURPOSE OF THE THESIS The purpose of this thesis is characterised by being mainly explorative and explanatory. Explorative research has the main purpose of examining and studying phenomena or aspects that there only exists little knowledge about (Andersen 1999:24). Based on a comprehensive 6
12 KNOWLEDGE OF SCIENCE AND METHODOLOGY review of the existing CRM literature, it became apparent that there only exists very little knowledge about strategic CRM, and the need for an explorative study thus arose. The first two sub-questions to the main research question are related to exploring and understanding the concept of CRM and its ties with consumers and companies. Explanatory research tries to explain causalities and consequences. This will often be done with the purpose of making generalisations (Andersen 1999:27). The thesis findings of the explorative research are used as the starting point for the explanatory research where different aspects of CRM are analysed, interpret and explained. The third sub-question is linked to the explanatory aspects of this thesis. The explanatory parts of the thesis also have some normative characteristics as normative research goes a step further and tries to make relevant recommendations for actions and solutions (Andersen 1999:28). This thesis tries to make specific recommendations for companies in CRM based on the explorative and explanatory parts, and this takes a somewhat more normative character REASONING APPROACH The choice of the hermeneutic paradigms entails that it is more natural to use an inductive approach to reasoning. An inductive approach implies that the researcher makes generalisations based on the empirical data. In other words, the researcher moves from empirical data to theory (Andersen 1999). One can never be absolutely certain about inductively found conclusions as they are based on empirical data, which is rarely complete (Thurén 1992:19). Generally, most of this thesis uses an inductive approach as the empirical data is used to make generalisations and recommendations. With a deductive approach the theory becomes the controlling element, and empirical data is used to support and confirm the theory. Deduction entails that reasoning is always correct when it is logical according to the theory. This does, however, not mean that the reasoning is actually true in real life (Thurén 1992:22). Deductive elements are seen in the thesis as qualitative interviews are conducted according to a theoretical foundation, the Means-Ends Chain theory. The interviews are conducted in a manner that will confirm the theory, and the theory is not questioned. Once the data is collected, the approach to processing it is more inductive. 7
13 KNOWLEDGE OF SCIENCE AND METHODOLOGY 2.3. RESEARCH DESIGN Research design is the combination of approaches to data gathering (Andersen 1999). Data gathering is determined by the research purpose and question. The research design of this thesis has taken the shape of a case study according to Yin s definition (Yin 1989 in Andersen 1999:164). A case study is an empirical study that examines a current real-life phenomenon. The borders between the phenomenon and its context are not clear, and it is possible to use several data sources to illustrate the phenomenon. It is central that the design only concerns one phenomenon and that it is non-experimental (Yin 1989 in Andersen 1999:164). With the research question established, the phenomenon has been chosen. Nevertheless, it is difficult to define the limits of the phenomenon, CRM, and several data sources are used to illustrate the phenomenon. Case studies are often associated with qualitative data collection (Yin 1989 in Andersen 1999:164). An important aspect of the research design is the method for collecting data. Andersen (1990) differentiates between three data collection approaches, i.e. the documentary method, the observing method and the questioning method. These can be combined in different ways to complement any research design. This thesis has used the documentary and questioning methods. The following is based on Andersen 1999: THE DOCUMENTARY METHOD This method is based on the indirect study of a phenomenon, e.g. through the use of secondary data. Secondary data has been collected for another purpose than the current, but may still provide useful knowledge. A major drawback of this type of data is that it is fixed and cannot be influenced as it already exists. The documentary method is very useful as it is cheaper and less time demanding than other methods. In the present thesis, the documentary method has played an important role. An extensive academic literature review was conducted in the beginning of the writing process and helped defining the research question. The author aimed at developing a broad knowledge about CRM and already existing research. The internet has also been used as a documentary method to find information about CRM, previous thesis works on similar topics, and blogs about CRM. Current and previous CRM campaigns have been studied in detail on the internet. 8
14 KNOWLEDGE OF SCIENCE AND METHODOLOGY THE QUESTIONING METHOD The questioning method basically consists of asking questions, either in writing or verbally. Generally, questions are asked to obtain knowledge about the respondent and her habits, attitudes, opinions, and experiences. The questioning method can generally take two different shapes, the quantitative survey and the qualitative interview. Due to the purpose of this thesis being exploratory and explanatory and the fact that a hermeneutic paradigm is the researcher s fundament, it was natural to choose a qualitative questioning method. The qualitative method is superior in gaining in-depth knowledge of the respondent s thinking and reasoning patterns (Kvale 1997). Further, the choice of Means-End Chain theory supported this data collection method as it is mainly linked with qualitative laddering interviews. The methodological concerns related to the qualitative consumer interviews are found in chapter 5. The questioning method was also used in an expert interview with CRM expert, Niels Heilberg. This interview was conducted in the final stage of the writing process, and the purpose of the interview was to discuss the findings of the thesis and put them into a context. Interviewing a person in a superior position can create certain challenges for the interviewer. The interviewee will often be used to taking the lead in conversations, he will not feel uncomfortable about the interviewing situation, and it is not unlikely that he will see the interviewer as inexperienced and green and thus acts didactic (Andersen 1999:225). It is therefore critical for the interviewer to take the lead in the conversation from the beginning and focus less on making the interviewee feel comfortable and relaxed. As the interviewer had little interviewing experience, it was difficult to prepare for the challenges. The interview was conducted as a semi-structured qualitative interview. The interview guide was loosely structured around the results that had been reached in the thesis and also aimed at getting new insights on certain topics (see appendix 2 for the complete interview guide). The interview lasted approximately one hour and was conducted at the interviewee s office. The problems that Andersen (1999) identifies were experienced to some extent, mainly due to the interviewer s lack of experience. Nevertheless, the interview still generated interesting and useful knowledge for the discussion of the thesis findings. The interview was recorded and transcribed by the author afterwards. Three dots ( ) were used to indicate pauses in the speech, and it was indicated in Italic when the speech is not clear in the recording. The interview was conducted in Danish. The quotes in the thesis are translated 9
15 KNOWLEDGE OF SCIENCE AND METHODOLOGY to the author s best ability. The transcribed interview can be found on the enclosed CD-rom as appendix 3.A STRUCTURE OF THE THESIS Figure 1 gives a graphical illustration of the thesis structure. Figure 1: Structure of the Thesis Introduction and Methodology Chapter 1 & 2 Literature Review Chapter 3 Theoretical Framework Chapter 4 Consumer Perspective Chapter 5 Discussion Chapter 7 Company Perspective Chapter 6 Conclusion and Further Research Chapter 8 & 9 PART I: Introducing CRM, the research question and the methodological approach PART II: Background, prior research and theoretical foundation PART III: Empirical findings, analysis and discussion hereof PART IV: Concluding chapters 10
16 LITERATURE REVIEW 3. LITERATURE REVIEW A large amount of research has been conducted on CRM since the first cases of CRM saw the light of the day. First, this section will start by very briefly presenting one of the earliest examples of CRM 2 and subsequently introduce a short overview of the academic literature within the field. The literature will be examined from a customer perspective and a company perspective. The case of American Express is today considered one of the first examples of CRM. The highly successful campaign was introduced in 1983 with the purpose of contributing to the restoration of the Statue of Liberty. American Express launched a three-month promotion where the company donated 1 cent to the cause every time a credit card was used and 1 dollar for each new card issued. The campaign raised 1.7 million dollars for the restoration of the Statue of Liberty, the use of American Express cards rose by 28 percent and new card applications increased by 25 percent (Adkins 2000) CONSUMERS IN CRM CHARACTERISTICS AND INVOLVEMENT There exists a vast amount of research on CRM in relation to consumers, and it is often conducted in an Anglo-American context. Some papers have focused on the cultural aspects in CRM (e.g. Lavack and Kropp 2003; Brønn and Vrioni 2000; Junge 2004; Teilmann and Olesen 2003; Struck 2007). Both Teilmann and Olesen (2003) and Brønn and Vrioni (2000) mention the cultural differences and the welfare system in Denmark and the Nordic countries as important aspects in comparisons with USA and United Kingdom. Junge (2004) uses the broader definition of CRM, but the figures can, nevertheless, still give an indication of Danes attitude to CSR and cause marketing 3 in general. He finds that 61 percent of the respondents are either positive or very positive towards what he defines as CRM. It is also found that younger people and men are more positive than other groups. Further, people with higher educations and higher incomes are more positive as are people living in urban areas (Junge 2004). However, the gender differences found by Junge contradict research, which suggests that women have more favourable attitudes towards both the cause and the company (Ross et al. 1992; Husted and Whitehouse 2002). 2 For more recent examples of CRM, pls. see appendix 4. It gives a detailed description of the cases that are used in the consumer interviews. 3 Cause marketing is defined as marketing that supports a good cause in some way, e.g. by raising awareness. CRM is included in the concept of cause marketing (Junge 2004). 11
17 LITERATURE REVIEW Figures generally support the effectiveness of CRM campaigns. Gupta and Pirsch 2006 find that 78 percent of their surveyed consumers state that when price and quality are equal, they would be likely to switch to brands or retailers associated with a cause or issue that they cared about. 54 percent would pay more for a product associated with a cause that they cared for. 56 percent of Australian consumers are willing to switch retailer, where an appropriate good cause will benefit (Endacott 2004) PRODUCTS AND DONATIONS Consumers will often be more likely to support charity and CRM based campaigns when the product in question is of frivolous rather than of practical nature (Strahilevitz and Myers 1998). It is suggested that the altruistic utility offered by the charity incentives may be more complementary with the feelings generated from frivolous products than with the more functional motivations associated with practical products (Strahilevitz and Myers 1998:444). Hamlin and Wilson (2004) note that case studies show that CRM is almost solely used with products connected with low involvement decision-making behaviour, i.e. FMCG and services. CRM with high-involvement products is very rare and not very likely to succeed as consumers are often more brand loyal for other reasons (Van den Brink et al. 2006). Further, research has explored the relationship between donation and discount in price. When the discount/donation becomes larger compared to the purchase price, the majority prefers the discount, especially when the product is practical. When the discount/donation is smaller, 1-5 percent of the price, the majority would choose a donation (Pracejus and Olsen 2004) ETHICAL CONCERNS Many consumers thus only prefer a donation when the amount in question is small. On the other hand, consumers are often more sceptical and believe that the cause is being exploited when the donation is smaller (Webb and Mohr 1998; Drumwright 1996). Perceived cause exploitation has a negative impact on customer purchasing intention. Barone et al. (2000) examine purchasing intentions in relation to the tradeoffs in price and performance that the customer is required to make, and the customer s feelings about the company and its intentions. It is found that the company s CRM motivation influences the consumers choice when moderate tradeoffs in either price or performance are required (Barone et al. 2000). That is supported by Van den Brink et al. (2006) who claim that customers evaluate the motives of the company in a CRM setting. A company with intrinsic motivations believes that the CRM programme can be rewarding in itself, whereas an extrinsically motivated companies search for 12
18 LITERATURE REVIEW rewards from the environment. The first motivation is more altruistic, while the latter is more egoistic and concerned with self-interest. It is argued that consumers respond more positively when they judge the motivation to be intrinsic (Van den Brink et al. 2006) THE CAUSE Consumers often perceive the brand/cause fit to be a measure of the company s intentions and motivations behind a CRM campaign. Pracejus and Olsen (2004) study the fit between brand and cause and find a strong relationship. A company can charge more for a CRM campaign product when the perceived fit is higher. A high-fit campaign has 5-10 times the impact than a low-fit campaign has (Pracejus and Olsen 2004:640). Kotler and Lee (2005) also support the idea of fit. Hamlin and Wilson (2004) also look at the brand/cause fit, but find more scattered results. They find that good fit show superiority compared to a low brand/cause fit, but it is also found that the purchasing intentions for some products decrease with any CRM campaign and increase for other products regardless of fit. Nan and Heo (2007) also partly reject the concept of fit with another survey, which concludes that the addition of a CRM component, whether it involves a high or low brand/cause fit, to a regular ad message is beneficial in that it enhances the sponsoring company s overall image (Nan and Heo 2007:70). It is still suggested that the effect of CRM may be increased with a good fit compared to a less appropriate fit (Nan and Heo 2007). Broderick et al. (2003) and others (Kotler and Lee 2005) find that the individual consumer s own relationship with and involvement in the cause have significant influence on the purchasing intention. The concept of fit thus extends to a matter of fit between the company/product, cause and the customers. Consumers tend to feel that their personal role as contributor is very important in a CRM purchase situation (Broderick et al. 2003). The nature of the cause is therefore rather important. The consumers involvement in the cause varies according to personal experience, relevance of the cause and the degree of emotional involvement in the cause (Broderick et al. 2003:601). More controversial causes or charity organisations can create resistance and alienate some customers or even lead to boycott (Kotler and Lee 2005; Webb and Mohr 1998). It seems difficult to determine what consumers consider a good cause in a CRM context. Good causes differ highly from country to country and over time. Some of the common causes across borders are related to health, combating poverty/homelessness, environmental issues/nature and children/education (Endacott 2004). World events like 9/11 can change consumers opinions about a good cause (Endacott 2004). There is also a preference for local causes over national causes (Ross et al. 1992; Welsh 1999; 13
19 LITERATURE REVIEW Varadarajan and Menon 1988). 70 percent actually give a local donation a higher degree of importance (Husted and Whitehouse 2002) COMPANIES IN CRM OBJECTIVES Varadarajan and Menon published a seminal work on CRM in 1988, and twenty years later with much research conducted this paper still stands as one of the corner stones in CRM literature. Varadarajan and Menon refer to CRM as doing better by doing good and view it as the alignment of corporate philanthropy and enlightened business interest (Varadarajan and Menon 1988:59). According to Varadarajan and Menon, there can be a range of different objectives for a CRM campaign. They are listed in table 1. Table 1: Objectives for a CRM campaign Gaining national visibility Enhancing corporate image Thwarting negative publicity Pacifying customer groups Generating incremental sales Promoting repeat purchases Promoting multiple unit purchases Promoting more varied usage Increasing brand awareness Increasing brand recognition Enhancing brand image Reinforcing brand image Broadening customer base Reaching new market segments and geographic markets Increasing level of merchandising activity at the retail level for the brand Source: Varadarajan and Menon 1988:60 Other, more intangible objectives have since been added, e.g. being seen as a good corporate citizen, helping the local community, communicating the essence of the company s mission and motivating staff (Endacott 2004). It is, nevertheless, still stressed by several that CRM is business and marketing with the main objective of making money for the company. It is not and should not be considered philanthropy (Welsh 1999; Husted and Whitehouse 2002; Lavack and Kropp 2003). Further, it is suggested that the effects of unethical behaviour can be reduced through a CRM campaign (Webb and Mohr 1998) and that CSM 4 programmes may provide a reservoir of goodwill that will help deflect criticism and overcome negative publicity from unexpected events (Hoeffler and Keller 2002). This also links to the fact that in some cases the brand will benefit substantially more than the causes they are trying to help (Endacott 2004). 4 Hoeffler and Keller (2002) use the term Corporate Societal Marketing (CSM) as a synonym for CRM. 14
20 LITERATURE REVIEW STRATEGIC VERSUS TACTICAL CRM Keeping the multiple objectives for a CRM campaign in mind, it is important to consider the fundamental understanding of what CRM is or should be. The issue of strategic versus tactical use of CRM is addressed in several studies (Van den Brink et al. 2006; Varadarajan and Menon 1988), while others take it for granted that it is either a tactical tool (Polonsky and Speed 2001; Nan and Heo 2007) or a strategic tool (Barone et al. 2000; Husted and Whitehouse 2002). Van den Brink et al. (2006) have developed a simple model that focuses on four aspects to determine the nature of a CRM campaign. Purely tactical CRM is characterised by a low level of congruence between the cause and the company s core competency, short duration of the campaign, few invested resources and little management involvement. A high level of congruence, longer duration, more invested resources and management involvement defines completely strategic CRM. A CRM campaign can, however, be a mix of the two with both tactical and strategic aspects. Van den Brink et al. (2006) conduct a comparative survey of tactical and strategic CRM and relate the findings to brand loyalty. The main hypothesis, i.e. strategic CRM creates higher brand loyalty than tactical CRM, is generally supported. The difference in brand loyalty when strategic and tactical CRM is compared, is, however, only significant for low-involvement products (Van den Brink et al. 2006) DEVELOPING A CRM CAMPAIGN When CRM is defined narrowly, the donation is dependent on a customer s purchase for the donation to take place. Kotler and Lee (2005) suggest various different ways to set up a CRM campaign. The most common frameworks for CRM donations are listed in table 2. Table 2: Most Common CRM Frameworks A specified amount donated for each product sold A specified amount donated for every application or account opened A percentage of the sales of a product or transaction donated The company matches the consumers contribution or a percentage of net profit from sales of a product Source: Kotler and Lee 2005:83 Further, the campaign can be specific for just one product or for Table a whole 2 (source: line of Kotler products, and and Lee 2005) the company can choose to set a ceiling for its contribution. Finally, there can be a timeframe for the campaign or it can be open-ended (Kotler and Lee 2005). Table Welsh, 2 Table 2 (source: on the other hand, Kotler and Lee 2005) states in relation to CRM that every promotion should have a clearly defined point of closure (Welsh 1999:24). However, others (Varadarajan and Menon 1988; Bulletpoint 2004) focus on the long- or medium-term perspective of CRM. Van den Brink et al. (2006) also support a long- 15
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