Corporate Social Responsibility and Brand Equity

Running head: Corporate Social Responsibility and Brand Equity

The Impact of Corporate Social Responsibilities Marketing Activities on the Brand Equity
a.bayoumi (S0900-498)
The German University in Cairo

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Corporate Social Responsibility and Brand Equity

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Abstract
New type of customers start to exist in the market as a result of the continuous increase of
societal concern about environmental issues, accordingly firms creates new type of
communications to interact with such phenomenon. This type of communication is known by
corporate social responsibility (CSR) marketing strategy. The purpose of this study is to explore
the impact of CSR marketing activity on the brand equity of the firm applying this type of
marketing strategy.
Keywords: Corporate Social Responsibility, Sustainability, Strategic CSR, Sustainable
Marketing, Environmental Marketing, Brand Equity.

Taqa has joined the 3C initiative. This leads firms to interact with this social phenomenon and try to create a way of exchanging relationships with this type of customer. 2006). your business will not be sustained” (Ottman. 2010). Taqa started with its employees as it believes that changing individual behavior is the first step toward changing societies (Kotler. employees. Having a deeper look on some famous brands’ strategies. sustainable marketing. This way is variously known by societal marketing. and also its clear support for the business. . ethical and environmental programs to all of its stakeholders. Home Depot (sustainable harvested wood) and Coke (sugar and packaging). 2008). Abu Dhabi National Energy Company “Taqa” is one of the companies that are focusing on executing social. green marketing.Corporate Social Responsibility and Brand Equity 3 Corporate Social Responsibility and Brand Equity Steadily increasing societal concern about social and environmental issues leads to the existence of a new type of customers. the community and the environment. who used to apply this concern during the purchase process (Chen. accordingly they offered their employees to buy a hybrid low emissions car. and for the brand specifically. Here comes out the importance of green marketing and its social role in the market for the consumers. including shareholders. it will be evidently clear that nowadays it becomes a matter of social responsibility and sustainability. McDonalds (recycled packaging). a group of business leaders that aims to set global limits for temperature increases. and have specific emission reduction targets. environmental marketing or ecological marketing (Banegil. bondholders. 2010). This obviously states that “If you don’t manage your business with respect to environmental and social sustainability.

Corporate Social Responsibility and Brand Equity 4 This paper will try to find out if there is a positive relation between corporate social responsibility marketing activities and the brand equity. this paper is structured as follows. In addition. along with a final conclusion of a semi-structured interviews held concerning this research topic. First. we will describe the conceptual frame work along with the thesis question. Finally. . we review prior literature on CSR and its main sources. then literature on the Brand Equity. Second. we explore the relation between applying corporate social responsibility and the brand equity.

. noting that a lot of definitions have been proposed. CSR is interrelated with complex issues such as environmental protection. human resources management. health and safety at work. beyond the interests of the firm and that which is required by law” (Mc Williams et al. CSR can be defined as “situations where the firm goes beyond compliance and engages in actions that appear to further some social good. of course this is one definition. in addition to local communities and society in general to improve the quality of life (Holme et al. 2010). though not identical (Milton. a car manufacturer could produce “hybrid” vehicles. relations with local communities. with suppliers and consumers (Branco et al.Corporate Social Responsibility and Brand Equity 5 Literature Review Corporate Social Responsibility (CSR) CSR has been used as a synonym for corporate philanthropy and also for business ethics. CSR and corporate sustainability are overlapping movements. 2006:1). 2006). For example. which extensively exceed government fuel efficiency requirements. 2000). Another definition of CSR relates it to the firms’ contribution in sustainable economic development. and through it social investment. In addition and as cited by Milton (2010). but there’s no clear chosen definition and this makes measurement process harder. working with the staff and their families. As per Siegel et al (2007) corporate social responsibility (CSR) occurs when firms join in any activity that advance a social agenda beyond that which is required by law. which usually highlight the corporate contribution to society through its business activities. there is a classic description for CSR developed by Carol . CSR has also been used in describing corporate social performance and corporate citizenship. Moreover.

Ethical responsibilities a set of societal standards wider than the legal ones. and corporate social responses (e. and.Corporate Social Responsibility and Brand Equity 6 (1979). and finally philanthropic responsibilities that shows the voluntary activities such as charity donations done by the corporate (Figure 1). corporate social performance (Carroll 1979..g. Wood 1991). have been the subject of many conceptualizations initiated . Strand 1983). CSR (Bowen. the most important social responsibility of business in the production of goods and services and the generation of profits. Figure (1) Brief overview on CSR Past Conceptualizations Starting 1950s. 1953) along with the related concepts of corporate social responsiveness. Economic responsibilities. Legal responsibilities: (that shows the corporate compliance with regulation. in which he mentioned that there are four categories for CSR activities.

. Carroll 1979). special interest groups). (b) community (residents. .g. and (d) media stakeholders (Maignan. These are simply called stakeholders and can be regrouped in four main categories (a) organizational (shareholders.. society is at "a level of analysis that is both more inclusive. suppliers.1990s. (c) regulatory (regulatory systems. 2006).Corporate Social Responsibility and Brand Equity 7 from the management literature. Donaldson and Preston 1995. customers). CSR as social obligation: As cited by Maignan. In the following section we will outline the main viewpoints that come out of this generous literature (Maignan. As Clarkson (1995) mentioned. Carroll (1997) emphasized different types of social obligations can be noticed: (a) legal and ethical obligations (b) economic obligations. 2006. and (c) philanthropic obligations. The view of CSR as a social obligation has been promoted in later conceptualizations (e. 2006). the first standpoint was initiated by Bowen (1953). more ambiguous and further the ladder of abstraction than a corporation itself". CSR as stakeholder obligation: A number of scholars have challenged that the term of social obligation is too broad to smooth the progress of the effective management of CSR in the mid.g. who defined CSR as the obligation "to pursue those policies. Clarkson (1995) and other scholars (e. Wood and Jones 1995. employees. Jones 1995) argue that businesses are responsible only toward those who directly or indirectly affect or are affected by the firm's activities. to make those decisions. or to follow those lines of action which are desirable in terms of the objectives and values of our society". municipalities).

Corporate Social Responsibility and Brand Equity 8 CSR as ethics driven: Swanson (1995) regrets that the previous approaches fail to account for a "positive commitment to society that disregards self-interest and consequences". The integration of all the past definitions is difficult as scholars have considered social responsibilities have different entities. As an example. For example. Based on these condemnations. following justice-based ethics. CSR as managerial processes: The previous three perspectives introduced thus characterize the factors inducing businesses to consign to CSR. (b) monitoring environmental conditions. and (c) designing plans and policies required to enhance the firm's positive impacts. and fairness of opportunities for all stakeholders. including (a) businesses in general. a corporate could challenge to systematically favor decisions and procedures that kindle liberty. the view of CSR as a obligation does not succeed to provide a clear criteria to evaluate the extent to which business activities can be or cannot be considered as socially responsible (Jones 1995). . some authors have showed CSR in terms of concrete organizational processes. Moreover. it is crystal clear that no single conceptualization of CSR has dominated past research. Ackerman (1975) stated three major activities representing corporate social responsibility: (a) attending to stakeholder demands. some scholars started to advocate an ethics-driven view for CSR that affirm the appropriateness or wrongness of specific corporate activity of any social or stakeholder obligation. Considering the different viewpoints outlined above. and (c) the decision maker (Wood 1991). (b) the individual firm. equality. On the other hand.

Baron (2001) emphasizes that companies compete for socially responsible customers by clearly linking their social contribution with the sales of their product. managers can conduct a cost/benefit analysis to determine the level of resources to be dedicated to CSR activities. 2011). and as cited by Siegel (2007). McWilliams et al. CSR can be considered as a form of product differentiation. (2011). Consequently.Corporate Social Responsibility and Brand Equity 9 Corporate Social Responsibility and Strategy The notion of CSR and the view of strategic management for firms usually seem to be contradictory. As cited by Sharma et al. Simply put. As Baron (2001:774) defined CSR as the “private provision of a public good. This social attribute is valued by some socially responsible consumers who view CSR as a signal of firms’ reliability and honesty. d) Perceived impact of social programs on the firm’s competitive position. Strategists usually aim for generating and maximizing profits while CSR’s main goal is ensuring that business earn a ‘social license to operate’ (Milton. and e) measuring outcome of the social programs applied (Husted et al. However. 2007). Moreover. firms simultaneously assess the demand for CSR and the cost of satisfying this demand and then determine the optimal level of CSR to provide (Sharma et al. . the term Strategic CSR appeared on the surface in 2001. and who believe that those firms will accordingly produce better products. A lot of firms identify CSR applications with their core strategy and policy based on the importance given to a) defining social action plan.. Moreover.” In addition. Siegel and Baron plotted the model “profit maximizing CSR”. 2010). when Mc Williams. and also a method for building brand loyalty. b) amount of investment awarded to social programs. while one firm adds an extra “social” attribute to its product. c) commitment of their human resources. (2001) identified a model in which two different firms sell identical goods.

planning. There are various forces that also affect the implementation of CSR.. 2011).. stakeholders. have managed to create a better social image in society by providing a better and healthier work environment to their employees and by providing the best services for their entire society (Sharma et al. Proper implementation of CSR practices can shape the perception of customers. 2011). etc. 2008). And in order to put together the different perspectives of CSR design. like the Tata Group. the implementation of CSR practices calls for a strategic framework. we need to develop a preliminary model that helps in testing of all these practices. and implementation into one single strategic framework. suppliers and competitors. As cited by (Sharma et al. investors. local communities. financial investors. also suggests the required changes. Gov. DuPont. the organization shall align its CSR goals and its decisions along with its overall targets and strategies so that having corporate social responsibility becomes a natural in a day to day activity (Maon et al. governments. CSR can be used as an opportunity for businesses. ITC.Corporate Social Responsibility and Brand Equity 10 The CSR concept is regarded as a powerful tool for achieving sustainable competitive profit and also for achieving enduring value for the investors. and society. as outlined in Figure 2. Many multinationals. Moreover. Policies Philanthropy Introduction of CSR MNC’s Ethical Consumerism Figure (2) .

they will gain new business opportunities and may be business partners. firms can cut costs and make good relations with stakeholders. Finally.Corporate Social Responsibility and Brand Equity 11 Drivers Pushing Business towards Corporate Social Responsibility According to Sharma et al (2011). direct stakeholder pressures and an increased social responsibility sense. This enhanced reputation will catch the attention of more customers. which in turn will increase profits. Sharma et al added that when the businesses are implementing CSR. In addition. investor pressure. (2007). Ernst and Young (2002) suggest that there are five major drivers have influenced the growing business focus on CSR. Also the firm’s social image and reputation will be enhanced. there are different drivers that make business pushed toward CSR activities. corporate ethical and environmental behavior. In addition and in order to cope with the . Corporate Social Responsibility and Marketing As cited by Jones et al. These drivers shown in figure (3) are commonly affected by the firm’s main objectives. greater stakeholder awareness of social.

the selective and the invisible .Corporate Social Responsibility and Brand Equity 12 overall changing business environment. Exploring the links between CSR and marketing. Ogrizek (2002) has clarified that “CSR branding is of paramount importance to the financial sector” while for the retail sector Girod and Michael (2003) have emphasized that CSR can be considered a key tool to create and sustain differentiated brand names”. for example. a continuous growing interest in the ways by which CSR can develop and enhance brands and in what Blumenthal and Bergstrom (2003) have defined as the “convergence of branding and Corporate Social Responsibility”. image and reputation. National and supranational governments have been dynamic in promoting CSR. Bronn and Vrioni (2001) emphasizes that “having a pro-social agenda means having a powerful marketing tool that can build brand image and brand equity sector” . (Jones et al. For example. They also explored some specific dimensions of CSR such as the protection of the environment and the support of charitable causes (Jones et al. while Yan (2003) argue that CSR “marks the difference between brands that have captured the imagination of tomorrow’s consumers and those that are proving to be causalities”. The European Union promotes CSR in all the member states. Moreover. in addition Middlemiss (2003). the importance of CSR among marketing practitioners and the marketing benefits achieved as a result from corporate social activities. in addition the UK Government has a clear ambitious vision for CSR. 2007) Moreover. 2007) As cited by Jones et al (2007). which include the issues of globalization. long term brand value”. suggests that “CSR is taking centre stage to provide more sustainable. Blomqvist and Posner (2004) argued that there are three ways to integrate “CSR with marketing namely the integrated. Maignan and Ferrell (2004) summarized the work of marketing researchers in examining consumer reactions to CSR initiatives.

Keller (1993) clarified that the differential effect of brand knowledge on consumer response to the marketing of a brand is totally created by brand equity (as cited by Chen. Rangaswamy et al. 1993. the second perspective is the financial one which highlights the value of a brand to the firm (Simon and Sullivan. 2010: 459) As per Chen (2010: 310). In the second CSR is said to manifest itself in much targeted ways and that it can provide differentiation in a crowded marketplace. 2005: 1433) In addition. .Corporate Social Responsibility and Brand Equity 13 approaches. and most of them are consistent with Farquhar’s (1989) definition as he defined brand equity as the value added to the product by the brand itself. and according to (Mudambi et al. Several definitions for brand equity have been presented over the years.” Brand Equity Brand equity is one of the most significant marketing concepts since the 1980s.. there are two perspectives in defining brand equity: the first is the consumer perspective that clarifies the value of the brand to the consumer (Aaker. while CSR plays an important strategic role within the company it receives little attention in external communications. 2010: 310). 1993). Aaker (1991) defined brand equity as “a set of brand assets and liabilities linked to a brand. Keller. Moreover. Third. In addition. 1993). (Srinivasan et al. 1991. brand equity also can be defined as “the total value added by the brand to the core product”. thus industrial brand equity is the value added by the brand to the industrial buyers (as cited by Lai et al. The first sees the brand and CSR operating synchronously and it works most successfully where responsible practices are seen to be a key in driving brand preferences. 1997). 2010: 310). its name and symbol that add or subtract from the value provided by a product or service to a firm and to the firm’s customers” (as cited by Chen.

like brands. brand satisfaction and perceived quality (Lai et al. consumer evaluations of brand extensions (Aaker & Keller 1990. Fornell et al. In addition. 1993. Marketing theorists hypothesize that market-based assets. 2006. and Fahey 1998). 1991).. Brand equity is a major marketing asset (Ambler 2003). brand loyalty. these components are brand awareness.g. this clarifies the importance of differentiation for the business. previous research recognized a positive effect of brand equity on the following: Consumer purchase intention and consumer preference (CobbWalgren et al. may help firms not only to increase returns but also may help to decrease the risks linked with these returns and accordingly increase their value (e. Shervani. . Rangaswamy et al.Corporate Social Responsibility and Brand Equity 14 Creating brand equity is achieved when buyers perceive meaningful variation among different brands in a product category. 2002). As cited by Christodoulides (2009). brand associations. Brand equity has some components that shall be taken into consideration. 2000). which can provoke a unique relationship differentiating the link between the firm and its stakeholders (Hunt & Morgan 1995) and encouraging long-term buying behavior. Bottomley & Doyle 1996). then investing to build up this intangible asset increases the competitive advantage and drives brand wealth (Yoo et al. shareholder value (Kerin & Sethuraman 1998). Srivastava. 1995). 2010: 459). consumer price insensitivity (Erdem et al. consumer perceptions of product quality (Dodds et al. Clear understanding for brand equity.

and competitors. Firms with strong social responsibility commitment usually have additional ability to catch the attention of better job applicants.. or substituted. On the other hand. 2003). Corporate social responsibility activities may have internal benefits for a firm through developing new resources and capabilities that are interrelated to corporate culture. loyalty and commitment to the firm. This.Corporate Social Responsibility and Brand Equity 15 Corporate Social Responsibility and Brand Equity Firms apply corporate social responsibility (CSR) activities as they consider that some kind of competitive advantage can be achieved. Firms with a superior social responsibility reputation may get better relations with external factors such as suppliers. Moreover. 2006). They may also catch the attention of better employees and may increase the current employees’ morale. (2006) argued that in addition to the productivity benefits. may improve the firms’ financial . valuable. From a resource-based perspective CSR can be seen as a source of providing internal or external benefits for firms (Branco. bankers. Accordingly this leads to reduced recruitment and training costs and long with lower rate of turnover. sequentially. As cited by Branco (2006). customers. firms also can save on costs for staffing and training of new employees. firms’ socially responsible activities have an obvious effect on corporate reputation. and maintain their employee morale. Human resource activities that enhance employees’ attitude on workplace quality are considered as a base to fulfill these four characteristics (Ballou et al. Branco et al. investors.. these internal benefits whether the outcomes or behaviors are irrelevant to the development of internal resources and organizational efficiency (Orlitzky et al. cannot be imitated. retain them upon hiring. The RBV suggest that firms generate sustainable competitive advantages through managing and controlling their resources and capabilities that are rare. 2003).

In addition. In addition it can be seen as a public relations vehicle. (2006) that. 2006). and give a hand for firms to build reputational assets that may improves their ability in negotiation with suppliers and governments. 1996). . By disclosing that they operate in accordance with ethical and social criteria. Hooghiemstra (2000) argues that social responsibility disclosure is a communication tool that can be used by firms to create.Corporate Social Responsibility and Brand Equity 16 performance. It can support the firm in the having a competitive advantage as creating a positive image may entail that people are prepared to buy the firms products or even do business with it. enhance their image and reputation. firms can benefit from CSR and disclosure as it helps firms along with their employees to become socially integrated with the surrounding community. which aims to influence people’s perceptions about the firm. According to Fombrun et al. They depend on the ability to catch the attention of new investors and reduce exposure to risk. firms can build reputation. As cited by Branco et al. Some authors argue that the firms’ stock value can be increased through the involvement in corporate social initiatives.. such as oil-spills (Klassen et al. CSR activities disclosure is thus mostly important in enhancing the corporate reputation. (2000). disclosure of information about firms’ performance and outcomes regarding CSR may help build a positive corporate image with all stakeholders (Branco et al. and also to charge premium prices “Cost of Brand Equity” for whatever they offer in terms of products or services. As cited by Branco et al (2006) that public declaration of environmental awards had a positive effect on the firms’ market valuation and also on the negative impacts immediately followed environmental crises. It also mitigates the risk of reputational losses that can end result from pushing away key stakeholders.

H1: Firms’ green marketing activities positively affect the firms’ brand equity. and he considered socially responsible behavior as one of the most proposed expectations that will affect brand equity (as cited by Lai et al. we can deduce that there is a positive relation between the CSR marketing activities and the brand equity. the more valuable brand equity.Corporate Social Responsibility and Brand Equity 17 According to Jones (2005). Thesis Statement Following the same logic. 2010: 460). this means the more satisfied stakeholders. CSR Marketing Activities Brand Equity Brand Loyalty Brand Awareness Perceived Quality Brand Satisfaction . especially with the increase of the societies’ concern about environmental issues. brand equity is derived from co-creative interactions between the brand and its stakeholders. In addition and as indicated by Smith and Higgins (2000) “the brand manager uses consumer concern for business responsibility as a means for securing competitive advantage”.

the first part is to assess the suppliers’ CSR marketing activities concept. A semis-structured survey (Attachment 1) is already discussed with all the eight interviewees. and it will help marketing managers to identify their strategy in increasing their companies’ brand equity. The questionnaire is checked for reliability and validity by the use of the causal model that specifies the causal relationship of each construct to each other (Anderson and Gerbing. which doesn’t directly answer it. The researcher had a quick one to one interview with a random sample of 8 persons. . The questionnaire includes three main parts. The last part is to collect demographic information about the respondents. In addition we are going to answer the following research question: Shall firms focus of CSR marketing activities in order to increase its brand equity? Answering this question is a value added to the literature. and the balance is working in Egyptian companies. as commercial directors. Also all of them are working in the commercial field.Corporate Social Responsibility and Brand Equity 18 In this research we are going to study the relationship between the CSR marketing activities as an independent variable and the brand equity as a dependent variable. 1988). and the second part is to assess the brand equity and the consumers’ respond toward it. marketing managers and supply chain manager as well as two sales agents. Limited Qualitative Study The researcher relies on the findings of the literature to identify the research question that need to be addressed. 3 of them are working in multinational companies.

CSR practices are becoming necessary for the endurance of every firm. have a perceived high quality about what they offer. and finally they feel delighted once dealing with or buying such brands. and help in changing the overall mindset of consumers toward socially responsible attitudes of corporate.Corporate Social Responsibility and Brand Equity 19 Conclusion Among all the eight interviewees. around 60% of them are concerned about social activities done by any of the suppliers they are dealing with. The CSR marketing activities will help firms to improve their social image and market reputation and accordingly their brand equity. . Moreover. 40% feel not only satisfied but loyal for such socially responsible brands. foreign multinational firms are implementing CSR practices at higher levels. and also they have no problem to pay a little bit some extra costs for the products just to support suppliers sustain such campaigns. also customers prefer to buy their products more than the products produced by companies who don’t apply CSR activities. As is evident from previous literature. This finding suggests that there is a great responsibility for firms to put a hand and adapt their strategies accordingly.

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Corporate Social Responsibility and Brand Equity Attachment 1 CSR Marketing Strategy 22 .

this company is a leading brand in the industry 4.Corporate Social Responsibility and Brand Equity 1. The likelihood that this brand is reliable is very high Brand awareness/association 1. We can recognize this brand among competitive brands 3. This brand is of very good quality 2. Our major supplier / brand is very concerned with environment protection 3. The likelihood that this brand will function well is very high 3. Products and services of this brand are the first choice of us 2. we will not choose alternative brands Perceived quality 1. We can recall some characteristics of this brand 23 . Even with many choices. Our major supplier / brand actively participates in social initiatives Brand equity Brand loyalty 1. We feel ourselves loyalty to this brand 3. Our major supplier / brand is very concerned with local community 2. We have no difficulties in imagining this brand in mind 5. The name of this provider is well known in our industry 2. In comparison to other providers. Our major supplier / brand is very concerned with buyers’ environmental benefits 4.

Products and services of this brand usually meet our expectations 2. Products and services of this brand always bring happiness and delights to us 24 . Overall. Products and services of this brand are at the desirable level 3. we are very satisfied with products and services of this brand 4.Corporate Social Responsibility and Brand Equity Brand satisfaction 1.