CHAPTER 2

REVIEW OF RELATED LITERATURE

This research aims to understand the causative relationship between a

business's participation in corporate social responsibility and consumer
preferences, piques, and perceptions. Past studies concerning this topic have
already been conducted; thus, the researchers hope to nuance the historical data
found in related literature to current modernization. This chapter presents a
collection of data gathered by past researches. This chapter is organized into the
following headings:

1. Studies on Corporate Social Responsibility

2. Studies on Consumer Perception, Piques, and Preferences
3. Studies on the Causative Relationship Between Corporate Social
Responsibility and Consumer Perception, Piques, and Preferences

Studies on Corporate Social Responsibility

Corporate social responsibility may affect the performance of a particular

firm in terms of its stock performance. As a result, more companies opt to employ
related marketing strategies to drive their market value to greater heights. Such
was studied by Bhattacharya and Luo (2006) as they analyzed if firms achieved
higher monetary returns and higher market value through the practice and public
disclosure of their corporate social responsibility activities. The research
attempted to investigate how customer satisfaction could act as a mediator in the
relationship between CSR and market value, how corporate abilities could
moderate the financial returns, and how these relationships are mediated by
customer satisfaction.

In the study's conceptual framework, the researchers theorized how the

relationship between corporate social responsibility and a firm's financial
performance is decisively mixed as multiple other factors must be taken into
consideration. This framework is highly commendable as it recognizes the other
driving factors in a firm's market value and performance. It notes that although
some firms may employ the same corporate social responsibility as other
companies, their corporate abilities may differ. Product quality, top management
performance, corporate innovativeness, and the firm's financial decision-making
are all factors that play a significant role in a company's market performance. As
they conducted the study, it was discovered that in smaller firms with lower
corporate abilities, corporate social responsibility reduced customer satisfaction
and harmed its market value. It even resulted in lower profits as these small firms
continued to add expenses dedicated to their practices. However, in more
established firms, higher market value and performance were realized, proving
their conceptual framework to be true.

Moreover, the research failed to discuss further how small firms could
utilize corporate social responsibility in a way that is not harmful to their market
value. It states that there are potential positive and negative effects, but no
recommendations are made to solve it. It focuses solely on how the monetary
returns are differentiated due to corporate social responsibility initiatives
practiced. In this research, the gap will be addressed as the researchers will
attempt to study the strategies employed by small firms in their businesses and
will examine if these have proven to be successful in their overall financial
performance and in creating new consumer preferences and perceptions as well.

Corporate social responsibility can also have an impact on a corporation's

brand image and loyalty. Companies are proactively shifting to adopt a CSR
approach in dealing with their marketing and management activities. Brand
loyalty is heavily related to consumer preferences, piques, and perceptions as
the method in which a consumer chooses and stays with a brand impacts the
operating decisions of a company. By analyzing the relation of brand loyalty and
corporate social responsibility, we also see how much it relates to consumerism.
This was studied by Dapi and Phiri (2015) as they analyzed the usage of
corporate social responsibility as a tool in gaining brand loyalty from consumers.
Specifically, this included consumer behavior towards CSR activities, the impact
of these CSR activities on brand image and loyalty, and the specific CSR
activities that consumers think is adequate.

In the study's conceptual framework, the researchers contextualized the

main factors of the emergence of CSR activities and the benefits of businesses
involving themselves with CSR activities. Here, they showed different issues of
the last ten years and related them to factors like increased stakeholder activism,
increased stakeholder engagement, and etcetera. They also recognized the
benefits of having CSR activities as a strategic approach to boost the brand
image of a company. They related this to addressing issues stemming from the
operations and management of the business affected, which will also affect the
stakeholders and the community around them. This is a commendable
framework as it presents the most vital motives and advantages of CSR
activities, and how it directly affects the operations of the company. By realizing
such, companies can upgrade their strategies for higher consumer interaction.
However, the research failed to account for diversity in their target population as
they only sampled consumers from a particular company, Vodacom. The
participants had different demographics like gender and age but were only
consumers under the Vodacom company, which could have only let consumers
give answers related to Vodacom. In this research, the gap will be addressed as
the researchers will attempt to find a more diverse sample that will not be
restricted to a particular company. This will give more insight in comparing the
CSR efforts of different companies. Through this, the researchers will also be
able to create more applicable recommendations for other businesses.

A study conducted by Du, Phattacharya, and Sen (2007) entitled "Reaping

relational rewards from corporate social responsibility: The role of competitive
positioning," analyzes how corporate social responsibility activities affect or
influence its competitive positioning in the market. It examines how companies
can gain competitive advantage by integrating CSR positioning in their market
segmentation. Specifically, the study connects the importance of CSR positioning
in gaining long-term brand loyalty and higher purchasing likelihood. A company
needs to choose the best market segmentation for its positioning, as this affects
its target consumer market. Businesses employing a CSR positioning can gain a
competitive advantage against its fellow competitors as its core strategy will
focus on benefitting from the activities to alter consumer perception, piques, and
preferences.

What sets this study apart is the formulation of its conceptual background
based on the determinants and consequences of CSR beliefs on a company. As
little research has still been done concerning this topic, the researchers believed
that past research had been either manipulated or assessed without attention to
its scope. The researchers did an excellent explanation for both the determinants
and consequences of CSR beliefs. For the determinants, the researchers explain
that when a brand is positioned as "a CSR brand" rather than a brand that only
participates in CSR, it is likely to assume that consumers' CSR awareness levels
will be raised for a CSR brand than its competitors because such a brand is likely
to have more sustainable communications regarding its CSR activities. For the
consequences, brands that lack a systematic, integrated, and comprehensive
approach toward CSR, though attractive to consumers, are less likely to be
candidates for identification and join voluntary advocacy behaviors. These two
balancing factors help the researchers gauge the extent to which CSR activities
can be used as a tool for positioning in the market.
However, the research failed to delve more in-depth on how competitive
positioning using CSR activities affects consumer preferences, piques,
perceptions, and behavior. It only attempted to establish a connection between
the two ideas but failed to explain the underlying factors and motives behind
these two concepts. This research will attempt to build a deeper relationship
between CSR activities as a tool for market positioning and how its factors affect
consumer behavior toward these activities mentioned. This will be done by
interviewing both business owners regarding their positioning strategies and
consumers and their response to the implemented CSR marketing strategies.

Studies on Consumer Perception, Piques, and Preferences

This section studies the suggestion and managerial implications of Horn's

research on the impact of consumer perception on sales. "Consumer satisfaction
monitoring should be viewed as a timely managerial tool that can help to
increase store sales." (Horn, 2009). This research is highly commendable as it
was able to prove that customer satisfaction affects sales. This is in relation to
the nuance of customer satisfaction to consumer perception based on a
business's participation in corporate social responsibility. Horn derived such a
conclusion from his findings through thorough research on consumer
perception's effect on sales. On this premise, the researchers can relate the
perception of consumers to the corporate social responsibility of a business. This
logical link legitimizes the study since it confirms that consumer preference must
be considered when discerning specific choices to raise sales, which in this
context is through corporate social responsibility.

Contextualized in India's business frame, Horn's study was nuanced to

global-scale businesses in hopes of introducing new methods and mechanisms
to develop the Indian market further. The conducted research presented three
goals: to measure the asymmetries and nonlinearities in the relationship between
customer satisfaction and sales performance, to present the behavioral links
between customer satisfaction and the performance of a business, and to exhibit
how this study can help firms in further developing their company policies to
adjust to customer satisfaction. This was done by gathering extensive data from
a large sample size of one hundred eighty (180) consumers.

The research concluded that improved customer service is a more

effective tool for maintaining customer satisfaction than lowered prices. This
research is commendable as it achieved its goal of helping firms by proving that
consumer service is the most effective strategy in promoting customer
satisfaction. It illustrated consumer behavior and related it to how a business can
respond to their changing preferences by presenting examples of companies that
urgently modified its strategies that aimed to increase consumer satisfaction.
This research proved the causative relationship between customer service and
consumer satisfaction rather than the accepted notion of lowered prices leading
to better performance.

Horn's research heavily focused on the relationship between customer

satisfaction and sales performance. It failed to discuss the impact that lowered
prices have on sales. This should have been a significant discussion since
reduced prices were mentioned numerous times in this research. The research
claimed that customer service was a more effective tool rather than lowered
prices, yet it failed to present its impact on sales. This resulted in a biased
conclusion. This research will fill the gaps in Horn's study by assessing all
possible consumer perception factors rather than automatically concluding a
specific idea. This will be done through thorough data gathering. The survey
questions will specifically target the various elements of consumer perception
rather than merely focusing on Corporate Social Responsibility.

The second related literature under this section heading will address the
practical implications of Chaudary's research. "Managers must make sure that
initiatives for societal benefit are well accepted and well recognized by
consumers in a positive array of light. Corporations enthusiastically involved in
initiating CSR activities and forecast a positive income." (Chaudary, 2016). This
study studied three aspects of Corporate Social Responsibility: ethical,
environmental, and philanthropic. It examined the effect of CSR on various
aspects of consumer and corporate behavior such as consumer attachment,
repurchase intention, consumer loyalty, and brand performance. It studied
Corporate Social Responsibility as a middle man for the image of a business and
its performance. This was done by gathering data from two hundred fifty (250)
consumers who had specific knowledge of Corporate Social Responsibility. The
research questioned its respondents by asking them to list down organizations
they believe possess eco-friendly policies.

From the gathered data, Chaudary concluded that consumer perception

has a severe effect on consumer attachment and overall brand performance. It
recommended that organizations should take part in marketing strategies that
showcased the practice of Corporate Social Responsibility. Managers must
redirect their initiatives to those with societal benefits as those are more accepted
and preferred by consumers who will then extend to the improvement of their
satisfaction levels. Chaudary claims that corporations explicitly involved in
Corporate Social Responsibility are more likely to produce positive results in their
sales reports. This research paper succeeded in proving that a business's
participation in Corporate Social Responsibility affects its overall performance as
customer satisfaction will increase accordingly. This points out the importance of
Corporate Social Responsibility and showcases its link with consumer
preferences, piques, and perception.

The conducted data collection of Chaudary failed to gather substantive

information from its respondents since the only question raised was for
respondents to list down brands they believe to have exhibited Corporate Social
Responsibility. They failed to take into consideration that would limit a
consumer's ability to recall brands. One's capability of listing down various brand
names is affected by multiple factors, such as the memory of the consumer.
Brand advertisement is not the only factor that affects the recalling ability of a
person. For this reason, this research on the effect on Corporate Social
Responsibility on consumer preferences, piques, and perceptions will fill in the
gaps presented in Chaudary's research. It will do so by listing down specific
questions in the survey forms to be attended to by the respondents to gather
substantive data that considers the various external factors that could affect
consumer perception.

Studies on the Causative Relationship Between Corporate Social

Responsibility and Consumer Perception, Piques, and Preferences

Rahim's 2011 study on the importance of Corporate Social Responsibility

claims, "Companies who disregard expectations concerning social responsibility
may risk consumer boycotts as a result of the strengthening of consumers'
awareness and rights in today's business world." (Rahim, 2011). This research
tackles the influence Corporate Social Responsibility has on consumer
perception and the Malaysian market's buying behavior. It characterizes
traditional business views as strategies that are no longer implementable and
effective since most corporations have participated in Corporate Social
Responsibility. It discussed the economic, legal, ethical, and philanthropic
responsibilities a business has. According to Rahim, consumers consider a
company's participation in Corporate Social Responsibility before making
purchase decisions. The data was gathered from 193 respondents. It concluded
that there is indeed a relationship between consumer perception and a
business's participation in Corporate Social Responsibility. It suggests that
managers and entrepreneurs should consider corporate social responsibility
when implementing business strategies to attract more customers, as this affects
consumer perception.

The researchers commend Rahim's study as it efficaciously clarified the

link between a business's performance and consumer perception by stating that
companies that do not practice corporate social responsibility are likely to be
boycotted by consumers. This tackles the importance of corporate social
responsibility and how this affects consumer behavior. It highlights the
implications of a business practicing corporate social responsibility by relating it
to consumer behavior by saying that consumer preference increases when a
company participates in such practice. The research focused well on the various
aspects of Corporate Social Responsibility. It studied Carroll's pyramid of CSR.
This was done to support the claims made by past researches that there is a
positive relationship between a business's CSR activities and the perception of
consumers.

This research failed to consider the various demographic and cultural

factors that affect consumer perception of Corporate Social Responsibility. To
gather substantial and accurate data, the researchers will focus on how
consumer perception operates in the context of Philippine society. The study will
be conducted with regards to the various Corporate Social Responsibility trends,
such as going green, managing waste, and the ethical attainment of raw
materials. All of this will be tackled in the surveys to be distributed to the
respondents.

Previous studies conducted noted that practicing corporate social

responsibility may have alternate effects on consumer perceptions when utilized
as a marketing tool. Such was the case when Salleah, Saba, and Qasim (2017)
examined its use as a marketing tool that can impact a consumers' attitude and
behavior towards a specific brand. An investigation was conducted into these
effects that could ensue as a result of its practice. The main research goal was to
provide understanding to companies who would want to apply different corporate
social responsibility strategies in their daily operations. It also examined further
how the main advantages centered upon brand image improvement, brand value
development, and customer relationship fortification.

A commendable aspect of this study is the research model that was

employed which revolved around how a consumers' trust plays an essential role
in corporate social responsibility, consumer attitude, and consumer behavior and
shows how all of these four aspects are interrelated with one another. It is
because of a consumer's trust built from corporate social responsibility practices
that a consumer then changes his or her attitude and behavior towards a
company. Consumers are frequently impressed by the efforts brands exert for
their social responsibility which creates a new perception of the business in their
minds. This then entices the customer to patronize their brand and develop a
form of brand loyalty, creating stability and sustainability in their customer
relations. It also analyzed corporate social responsibility as a showcasing
methodology as it publicly discloses their activities to market their products more
effectively.

However, the study fails to determine what marketing strategies or in what

ways can corporate social responsibility be used by large and small scale firms
alike. Although it concludes that corporate social responsibility is a great
marketing tool, it fails to exemplify its uses more concretely as secondary data
was heavily used in the study. As the research was based purely on the concepts
developed by previous researchers, it lacked an entrepreneur's perspective as no
primary information was given. In this study, however, the researchers will be
interviewing different respondents to gain their perspective on the matter. This
will be done to see the practical application of corporate social responsibility in
particular businesses and firms and evaluate if they have been effective in raising
consumer preferences and perceptions or not.

As mentioned earlier, one aspect of corporate social responsibility is that it

has the ability to be transformed into a marketing tool. Such is the case when
referring to cause-related marketing. Bronn and Vrioni (2001) took the
relationship between corporate social responsibility practices and cause-related
marketing, a strategy employed by marketers to showcase a company's social
activities. It analyzes how this form of marketing is used as a communication tool
in building brand loyalty and recognition and helping these businesses gain a
competitive advantage over their competitors in the market. The study discusses
how these factors lead to the overall development of a brand's image and
reputation in society as well. It discovered that differentiating a company through
the image of care and compassion to society can be highly rewarded in terms of
market value. However, that can only be achieved through strategizing one's
corporate philosophy.

The study conducted a comprehensive analysis of the role of skepticism in

corporate social responsibility practices as most consumers remain skeptical of
all claims made by large firms. It recognizes that the utilization of cause-related
marketing entails two possibilities, with the first being if firms limit the disclosure
of their social activities, the public may be led to believe that the company is not
entirely truthful. The second possibility would be if a firm extensively discloses its
activities, the public may think that these corporations are exploiting the firms'
beneficiaries. Nevertheless, consumers continue to appreciate any company's
involvement in these practices as they believe that these companies must
continue to contribute positively to society. The researchers also recommended
marketers as they stated that they must learn how to emphasize the awareness
of corporate social responsibility and its benefits among the consumers, ergo
creating the perception that the consumers also contribute to the cause the firm
leads.

However, the study fails to give concrete examples of the utilization of

corporate social responsibility practices in creating a positive impact on
consumer perceptions and lacks a consumer's personal perspective in
understanding its implications. It is solely based on secondary data collection
based on past researches conducted. The application of the practice can be
considered to be broad as it fails to specify the scope of the companies that can
effectively use cause-related marketing as a tool in their businesses. The
possible repercussions on market value and overall expenses are also not
mentioned by the researchers, which are aspects that this study will look into.
This study will explore both the consumer's perspective and the entrepreneur's
perspective as it aims to analyze how corporate social responsibility can affect
perception and preference in the market.

The related researchers all addressed the different aspects of the current
study, namely, corporate social responsibility, consumer preferences, piques, and
perceptions, and the causative relationship between the two concepts. Although
each of their research aims was achieved, notable gaps were noticed in each of
the studies. Bhattacharya and Luo (2006) analyzed how corporate social
responsibility practices could result in higher monetary returns and higher values,
as they concluded that the outcome might depend on the other corporate abilities
of a firm. It failed to discuss further how small firms could utilize corporate social
responsibility in a way that is not harmful to their overall market value. It states
that there are potential positive and negative effects, but no recommendations
are made to solve it. In this study, the researchers aim to examine small-scale
firms in Cebu City and analyze how specific practices have led to positive or
negative effects on their overall market value. Dapi and Phiri (2015) studied how
corporate social responsibility could impact a firm's brand image and loyalty.

However, the research failed to account for diversity in their target

population as they only sampled consumers from a particular company,
Vodacom. The participants had different demographics like gender and age but
were only consumers under the Vodacom company, which could have only let
consumers give answers related to the company in question. This study will
consider more than one enterprise as the researchers will be interviewing five
different companies and a diverse set of consumers. Du, Phattacharya, and Sen
(2007) studied the relationship between corporate social responsibility and
competitive positioning in the market and explored how these companies could
gain an advantage over their competitors. The study could not delve deeper into
how competitive positioning using CSR activities affects consumer preferences,
piques, perceptions, and behavior. It only attempted to establish a connection
between the two ideas but failed to explain the underlying factors and motives
behind these two concepts. The current study's findings will allow for a more
comprehensive understanding as it attempts to build a deeper connection
between corporate social responsibility and the average consumer.

Horn (2009) also heavily focused on the relationship between customer

satisfaction and sales performance. He failed to discuss the impact lowered
prices has on sales. This should have been a significant discussion since
reduced prices were mentioned numerous times in this research. The research
claimed that customer service was a more effective tool rather than lowered
prices, yet it failed to present its impact on sales. The conducted data collection
of Chaudary (2016) was unable to gather substantive information from its
respondents since the only question raised was for respondents to list down
brands they believe to have exhibited Corporate Social Responsibility. They
failed to take into consideration that would limit a consumer's ability to recall
brands. The researchers' methodology in this study will allow us to gather the
substantive information that Horn (2009) and Chaudary (2016) lacked as the
various external factors that affect consumer perception will be taken into
account. Rahim (2011) tackled what influence Corporate Social Responsibility
had on consumer perception and the Malaysian market's buying behavior. Still, it
failed to acknowledge the various demographic and cultural factors that affect
consumer perception.

As the current study will be based in Cebu City, the researchers will focus
more on how perception operates as a factor in purchasing decisions in the
locality. Salleah, Saba, and Qasim (2017), the use of corporate social
responsibility as a marketing tool was examined, but it failed to determine the
exact marketing strategies that large and small scale firms alike could use to
better their systems as the methodology of their data collection made use of
secondary information. Such is the case with Bronn and Vrioni (2001) as they
also made use of secondary data as the basis for their study. The current study
aims to fill these gaps as the researchers will be interviewing consumers and
entrepreneurs alike to gain a more personal perspective of their perception
towards corporate social responsibility in a Philippine context.

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