Corporate Giving Can Encourage Customers to Give Too

Newswise — The old business adage that a company does well by doing good needs adjusting, according to new research led by a University of Colorado at Boulder Leeds School of Business professor.

The CU-Boulder researcher found that when customers see a corporation as behaving in a socially responsible way, they reward the company for its good reputation by buying more. And the good feeling customers get from affiliating with the corporation can extend to third parties, most notably the nonprofit organizations with which the corporation partnered to create the perception that it is socially responsible. "If I were a nonprofit I would want to partner with a corporation that has a good record of socially responsible behavior, because what we show here is that not only will the nonprofit receive support from the corporation, but its consumers are also likely to give donations directly to the nonprofit," said Professor Donald Lichtenstein of CU-Boulder's Leeds School of Business, the study's lead author.

The findings are important, he said, not only because it is crucial for nonprofits to benefit from these partnerships, but also because the extent to which firms will be able to use these relationships ultimately will hinge on the benefits the nonprofits receive. "While similar evidence with respect to corporate support has been found in a controlled lab setting, we found it in an actual field setting using real customers, real stores and real dollars," Lichtenstein said. "And for the first time in any study, we found that customers also directly supported a nonprofit organization that had partnered with the company."

The study will be published in the October 2004 issue of the Journal of Marketing. Advertising Professor Minette Drumwright of the University of Texas at Austin and Bridgette Braig, an independent consultant in Boulder, Colo., were co-authors of the study.

The study showed that being viewed as socially responsible is beneficial because it makes the company more attractive to customers through what is known as "customer identification with the corporation." Ultimately this identification leads to increased sales, according to Lichtenstein. With this in mind, companies donate millions of dollars to various nonprofit organizations through partnerships each year. But while there is some research regarding the benefits to corporations, empirical field research focusing directly on the benefits to corporations is sparse, and there is almost no research on benefits to third parties that align themselves with these companies, he said.

Despite some obvious benefits, corporate socially responsible initiatives can be particularly risky for nonprofits, usually the less powerful partner, and may not ultimately end up serving the nonprofit's long-term interests, Lichtenstein said. For one thing, people might think the nonprofit doesn't need additional donations because it is aligned with a big company.

The field study consisted of a survey of 508 grocery store shoppers across four stores in two Colorado cities. Each shopper filled out and returned a take-home questionnaire. The study also involved three follow-up laboratory experiments. The survey asked shoppers about their views of the grocery chain to determine if they thought the company was socially responsible, and to what extent they identified with the company. For agreeing to take the survey each participant was given coupons to either spend in the store or donate to various local charities. Lichtenstein found that customers who perceived the company to be socially responsible and identified more strongly with the corporation were more likely to donate to the corporate-supported nonprofits.

The follow-up studies involved marketing students from the Leeds School of Business who were asked to respond to different corporate promotions involving nonprofits.

One surprising finding from follow-up studies was that some consumers are more likely to donate to a corporate-supported nonprofit if the corporation has a weak historical record of socially responsible behavior.

"It's always in a company's best interest to have a good record," Lichtenstein said. "But if a company has a record of bad social responsibility and they are trying to clean themselves up, there are people who are more likely to give to that company. The idea is they want to show support for a company that is trying to change its ways. The public likes sincerity, so if you're honest about it, people will give you a second chance."