page 1 | page 2
Applying the same approach to CSR activities, it is reasonable to expect that corporate-brand firms will have more success than house-of-brands firms in generating good will by positioning themselves as socially responsible companies. When Kraft showcases its devotion to environmental programs or employee diversity, consumers are likely to take notice of it because they know the company well through its products. In contrast, any CSR activities of Yum! Brands as a company would be more likely to go unnoticed by consumers as this name means little to them, Agarwal says. Thus Kraft will get more bang for its buck.
To research this hypothesis, Agarwal and Berens have obtained historical data on the CSR activities of about 650 U.S. and 530 European firms over the last 10 years, which they are analyzing and cross-checking with corresponding financial and branding data.
Though Agarwal is still working through the modeling stage and applying econometrics to the data, his preliminary results are supportive. “We are finding that our initial hypothesis, which says the type of branding strategy a firm uses will make a difference on the link between CSR activity and the bottom line, is in fact coming out to be significant,” he says.
Agarwal also expects to find that CSR activities aimed at consumers and shareholders have a stronger effect on financial performance than activities aimed at other stakeholders, such as employees and communities. If branding a company’s CSR activities motivates consumers to buy more of that company’s products, it creates liquidity and higher value for the firm. Similarly, shareholders’ actions directly affect how a company fares on the stock market, so their endorsement of a company’s efforts to be a good corporate citizen have a direct impact on financial performance.
Companies that focus CSR branding activities toward employees or communities, on the other hand, are less likely to reap as much of a benefit on their balance sheets. While it can result in more motivated and committed employees, their impact on the bottom line is still an open question.
“Something like being a good employer is not usually public,” Agarwal says. “Unless you work for the company or live nearby, you probably don’t know about those activities, so they don’t create as much of a financial reward.”
In addition to bringing to the marketing literature a greater understanding about the links among branding, CSR and financial performance, this research holds important value for corporate America. What marketing executive wouldn’t want the ability to prove that a branding strategy has a positive impact on shareholder value while improving intangible assets such as corporate reputation?
“Knowing which types of CSR activities are effective will help managers allocate resources more efficiently. It will also help to comprehensively measure the effectiveness of CSR expenditures targeted at consumers and other stakeholders,” Agarwal says. “Basically, we think companies that perform CSR activities and tell people about it are going to get more bang for the buck.”
— Amy Roach Partridge
page 1 | page 2