Date of Award

5-1-2018

Degree Name

Doctor of Philosophy

Department

Business Administration

First Advisor

Clark, Terry

Second Advisor

Lee, Jaehoon

Abstract

As companies commit an increasing number of socially irresponsible behaviors, high profile corporate transgressions have become major social problems in many countries. Corporate transgressions are defined as serious violations of social norms and standards (White, Bandura, & Bero, 2009). Corporate transgressions tend to detrimentally affect the relationship between companies and their consumers, leading to negative consumer responses to the brand and product (Aaker, 2012; Lindenmeier, Schleer, & Pricl, 2011; Ingram, Skinner, & Tayler, 2005). Many companies use short-term marketing activities to improve consumer responses; however, these recovery strategies have temporary effects (Beverland, Chung, & Kates, 2009). There is no doubt that building long-term relationships with consumers is vital for companies to promote positive responses. Cause-related marketing (CRM) has been one of the most widely used activities to build long-term relationships with consumers because it can demonstrate a company’s sincere commitment to social responsibility (Ailawadi & Keller, 2004; Gupta & Pirsch, 2006; Kotler & Keller, 2006; Nan & Heo, 2007; Varadarajan & Menon,1988). Despite the fact that CRM can help build long-term relationships with consumers, there is a dearth of empirical study on the effectiveness of CRM as a corporate crisis recovery strategy. The purpose of this study is to investigate the effectiveness of CRM as a recovery strategy in changing consumers’ psychological (attitudes) and behavioral (purchase intentions) responses after corporate transgressions. More specifically, this study will examine the effects of corporate commitment types (time vs financial), degrees (long-term vs short-term and large vs small amount), and fit (high vs low) conditions between a cause and a company on consumer responses. A total of 213 college students (94 women, 119 men), between the ages of 18 and 25, participated in this experimental study. The participants were randomly assigned to one of eight between-subjects treatment conditions in which they read two short scenarios about a company’s (Brand X) corporate transgression and commitment to a CRM (sponsoring the Special Olympic games or the Human Society) campaign. Manipulation checks were conducted on time commitment, financial commitment, and fit conditions. The results of CFA, using LISREL 9.1, support the reliability and validity of all measures. The composite reliabilities (Cronbach's α) of the two constructs (attitudes and purchase intentions) are .72 and .798 respectively. The average variance extracted (AVE) of the attitudes (.593) and the purchase intentions (.611). For the convergent validity, all estimated loadings of indicators for the underlying constructs are significant (the smallest t-value = 4.32, p < .05). For the discriminant validity, as indicated earlier, AVEs for two constructs are, .593 for consumer attitudes and .611 for consumer purchase intentions, are greater than the squared correlation (.454) between two constructs. In addition, the goodness-of-fit statistics show a good overall fit (χ2 = 131. 57, p > .01, CFI= .94, GFI = .93, and RMSEA = .051). The results of the current study revealed that the company’s long-term and large financial commitments to a CRM campaign significantly changed participants' psychological and behavioral responses. However, the fit conditions did not significantly affect consumers’ response changes. The 2 x 2 x 2 interaction effects revealed that the time commitments play a more significant role in changing consumer responses than financial commitments and fit conditions. Furthermore, the combination of a long-term and a large financial commitment with a high fit condition showed the most significant consumer response changes. These findings support the fact that consumers value a company’s CRM activities when they are aware of the company’s sincere commitment. Hence, it is vital for marketing managers to demonstrate their consistently support to causes, rather than making a quick decision to engage in CRM activities. In addition, the findings of this study confirm that gaining positive responses from consumers takes a great effort for companies. Thus, companies should be conscious not to commit socially irresponsible behaviors that damage their relationships with consumers.

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