Today in Digital Marketing - Have We Been Doing Corporate Social Responsibility All Wrong?

Starting point is 00:00:00 This is a premium exclusive. We've heard the advice before. If you want to reach the younger generation of consumers, make sure you've got a story to tell about the good you're doing in the world. Corporate Social Responsibility, or CSR, has become an integral part of a digital marketing plan. But have we been doing it wrong all this time? Dionne Nickerson is an assistant professor of marketing at the Kelly School of Business at Indiana University.

Starting point is 00:00:33 This past summer, she co-authored a research paper that is one of the first to study the effect of CSR on brand sales. And she joins me now. Professor Nickerson, welcome. Hi, how are you? I'm well, thanks. I was actually surprised to learn that this was one of the first to try to find a link to actual sales. Were you surprised? My co-authors and I were surprised. What we found was that a lot of people had done laboratory experiments and looked at purchase intentions. And there's been a couple of papers here and there that have looked at sales, but not

Starting point is 00:01:06 exactly in the same way. Most of the papers that use real world data actually look at stock price or the market valuation of the entire company and not really consumer sales. Right. Interesting. All right. So let's let's talk about the different types of corporate social social responsibility. You and your colleagues identified three primary types. You know, corrective looks at a brand's work towards addressing its own harm to society or the environment, like negative externalities, by changing its business practices, correcting for what it's done. Compensating, on the other hand, also addresses environmental or societal harm, but in this case, it does not address, it does not relate to changes in business practices. And then cultivating is what we typically think of as corporate social responsibility in terms of corporate philanthropy, donating time, resources, addressing various issues in society, but not related to the company's own harm. It was interesting to read in the paper that one of the examples you gave was Coca-Cola, that they actually tested, like a marketing split test, a number of different CSR initiatives to

Starting point is 00:02:30 see which one got a better consumer reaction. Yeah, so they engage in a number of different corporate social responsibility initiatives, of course, a large company like Coke. And this is more of like focus groups. So they would tell them about different initiatives they were interested in pursuing. And if you check out their CSR report, you see that they have focused a large number of resources on environmentally friendly packaging, their bottles, and then water conservation. I want to get to like the effects of all three of those in a second, but do you think there's any risk to a brand doing the corrective action, which was one of the three that you mentioned, the more direct fixing the things that we do wrong in the world? Do you think there's a

Starting point is 00:03:13 risk to the brand doing that corrective version of CSR in that they might alert consumers to those big impact problems, consumers who may not have even known that that was an impact? Is that a risk to the brand that's a big deal? So I'd answer that in two ways. One, I would say you could look at it as a risk, but there's also a risk for not doing it. If consumers find out down the road that, you know, you have some sort of issue that you've never addressed, then that can have a serious impact, not only from from consumer standpoint, but from stock price as well. And then secondly, we actually did some lab testing to look at, you know, whether or not consumers were well aware of these issues or not.

Starting point is 00:03:56 And what we found out is that when they weren't aware of it, basically they treated a company like a company that had a higher CSR reputation. That is to say, in general, if they hadn't heard anything, they're going to react like you're a brand that's doing the right thing. They don't automatically assume that companies are doing the wrong thing. So by making it salient, it's just like if a company that was already doing the right thing did a corrective action. Did any of those three types, corrective, compensating, and cultivating goodwill, did any of those actually hurt sales? Yeah, we found in our analysis of real-world brand sales and in the lab studies

Starting point is 00:04:38 that cultivating CSR actually hurts purchase intentions and results in a slight drop, about three and a half percent drop in sales when they are cultivating, doing cultivating CSR. So this is if a brand has like nothing to do with, I don't know, the homeless, but they're donating money to the homeless instead of working on corrective or compensating. That impacts sales negatively. Why do you think that is? Exactly. So one of the things we tested in the lab was sincerity, the sincerity of the brand's initiative. And so that came out. So consumers tend to think that corrective and compensating CSR actions are quite sincere,

Starting point is 00:05:21 with corrective being the most sincere. And cultivating is seen as relatively insincere. And the intuition there is that it's a distraction, taking away resources. So you're investing this money into, if you're Starbucks, they had a Race Together campaign some years back, 2015 or so. They got a lot of backlash for that. But you're investing in this initiative that doesn't help an issue that you already may have a problem with help or even to invest it. You're not even invested in improving your product. So it's just going towards something that, you know, is seen as trying to cultivate the goodwill of consumers as opposed to, you know, working on your product or any issues that you

Starting point is 00:06:03 might have. Hey, premium podcast listener, I'm just interrupting this for a moment to, you know, working on your product or any issues that you might have. Hey, premium podcast listener, I'm just interrupting this for a moment to remind you that next week we have two expert live streams for you. The first on Monday will be all about Google Ads. Jill Saskengales will join us to answer your questions. She spent six years at Google. The second on Wednesday, Facebook ads with veteran Facebook ad consultant Andrew Foxwell will be covering everything from how to know when to scale a winning campaign, some of his favorite custom metrics, and more.

Starting point is 00:06:29 Both happen at 11.45 in the morning Pacific time. That's 2.45 Eastern time and I think 7.45 PM London time. These expert live streams are a benefit of being a premium member. So thanks again and back to the interview. I'm thinking about a brand that might or a small business even that might not have any direct negative social or environment impact that you know corrective action might be taking i'm thinking like a small business owner who sells jewelry online for instance should they still stay away from cultivating goodwill or should they look

Starting point is 00:07:02 deeper to find something in their supply chain like maybe the impact of diamond mining or something and use a corrective or compensating model on that yeah so there's a recent um report carbon majors report i think this i was looking at the one from 2017 or 2018 that said 100 companies are responsible for about 70 percent of greenhouse gases so that means that and even our study we studied larger brands from larger corporations so most of the onus when it comes to corporate social responsibility it should be on larger companies because they have the outsized impact on society and environment but when it comes to a smart organization, I think that,

Starting point is 00:07:46 you know, as I said before, you should be aware as a company, even a small company, of any issues in your supply chain or things of that nature, because it could come back to bite you later on. And, you know, when it comes to, you know, corrective, maybe there are some things that are a lot more difficult for a smaller business to correct. But when it comes to how they treat their employees, that's something that is very much within their purview to do. So I would say maybe you can focus on cutting down your own waste, your use of energy, your relation to employees.

Starting point is 00:08:21 So there are ways of engaging in corrective CSR for small business that are feasible. Your relationship to the community that you're operating in, so things of that nature. But what was your methodology here to find that correlation to brand sales? I understand part of it involved studying news releases. Yes. So we actually looked at 80 different CSR press releases for consumer packaged goods brands. And then we collected weekly sales data for one year before the announcement and one year after for the brand in question and a set of competitor brands. On average, we had about five competitor brands. From there, we collected data on the brand CSR reputation. We actually devised an

Starting point is 00:09:06 index where we recorded the number of instances where the brand for the year prior to the CSR announcement for the brand and each of its competitors, if it announced its CSR annual report, any sustainability awards, a new sustainability website, all of those things to get an idea of their reputation. We also looked at whether or not the CSR announcement was related to the environment or to social issues. And then finally, to rule out other reasons that the brand sales could increase or decrease, we collected data on the brand's products, prices, the intensity of its distribution,

Starting point is 00:09:47 because we looked at 48 designated market areas in the United States, advertising sales, spending. We looked at display or promotion in the stores and negative and positive press coverage. And this is why I'm not an academic person, because I would have no patience for that. I'd get about an hour in and just be completely overwhelmed by the data. I leave it to the people who are good at it. Yeah, it was a lot of data collection. It sounds like it.

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Starting point is 00:10:54 Is there any kind of amplifying effect or are their sales changes going to be more modest? Their sales changes are going to be more modest. And, you know, we attribute that to a ceiling effect. So these brands actually are already doing the right thing or moving in the right direction, and so doing more doesn't give them as much of a sales lift. So for compensating and corrective, they're going to get a sales lift, but not as much as maybe a lower reputation brand where it's more unexpected. It changed a lot of things, and consumers are reacting more positively.

Starting point is 00:11:25 But I liken it to ad sales. I mean, everybody knows Coca-Cola, but they still spend on ad sales. It's just expected to keep it at top of mind. And with a higher reputation brand, there's just an expectation that they're going to be doing the right thing. And so they need to continue doing it anyway. You mentioned earlier, there were sort of, in addition to the three C's, there were also sort of different topic focuses as well, and two kinds in that area, environmental programs and social programs, so things like employee wellness and so on. Did you find that one of those was better in terms of driving sales? Yeah, we found that at least for corrective and even cultivating when brands engage in environmental CSR.

Starting point is 00:12:08 Corrective is going to get a higher sales boost, and cultivating is going to get them out of the negative into a positive sales increase. For compensating, there's no difference for environmental or social. It's both. Both of them are positive. And we attribute that to just the fact that consumers are more aware of brands' impact on the environment. And also, when it comes to social issues, there may be groups or issues that consumers feel more or less comfortable with. So you can think of breast cancer as seen as relatively acceptable to donate to, but maybe some other issues, maybe that are seen as more politically motivated

Starting point is 00:12:50 or activists or brands engage in that, consumers may not like that. I see, that's interesting, because if I had my money to put down on which consumers would respond better to, environmental or social, I would have picked social. Yeah, I think a lot of people would have.

Starting point is 00:13:05 But when you, you know, kind of think a little deeply, and there's a paper that some researchers came out with last year in the Journal of Marketing that showed that activism from a corporate standpoint can hurt the brand in terms of like stock price and things like that. So it's documented as well. A lot of the reporting around this topic usually includes, as I did, in fact, a mention that corporate social responsibility is especially important to young people. Did I get that wrong? How much more broad are these concerns than just Gen Z and millennials? I think that in general consumers, although in this paper we did not look at age,

Starting point is 00:13:48 but in general, this is just from my research and other readings that I've done, consumers are more aware of these issues. We're just a lot more interconnected. It's a lot easier to share information right now, but definitely the younger generations are even more concerned about that. And you can think, you know, it makes sense. They are growing up seeing a lot of these climate disasters, and they're going to have to live with it a lot longer than even us. So I think that they expect companies to engage in some sort of way in terms of the environment and society. Can we talk a bit about marketing science as a whole? My wife is a public health scientist. She tells me that it takes 17 years for research knowledge in health to make it

Starting point is 00:14:41 to the patient's bedside. Is that a problem in this field as well? I would say that a lot of my colleagues, first of all, they do work with companies, you know, to get data and help them with, you know, some of the issues that they are facing. So that's one thing that's just clear. But on the other hand, I would also say that, you know, I'm an academic researcher. And so think about a political science professor. They're not necessarily every paper that they write or book they write is going to be taken up by one of our political parties and applied. Sometimes when it comes to academia, you're studying things over a longer term to understand greater phenomena, and companies might not have time to wait for that.

Starting point is 00:15:28 So I think it's an aspect. There are two aspects to it. There are people who are working directly with companies. And I have a paper where I'm interviewing chief marketing officers right now looking at brand inclusivity. But there are some projects that I'm working on that are, this one took a longer time. We had to analyze the data.

Starting point is 00:15:50 And so it just, I think it depends. It's interesting because I've always thought that it's, that there's a gap between the academic world that's observing these data and then the boardrooms where those decisions are made. And as you point out wisely, I think that's, you know, I guess it varies really more than anything. But the frustration, especially, I mean, I'm just thinking like in terms of us researching this and trying to get access to the data, it's in complicated language, it's behind journals that have paywalled stuff. It's funny that these, I'm not asking you, I'm not trying to get you to defend marketing science as a practice, but does it frustrate you that there's a gap often between the work that you're doing and the knowledge that you're sharing and the people

Starting point is 00:16:39 who are making the decisions that should be taking those things into account? Yeah, I would say there is some frustration, but I think that one of the things, for example, journals like the Journal of Marketing, they're trying to have a greater interface between researchers and the public, whether it be practitioners or even just consumers. So we're trying to, you know, there is work trying to get that interface, you know, between those groups. And then I also think that there can be

Starting point is 00:17:15 a difference. So I might study things and make recommendations that brands just will not do because I can take a longer term view of things. When it comes to corporate social responsibility, that's exactly what's needed. Whereas at least most companies and definitely most publicly traded companies, the focus is on profits and very shorter, on a very shorter term, maybe a year or so. And these issues that are very serious when it comes to, you know, CSR and sustainability take a much longer time to deal with. Can you tell me about your next research? You mentioned CMOs and brand inclusion. I understandtsville. We are working on looking at corporate social responsibility announcements in the last year and a half. So we're going to be able to kind of look at COVID and the Black Lives Matter, all of these different things that have

Starting point is 00:18:16 come up and looking at the difference in response in terms of stock price and social media, which would be more of the consumer end. So which types of initiatives are likely to impact stock price more? Which ones are likely to impact Twitter chatter, which can ultimately impact how consumers are responding to the brand? So we're really excited about it. We've collected the data and started some analyses already. Well, let's stay in touch. I'd love to report on that when it's out.

Starting point is 00:18:45 Oh, yes, definitely. Professor Nickerson, thank you so much for your time. Thank you.

Today in Digital Marketing - Have We Been Doing Corporate Social Responsibility All Wrong?

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