Assessing the Prerequisite of Successful CSR

Citation preview

Springer 2008

Journal of Business Ethics DOI 10.1007/s10551-008-9729-9

Assessing the Prerequisite of Successful CSR Implementation: Are Consumers Aware of CSR Initiatives?

ABSTRACT. As a reflection of the values and ethics of firms, corporate social responsibility (CSR) has received a large amount of research attention over the last decade. A growing area of this research is the CSR–consumer relationship. Results of experimental studies indicate that consumer attitudes and purchase intentions are influenced by CSR initiatives – if consumers are aware of them. In order to create this awareness, business is increasingly turning to ‘prosocial’ marketing communications, but such campaigns is met with scepticism and their effectiveness are therefore uncertain. Consequently, researchers in the field (for example, Maignan, 2001; Mohr et al., 2001) have called for empirical studies to determine the level of actual consumer awareness of CSR initiatives. This study examines the Australian banking sector, which engages in and promotes its CSR activities, to help fill this gap. Results from our qualitative study with bank managers, and our quantitative study with consumers, indicate low consumer CSR awareness levels. Consumer understanding of many of the social issues banks engage with is also low. While CSR is effective in eliciting favourable consumer attitudes and behaviour in theory, CSR has not proven its general effectiveness in the marketplace. The low consumer awareness of the various social issues in which firms engage with their CSR programs suggests that firms may need to educate consumers, so they may better contextualise CSR initiatives communicated. However, better context may amount to little if claimed CSR initiatives are perceived as inconsistent with other facets of the business that reflect its values and ethics. KEY WORDS: banks, communication, awareness, corporate social responsibility

consumer

Introduction Values, ethics and corporate social responsibility (CSR) are linked in the culture and management of

Alan Pomering Sara Dolnicar

a firm (Joyner and Payne, 2002). CSR is ‘the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life’ (World Business Council for Sustainable Development, 2004). As an ethical business philosophy, CSR might be thought of as the minimisation of negative externalities of a firm’s operating activities and the maximisation of beneficial impacts on society (for example, Mohr et al., 2001). While attempts to justify CSR on purely normative grounds were open to criticism, particularly from neo-classical economists like Friedman (1970) who saw such practice as a breach of the manager’s fiduciary duty to the firm’s owners, the establishment of a link between CSR and financial performance (Orlitzky et al., 2003) has now provided the ‘business case’ for CSR, what Mintzberg (1983) calls ‘enlightened self-interest’, as a powerful justification for firms engaging in CSR initiatives. For this business philosophy to be successful then, and this success sustained, it must ultimately be rewarded in the marketplace by consumers through their purchase behaviour. For consumers to act as ‘rewarding and punishing authorities’, who, through their purchase decisions, ‘influence the profits of competing firms, and indirectly also the direction of the economy’ (Hansen and Schrader, 1997, p. 447), however, it is important they are informed of which firms are and are not socially responsible. Marketplace polls report that consumers not only expect businesses to be socially responsible, but they also want to be informed about what firms are doing, and will support firms that pursue CSR initiatives. A 23-nation poll of public attitudes to CSR found that

Alan Pomering and Sara Dolnicar Australians have amongst the highest CSR expectations of business (Environics, 1999). Cone Inc. (2004) found that 86% of American respondents said companies should tell them how they support social issues. In the UK, 74% of respondents indicated that more information on a company’s social and ethical behaviour would influence their purchasing decisions, and 86% thought companies should actively communicate their CSR activities (Dawkins, 2004). These survey results show a strong consumer demand for CSR information and imply that CSR information could significantly affect consumer behaviour, leading to what Hansen and Schrader (1997, p. 444) describe as ‘consumer responsibility’. CSR’s ability to produce positive consumer attitudes and purchase behaviour has been extensively investigated, particularly using the experimental approach, where consumer awareness represents the independent variable that is experimentally manipulated (see for example, Auger et al., 2003; Brown and Dacin, 1997; Creyer and Ross, 1997; Sen and Bhattacharya, 2001). Consequently, ‘awareness’ plays a major role in previous research into CSR effectiveness. While the effect of awareness has been demonstrated in laboratory settings, it remains unclear whether real consumers are aware of CSR activities when facing real consumption decisions, leaving a gap in our understanding of the CSR– consumer nexus. If consumer awareness is low, the effect of CSR initiatives on purchasing behaviour is only of theoretical, not practical, relevance. This has prompted several researchers (for example, Maignan, 2001; Mohr et al., 2001) to call for research to determine the true level of CSR awareness among consumers. This study primarily aims to investigate this knowledge gap, as it presents a key inhibition to the rewarding and punishing influence of consumer responsibility. It also aims to gain an insight into consumer CSR information demands, including identifying the most trusted media opportunities for CSR communication. Our study acknowledges the ethical issue of whether CSR should be used cynically for ‘public relations’ benefits, especially when it is not representative of the values and ethics of the firm, but does not include discussion of this issue here. Instead, our approach recognises that firms face a difficult task in seeking to publicise particularly sensitive areas of their business, such as their CSR

programs, and we investigate issues around the effectiveness of such communication behaviours (Pomering and Dolnicar, 2007). Given the unverifiable, or ‘credence’ nature of many CSR claims, such information obtained directly from firms is likely to be treated with a greater degree of scepticism than more provable ‘search’ and ‘experience’ claims. We examine these questions in the context of the Australian banking sector, chosen because (1) it represents the single-most active business sector with respect to CSR, illustrated by the fact that Westpac has dominated Australia’s annual Corporate Responsibility Index since its introduction in 2003. Other banks now imitate Westpac’s positioning approach. (2) For the consumer, banking is a high-involvement service, characterised by being important to the consumer, risky, and infrequently purchased. Note that the purchase in this case does not refer to day-to-day banking interactions but the decision to become a customer of a bank. This is typically a very infrequent decision and bank customers tend to stay loyal to their banks over long periods of time. As a consequence, consumers engage in complex buying behaviour (Kotler et al., 2006). Investigating a high-involvement category is important because consumers process information actively before making a purchase decision. It can, therefore, be assumed that CSR information would also be processed as part of the decision making process. In a low-involvement case, cognitive processing is minimal, and therefore CSR should have little, if any, effect on purchase decisions. (3) The consumer has an ongoing relationship with their bank. Consequently, the bank has considerable potential for customer contact and marketing communications via numerous high-contact (Lovelock et al., 2004) ‘touch points’, including customer interactions with bank staff in retail branches, and lower-contact interactions via, for example, Internet banking, automatic teller machines and account correspondence. (4) The Australian banking sector has experienced considerable consumer disaffection over the past decade, due to unpopular operational practices, such as the introduction of fees and the closure of retail branches in rural areas (Kohler, 2003). As a result of this disaffection, banks thus see CSR as a suitable avenue to re-engage with communities and improve their corporate images. While Porter and Kramer (2002) argue that CSR objectives can

Assessing the Prerequisite of Successful CSR Implementation produce competitive advantage, and Auger et al. (2003) and McWilliams and Siegel (2001) emphasise that if CSR is to act as a point of differentiation in a competitive ‘tiebreaker’ situation, awareness of a firm’s CSR activities is crucial. Claims of socially responsible behaviour that conflict with consumers’ perceptions of banks, based on their marketplace knowledge, may not be accepted, however. Where CSR programs are cynically perceived to be used as a corporate image tactic, rather than a genuine reflection of a firm’s values and ethical commitment, such claims may backfire. Our study does not measure the depth of such scepticism or cynicism, but seeks instead to highlight the effectiveness of CSR communication efforts. Nor does our study examine the ethicality of banks’ informing consumers of their CSR activities; such ethicality is assumed, given consumers’ need for information to be able to act as citizen consumers, rewarding ethical firms and punishing unethical firms, and firms’ obvious benefit in making such information available. We contribute to knowledge by determining the true level of CSR awareness among consumers in an industry sector in which member firms actively disseminate CSR information to influence perceptions of corporate image, and hence consumer favour. We see consumer awareness as the required precondition for consumers rewarding businesses for ethical behaviour. Such reward is critical as it helps to make ethical business philosophy compatible with profit maximization aims and therefore sustainable.

Prior work This section reviews prior work underpinning the present study, specifically in the areas of firms’ CSR communication strategies, consumer awareness of CSR initiatives, consumer CSR information demands, as well as the extent to which consumers trust alternative communication channels for such information. Regarding the role of awareness, Mohr et al. (2001) note that academic research into consumer response to CSR activities typically either assumes consumers awareness, or artificially creates it under experimental conditions. Among such studies are those of Brown and Dacin (1997), Creyer and Ross (1997), and Sen and Bhattacharya (2001). Brown

and Dacin find that a company’s CSR record creates a general context, for the evaluation of its products. Creyer and Ross, focusing on ethics rather than CSR, demonstrate that preference for a company’s products is linked to the extent the company’s ethical behaviour exceeds consumer expectations. Sen and Bhattacharya reiterate the general context result of Brown and Dacin, and conclude that consumers’ positive response to CSR is mediated by their selfcompany congruence, and moderated by their support for the specific CSR domain, but the impact on consumers may lessen if CSR is perceived to be at the expense of product quality. Maignan (2001) criticises the above studies for drawing conclusions on too narrow a conceptualisation of CSR and focusing only on one or two CSR activities. Commenting on Brown and Dacin’s (1997) findings, Maignan (2001, p. 58) acknowledges that, while typical of philanthropic responsibility, the two activities manipulated as the independent variable (corporate giving and community involvement) ‘do not represent the full spectrum of CSR initiatives’, leading her to conclude that past research offers very limited insights into consumers’ views of CSR behaviour. Instead, extant studies typically focus on one or two ‘social’ dimensions, which are then often taken to be an expression of CSR. Mohr et al. (2001, p. 48) state that there is a distinct lack of studies which measure general consumer awareness of CSR initiatives, presumably because ‘CSR is a broad and complex concept that is challenging to measure’. Auger et al. (2003) move towards filling this gap. In a cross-cultural choice experiment focusing on the athletic shoes and soap product categories, Auger et al. find that, while consumers are reasonably confident in their knowledge of the functional features of the products they currently buy, they have difficulty recalling some of the most basic ethical characteristics of these same products. Of subjects from Hong Kong, for example, 90% could not recall the ethical features of their current bath soap, and only 5% could recall the ethical attributes of their athletic shoes. By comparison, Australian subjects had slightly higher recall of 80% and 10% respectively. A lack of awareness and understanding of companies’ CSR achievements is one explanation for the disconnection observed between attitude and

Alan Pomering and Sara Dolnicar actual behaviour (Mohr et al., 2001; Bhattacharya and Sen, 2004). Bhattacharya and Sen (2004, p. 14) also report from focus group and survey research that, apart from a handful of ‘CSR mavens’, ‘large swaths of consumers do not seem to be aware that by and large most companies engage in CSR initiatives’. According to Mohr et al. (2001), consumers have difficulty acquiring and storing CSR information about the firms they buy from. Dawkins (2004, p. 4) identifies the problem at an earlier stage of the process – the corporate communication stage – proposing that effective communication of firms’ CSR programs is ‘a rare achievement’. Roberts (1996, p. 80) suggests that socially conscious attitudes may not result in behaviour, because ‘scant data exist on how most companies perform on any number of social criteria that might affect a consumer’s decision’. While Auger et al. (2003, p. 299) also highlight a lack of consumer awareness of firms’ CSR records, they go further, noting that ethical awareness levels – that is, knowledge of the ethical and social issues around which firms are framing their CSR initiatives – are surprisingly low, especially given the ‘occasionally extensive media coverage afforded to ethical issues’. They conclude that consumers may act very differently when CSR information is provided. While prior work indicates that consumer awareness levels of CSR initiatives are not very high, Dawkins (2004) concludes that consumers are in fact quite interested in learning more about CSR initiatives and that, consequently, CSR-related marketing communications present an opportunity to shape organisational image and brand beliefs. ‘Prosocial’ marketing initiatives can form a marketdifferentiating strategy (McWilliams and Siegel, 2001), build brand equity (Hoeffler and Keller, 2002), and lead to customer loyalty and other positive post-purchase outcomes (Bhattacharya and Sen, 2003). In a Danish study, for example, Schultz and Morsing (2003) found the use of CSR engagement for marketing communication purposes distasteful to some consumers, even though, ironically, consumers may otherwise possess little if any detailed knowledge about a firm’s CSR activities. Due to the sensitive nature of CSR communications, Schultz and Morsing conclude that CSR initiatives cannot be advertised in the same way as products, services or

brands typically are, thus posing a much more complex challenge to marketers. Drumwright (1996, p. 71) finds that ‘company advertisements with social dimension have been among the most controversial of marketing approaches,’ seen on the one hand as ‘marketing’s greatest contribution to society,’ while on the other, ‘as marketing’s most unabashed exploitation.’ Highlighting the risks of such perceived exploitation, Morsing (2006, p. 176) reports that despite the Danish telecom giant TDC’s repositioning from a high-profit shareholder driven company to a more socially responsible organisation, with an extensively communicated CEO-endorsed CSR commitment and several CSR initiatives, TDC’s CSR message has been ‘met with scepticism, disbelief, and accusations of window-dressing.’ Communicating CSR initiatives is problematic. Trust in the information source is critical for CSR communication success (for example, Maignan and Ferrell, 2001). Consumers have a natural tendency to be sceptical of advertising, more so than towards other information sources (Obermiller and Spangenberg, 1998). Consumers also react to marketers’ perceived attempts to persuade, as explained by Friestad and Wright’s (1994) Persuasion Knowledge Model. Communicating CSR through traditional advertising is perceived by many consumers as overaccentuating the good deeds of the company, which can lead to scepticism about the message, and cynicism towards the firm’s motives. Webb and Mohr (1998, p. 237), for example, find that cause-related marketing, where the firm contributes an amount of money per unit sold to a non-profit partner organisation, is the ‘easiest way for a company to educate the consumer about its philanthropic activities, yet the involvement of advertising, a particularly distrusted form of communication, amplifies cynicism’. While consumers express the desire for information on firms’ CSR records, the communication of CSR initiatives is therefore a challenge for the CSR marketing communicator. Morsing and Schultz (2006) find that consumers prefer CSR initiatives to be communicated through so-called ‘minimal release’ channels (such as annual reports and websites) over the use of traditional communication channels. Given these informational issues, we might only guess at the levels of consumer awareness of firms’ CSR initiatives in the marketplace. While Auger et al. (2003) report consumer knowledge of

Assessing the Prerequisite of Successful CSR Implementation the ethical features of products they purchase, and the actual ethical issues involved, is low, the precise level of this unawareness remains uncertain. Assuming the responsible consumer needs this information in order to make critical, economydirecting purchase decisions, we investigate an industry sector that claims it is actively engaged in CSR initiatives in order to address this gap.

Methodology Regardless of consumer support for particular CSR domains and perceived trade-offs with functional attributes (such as price and quality), prior work suggests that the lack of consumer response to firms’ CSR initiatives has two primary sources. Companies have not strongly communicated their CSR initiatives (Carrigan, 1997; Dawkins, 2004; Work Foundation, 2004). Or companies have communicated their CSR initiatives, yet consumers are unaware of them, which could be due to a multitude of reasons including bad communication campaigns, lack of attention by consumers, inability of consumers to place CSR information into relevant context, etc. If organisations do not even attempt to communicate their CSR initiatives, high consumer awareness would not be expected to develop (although it may well develop though word of mouth or other channels of communication which are not under the direct influence of the organisation). If organisations do communicate their CSR activities, it may be assumed that consumers will be at least somewhat aware of them. This assumption underpins most prior work in CSR, where information is provided to respondents and the effect on purchase intentions is measured as outcome. This study investigates whether this assumption is supported empirically, and examines a business sector in which active engagement in attempts to communicate CSR activities is common. Note that the assumption of CSR advertising effectiveness is not trivial, as the main object of communication is typically enhancing the product, service or brand, not the CSR initiative. It is therefore possible that CSR advertising efforts are not successful because consumers pay attention only to the core information relating to

the product, service or brand rather than the information on CSR initiatives.

Stage 1: Qualitative study of corporate communication behaviour We conducted personal interviews with the ‘big four’ Australian banks’ executives with responsibility for CSR programs to gain insight into their CSR activities and communication strategies. We conducted personal interviews in order to identify which CSR knowledge consumers could theoretically have if communication programs achieved their goals, and to understand fully the ‘supply side’ of these banks’ CSR communications. Personal interviews followed a pre-tested question protocol, and each were approximately 60–90 minutes long. These were later cross-referenced to written material outlining the brand’s CSR communications, such as websites, annual CSR reports and employee newsletters. Questions sought insights into the following areas: how the bank defines its responsibility to society; why the bank defines a responsibility to society beyond that of its responsibility to shareholders; within which domains and through what activities that responsibility is articulated; to whom the bank communicates about its CSR record; what gets communicated; how this is done; whether communication objectives are in place and results measured; and whether the bank believes it has an educative role in informing consumers about CSR issues.

Stage 2: Quantitative study of consumer awareness The second stage of the study involved a consumer survey to gain insight into the ‘demand side’ of CSR communications. We used an Australian permissionbased Internet panel to conduct the fieldwork. The approximately 120,000 panel members are recruited through a number of channels to be representative of Australia’s population based on census statistics. We assumed a 40% response rate, and 1,000 randomly drawn panel members were invited to participate. The online interface was closed when the required number of responses was achieved. The final sample

Alan Pomering and Sara Dolnicar consisted of 415 respondents. Respondents were qualified by their use of an Australian banking service provider to participate in the survey. The following questions were included in the survey: 5. 1. Specific verbal CSR recall was used to measure specific CSR awareness of respondents. We developed a list of 20 social initiatives of Australia’s big four banks, using the banks’ websites and information from the interviews. One example for such a list item was ‘Partners with Good Shepherd Youth and Family Services’. Respondents were asked to assign each initiative to a particular bank, or to state that they were unsure which bank was engaging in this initiative. 2. Specific graphical CSR recall served as the second measure of specific CSR awareness. The question structure for this question was similar to the verbal recall question, except it contained 16 graphical stimuli (logos of CSR partners). This approach is particularly realistic, since partners’ logos typically appear in the banks’ marketing communications, such as websites, point-of-sale displays in retail branches, and correspondence. 3. General awareness of CSR initiatives was measured using the question: ‘Are you familiar with any initiatives your bank is involved in which are aimed at improving social or environmental conditions in your community?’ Respondents were asked to answer using a full binary (yes/no) answer format. Note that it may have been interesting to include another question which would aim at understanding whether consumers have even more general associations about banks engaging in CSR without even being able to state a specific initiative. The value of such a question was highlighted by a reviewer, but we were at this stage not able to include it in the survey. We discuss this possibility of interesting follow-up research relating to this idea in the Conclusions section. 4. Consumers’ interest in bank-related information was measured by asking respondents which kind of information they would like to be regularly informed about by their bank.

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A list of nine bank-related pieces of information was provided, relating both to the core product (for example, fees and charges) and CSR initiatives (for example, support for the arts). Current information received was measured by asking respondents to respond on a binary scale to: ‘Does your bank regularly inform you about…’ Respondents were presented with the same list as described above (in 4), in order to compare information needs/ demands with banks’ current information supply. Information source trust. As source trust is important in information processing (for example, Maignan and Ferrell, 2001), and influences strategy for optimal communication, we asked respondents which information sources they would trust for learning about their bank’s performance on social issues, and which information sources they would trust for learning about financial products, fees and interest rates. Respondents were presented with a list of options, including ‘family and friends’. Respondents were asked to respond by ticking ‘yes’ or ‘no’. Information source use was measured by asking respondents to state for each of the abovelisted information sources to answer: ‘From which information sources have you learned a lot about your bank?’ Respondents responded by ticking ‘yes’ or ‘no’. Awareness of social issues. Prior research suggests that higher levels of knowledge about social issues lead to a greater response to CSR activities (see for example, Auger et al., 2003). Respondents had a list of 12 social issues (for example, financial skills of indigenous Australians) which appeared on bank websites in relation to their CSR initiatives. Respondents indicated their perceived level of awareness of each issue on a seven-point scale ranging between ‘very low’ and ‘very high’. Consumers’ evaluations of CSR responsibilities were measured using four items from a 16item, four-factor scale (Maignan, 2001) covering all areas of business responsibility identified by Carroll (1991): economic,

Assessing the Prerequisite of Successful CSR Implementation legal, ethical and discretionary. On a sevenpoint scale ranging between ‘strongly disagree’ and ‘strongly agree’, respondents rated the following statements: (1) To what extent do you believe businesses must maximise profits? (2) To what extent do you believe businesses must play a role in our society that goes beyond the mere generation of profits? (3) To what extent do you believe businesses must refrain from bending the law even if this helps improve performance? and (4) To what extent do you believe businesses must be ethical even if it negatively affects economic performance? 10. Consumers’ stated support of socially responsible businesses was measured by asking respondents, on a seven-point scale, ranging between ‘strongly disagree’ and ‘strongly agree,’ to rate the following statements: (1) I would pay more to buy products from a socially responsible company; (2) I consider the ethical reputation of businesses when I shop; (3) I avoid buying products from companies that have engaged in immoral action; (4) I would pay more to buy the products of a company that shows caring for the wellbeing of our society; and (5) If the price and quality of two products are the same, I would buy from the firm that has a socially responsible reputation.

Results Stage 1: Qualitative study of corporate communication behaviour Banks typically defined their responsibility to society in utilitarian terms of profitability and shareholders, achieved via considering the needs of other stakeholders. A universal thread in the four executives’ responses was the recent acknowledgement that different stakeholders could affect the business’s overall performance. In the words of one executive, the need for CSR was precipitated by a crisis: Banks were hated, banks could do no right. Around 2000, we realised we couldn’t continue to operate

without listening to customers and key stakeholders… If we’d have been less arrogant as a corporation, we probably wouldn’t have found ourselves in this sort of situation.

The CSR was articulated via various domains, from environmental management to philanthropic support of the arts. The development of the community’s financial literacy, especially for society’s more disadvantaged members, was captured in several banks’ CSR programs, as was responsible lending. Activities within these domains included employee volunteering, matched giving programs, financial support for sport, the arts and medical research, and engaging employees with environmental concerns. Employee support was generally seen as an important first step to securing customer support, with low staff satisfaction levels prior to CSR program introduction cited by several interviewees. Several interviewees stressed the importance of internal communications and getting all employees to ‘live the values’, reflected in this comment: We had to get our house in order first, to live the values, so our values were evident in every interaction with us.

Banks typically provided information about their CSR activities to internal and key stakeholder groups. In an effort to improve employee satisfaction and leverage that satisfaction to influence service transactions with customers and customer satisfaction, CSR was seen as an important internal marketing issue. Employee–customer relationships could be deepened through value-driven personal selling, aimed at ‘restoring customer faith’, as one bank executive referred to it. One interviewee commented on her bank’s point-of-purchase communications: Ultimately what we really want to do in this area is make this a point of competitive differentiation. We want people to go: ‘Well, all the banks seem pretty much the same, but this bank has got a great product and I know they are an ethical and responsible company, therefore, I will choose them.

Intranets and staff magazines disseminated the message internally, while websites and locally focused in-branch poster and brochure promotions communicated the stories out to customers. One

Alan Pomering and Sara Dolnicar executive reported that most of their bank’s advertising was brand related or financial product related, but in its point-of sale promotional materials the bank focused on what it was doing in the community and for its staff. Another executive described how print advertising was undertaken to acknowledge and thank employees – the bank’s ‘family’ – for their role in the success: It was basically our way of trying to advertise that we got to number one [in the annual Corporate Reputation Index], without advertising the fact that we got to number one. We’re very, very cautious.

The banks typically perceived distinct external stakeholder audiences, and communicated accordingly. Finance industry analysts and shareholders, for example, were considered key recipients of more formal and detailed reports, such as Westpac’s Stakeholder Impact Report and websites. Consumers were exposed to CSR information primarily within the retail branch network – particularly through local community initiatives which local staff might participate in – or through mass communication advertising campaigns, such as the ANZ’s Seeds of Renewal television campaign, promoting the bank’s support for rural communities. While interviewees generally acknowledged that specific objectives were set for CSR communications, these were generally framed in terms of delivering on general business objectives, such as increasing staff satisfaction. One bank, having designed the internal marketing program Living the Values, said they used a ‘cultural diagnostic tool’ to measure how successfully they were communicating the Living the Values theme. While all interviewees agreed their banks had not yet positioned the brand around CSR, the opportunity for such marketing communication was under consideration: CSR has become an issue that matters; it’s a very different time and space for the bank, especially under the new CEO.

The banks are at different stages in how they see their CSR ‘sense-giving’ role. On whether banks saw an educative role for their CSR communications. One executive said: That’s what we try to do. Often when we participate, or fund research, we’re doing it with the explicit intent

of growing the maturity of the consumer or financial markets around understanding these initiatives.

Sounding a cautionary note, however, another offered: I’m not sure if customers want to know all that detail. As a customer of the bank, am I more concerned about the open and honest structuring of the cost of your services?

The interviews with CSR executives in four major Australian banks led the researchers to conclude that: (1) banks were using CSR to help respond to a crisis in marketplace confidence; (2) banks’ CSR communications were primarily aimed at internal customers; (3) banks communicated their CSR initiatives at the local branch level; (4) banks communicated to specialist audiences, for example, shareholders and finance industry analysts, via their websites and special reports; and (5) banks’ overt communication of their good deeds via advertising campaigns was tempered with caution for a potentially sceptical marketplace. All four banks are communicating their CSR activities to the general public, making them suitable entities for the consumer awareness study.

Stage 2: Quantitative study of consumer awareness Awareness of CSR initiatives The verbal and graphical recall questions (the variables used to measure consumers’ specific awareness levels) were analysed from two perspectives. We used the number of correct assignments of CSR initiatives with banks, then analysed how many respondents stated that they were unsure about the answer. This latter response option indicated not only that a respondent was unable to provide the correct response, but also that they were aware of their inability to make a correct assignment. Figure 1 provides the results for the number of correct assignments, and shows that the level of specific awareness is very low. Two-thirds of all assignments of logos and banks were incorrect. The pattern is very similar for both the verbal and the graphical stimuli. The results from the analysis of the number of respondents who ticked the ‘unsure’ answer options

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Figure 1. Percentage of correct assignments of verbal and graphical CSR initiatives to banks.

for both verbal and graphical recall items support the above findings, in terms of the generally low level of awareness for CSR activities. On average, respondents stated unsureness about 13 of the 20 verbal stimuli. Forty per cent of respondents stated they were unsure about every one of the verbal items presented. Across all 14 graphical recall items, respondents stated on average they were unsure about 12. Fifty per cent stated they were unsure about 14 of the 16 graphical items presented. The two most-recalled verbal items were ‘sponsoring of Cricket Australia by the Commonwealth Bank of Australia’ (13%) and ‘Beyond Survival Workshops for women’ offered by Westpac (7%). The most-recalled graphical items were ‘the Australian of the Year’ (12%) supported by Commonwealth Bank of Australia, and ‘the Starlight Children Foundation Australia’ (6%) supported by the ANZ Banking Group. For most of the recall items that achieved the highest recall values, it is likely that the respondents who recalled them correctly represent a very specific market segment. Chi-square tests indicate that respondents who recalled the sponsorship of Cricket Australia correctly were significantly more frequently under the age of 45 (p < 0.01) and were more likely to have a university degree (p < 0.01). While the percentage among men was 16, and only eight among women, this difference did not lead to a significant test result when all answer options were included. When testing correct versus incorrect answers only, men gave the correct answer significantly more frequently (p < 0.05) than women. A significantly higher proportion (p < 0.01) of respondents between 29 and 45 years could assign

the logo for the Starlight Children Foundation Australia correctly. Although parenthood status was not asked, this age bracket covers the parenting life stage of respondents. The specific awareness tasks are very detailed, but general awareness of banks’ CSR activities could also influence consumer behaviour. Analysis of the general awareness question supports the findings related to specific awareness: general awareness was low. Only 7% of respondents stated they were familiar with any initiatives their bank was involved in at all. The results relating to consumer awareness do not mirror the advertising campaigns which were running on several banks’ CSR activities during the fieldwork stage of the project. The fieldwork was conducted at the close of the summer cricket season, and this may account for a proportion of respondents who could recall the Cricket Australia bank brand association correctly. However, such a correlation was certainly not evident for the recall of a funding initiative for small rural communities. This was recalled by the fewest respondents – a surprising result because it was featured in a national television advertising campaign just before the fieldwork was conducted. Customising CSR activities to clearly defined market segments may be a communication approach superior to broadly communicating a CSR activity which is not directly relevant to the majority of the public through the mass media. Consumer interest in bank-related information When asked which kind of information respondents would be interested in obtaining regularly from their bank, the vast majority were – not surprisingly – interested in information related to the core banking products (accounts, interest rates, fees and charges). The first-mentioned CSR initiatives, confidentiality followed by environmental initiatives, were related directly to consumer concerns. Only 19% stated they were interested in being informed about their bank’s sponsorship activities, and only 13% were interested in information about equal employment opportunity initiatives of their bank. Figure 2 provides the full ranking of information needs. Figure 2 also contains respondents’ assessment of the kind of information regularly provided to them by banks. While the banks generally satisfied the

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Figure 2. Consumers’ information demand and supply.

needs for product-related information, major information provision gaps emerged in the area of CSR communication. Most strikingly, consumers wanted to know more about executive pay levels: approximately one third of the respondents stated that they would like to receive more information about executive pay levels and only 3% stated that they have been provided with this information. This mirrors the high level of scepticism Australians have about banks in general (Kohler, 2003). Informing consumers about the safety and confidentiality of their data was identified as a second area in which banks should improve their communication with consumers. Another ‘information gap’ emerged in the area of the banks’ environmental improvements or recycling efforts. These results indicate that the information needs of consumers are not currently met. Although only a minority of consumers showed interest in regularly receiving CSR information, this market segment, of between 10 and 20%, represents a group that could potentially influence the demand for CSR initiatives among other less information-sensitive consumers. Price, Feick and Higie (1987, p. 330) attribute this potential to the ‘web of word-of-mouth’. In considering the demand-side effects of informed con-

sumers, Price et al., 1987, pp. 328–329) contend that ‘even a significant minority of informed buyers who gather and use information in their personal purchases’ can encourage business to ‘alter product offerings to appeal to them, and other consumers will accrue the benefits of informed consumers’ market vigilance’. The reluctance of banks to match consumer demands for information on key operating activities, such as executive remuneration, may be interpreted as a lack of commitment to the values claimed in publicised CSR initiatives, undermining the legitimacy of those claims. Information source trust Interesting insights were gained from responses to the question about which sources of information respondents would trust (see Figure 3). Major differences in trustworthiness exist between different information sources under the control of the bank. Forty per cent of the respondents stated that they trusted their bank’s website, but only half as many (20%) trusted bank advertising. Bank employees were trusted by 26%; banks’ direct mail by 24%; and information available at the branch by 21%. However, sources not within direct control of the bank played a major role, if not the dominant role, in

Assessing the Prerequisite of Successful CSR Implementation 0%

Independent experts

10%

20%

30%

40% 41%

6%

70%

58% 62% 39%

Family/ friends Newspaper articles

12%

27% 18% 26%

Bank employees

41%

30% 24%

Bank’s direct mail (including email)

29% 32%

21%

Information available inside bank branches

20%

Bank’s advertising

52%

33% 34% 31%

16%

Television news

37% 35% 29% 44%

Magazine articles

Radio announcers

60%

40%

Bank’s website

Other internet sites

50% 46%

19% 18%

7% 13% 12% 6% 8% 3% 4%

Trustworthy - social issues Trustworthy - product info Used

Figure 3. Consumers’ trust in information sources and information source use.

the communication of CSR initiatives: almost half of respondents trusted independent experts, and information obtained from newspapers and TV news was evaluated as trustworthy by about one-third of respondents. This indicates that banks might consider an increased public relations effort to communicate their CSR initiatives, as opposed to advertising campaigns, which are more prone to consumer scepticism (Obermiller and Spangenberg, 1998). This recommendation is supported by the difference between the stated trust regarding information about CSR and product-related information. Newspaper and magazine articles, TV news and radio announcers were perceived as more trustworthy sources of information about social issues compared with bank-controlled information sources. Figure 3 contains the information sources used by respondents. Two-thirds used the Internet as an information source in banking matters; and almost half of the respondents stated bank advertisements, followed by information provided in the branches and through direct mail were used. Family and friends (word-of-mouth) were used by one-third of respondents. That our sample was collected through an online panel is relevant here because, while it was representative of the Australian population in all

major socio-demographics, it was clearly skewed towards individuals who tended to use the Internet. The high level of trust and use of the bank website should therefore be interpreted with care, because of the sample’s likely higher Internet use than the general population’s. Association with CSR-related personal characteristics We conducted correlation analyses to test our hypotheses that consumer awareness of social issues, their evaluations of CSR responsibilities, and their stated support of socially responsible businesses are associated with their awareness of CSR initiatives. Consumers generally reported a low level of awareness of social issues. The percentage of respondents who reported a ‘very high awareness’ of the 12 social issues taken from banks’ websites fell between one and 9%. The greatest number of respondents felt familiar with environmental issues – unsurprising, given the emphasis on green issues over the past several decades (for example, King and Mackinnon, 2002), including the work of organisations such as Greenpeace and discussions about the effects of global warming. Between eight and 34% of respondents reported a ‘very low awareness’ of the 12 social issues, with corporate funding of the arts the least familiar.

Alan Pomering and Sara Dolnicar Positive correlations emerged between consumer awareness of social issues and their correct answers to awareness recall items. The association with the verbal recall items is statistically significant at the 0.05 level (Pearson correlation: 0.119), but not significant for the graphical recall items. No association was detected regarding consumers’ evaluations of CSR responsibilities and consumers’ stated support of socially responsible businesses. These results suggest that focusing on individuals with specific interests (sports, charities and so on) is currently the superior strategy compared to trying to identify ‘generally socially responsible’ consumers, and trying to customise CSR communications for this heterogeneous group.

Discussion While CSR has been acknowledged to have positive influences on consumers’ attitudes when awareness is created under experimental conditions, several researchers (for example, Maignan, 2001; Mohr et al., 2001) have called for research to determine the level of consumer awareness of CSR initiatives in real marketplaces. This study addresses this call by investigating Australian consumers’ awareness of and dispositions toward banks’ CSR programs. The qualitative phase of our study provided insights into the main four Australian banks’ perspective on CSR: the Australian banking sector views CSR initiatives as a promising strategy to rebuild relationships with key stakeholder groups, particularly employees and consumers, damaged over the past decade or so as a result of employee and service reductions, and price increases, through fees and charges. Consumer disaffection with the banking sector, and its source, was acknowledged in the first stage of our research – as one interviewed manager put it: We were arrogant toward customers.

Several of the managers interviewed conceded that the increased interest in engaging in and communicating CSR initiatives is also due to the competitive pressure which newer community-based banks have exerted as they have entered the market and grown their customer bases. While it may be

easy for new brands to enter markets positioned as community-friendly and unencumbered by negative associations, repositioning a tainted brand is likely to prove more challenging. The major banks risk cynical consumers agreeing with the Public Relations Watch view that industry’s current infatuation with CSR has been seen as simply a response to ‘the worst orgy of corporate irresponsibility in at least the past half century’ (www.prrwatch.org, 2006). Although one of the interviewed executives anticipated consumers would see little difference between banks and would choose one they knew had a great product and was ethical and socially responsible, the stain of past, self-confessed arrogance towards customers may in fact disadvantage the established banks which have been perceived to act irresponsibly in the past, giving new entrants a comparative advantage in CSR differentiation, at least in the short term. Research into consumer boycott behaviour indicates that animosity may be maintained towards a perceived egregious organisation long after the organisation has ceased its egregious behaviour (for example, Ettenson and Klein, 2003), indicating that the competitive disadvantage of the established banks may even have longer-term consequences. Nonetheless, all the ‘big four’ banks, to varying degrees, have now accepted CSR as a new competitive frontier and are attempting to position their brands as contributing more broadly to society. Since these banks have taken the same approach of using CSR to improve their position in the marketplace, however, merely engaging in CSR cannot be expected to lead to a competitive advantage. Engaging in different kinds of CSR initiatives is necessary to successfully use CSR for market positioning purposes, and this appears to be what is happening in Australia. Westpac, for example, emphasizes having signed the Equator Principles which commits them to not lend money to socially irresponsible corporations, whereas ANZ positions itself as supporting indigenous issues, such as building financial literacy, and providing scholarships and employment opportunities for Aboriginal Australians. Results from the consumer awareness study indicate that: (1) both general and specific awareness levels of banks’ CSR initiatives are low, despite communication efforts made by Australian banks;

Assessing the Prerequisite of Successful CSR Implementation (2) banks currently do not satisfy consumers’ interest in receiving CSR-related information; (3) while bank-controlled communication channels are perceived as highly trustworthy with respect to product-related information, independent sources, such as the media, are more trusted regarding information about CSR; and (4) differences in respondents’ interests are a possible basis for improving CSR communication effectiveness through segmentation approaches. The banks’ moves to reposition their brands as socially responsible may be based on the generally positive results of recent CSR–consumer research, but such results have been based on consumer awareness of firms’ CSR records being either assumed or artificially created rather than real. Also presumed is that consumers are sufficiently familiar with the pertinent social issues to be able to discern the CSR initiative’s contribution to addressing the issue. Low awareness of banks’ CSR initiatives may therefore be due to CSR issues generally having low salience for Australian consumers. One manager interviewed expressed this as: I think we – the Australian consumer market – are not as developed or mature as our European counterparts. The people living in very small crowded countries have the immediacy of environmental concerns right in their face. This has changed in the last few years, particularly around water shortages, and people are much more aware that they need to be thinking about these issues, but they are not buying on the basis of them yet.

Increased salience, brought about by external pressures, such as water shortages or other environmental or social crises, may heighten the importance of CSR as a purchase criterion. Current results support this assumption, because respondents with higher levels of interest in certain CSR domains demonstrate significantly higher awareness levels. A focus on consumer segments which are particularly interested in certain CSR areas appears to be the most promising CSR communication strategy. Little prior research has been undertaken investigating the potential of market segmentation to improve the effectiveness of communicating CSR initiatives. Roberts (1996), while not investigating the issue of CSR advertising effectiveness specifically, concludes that socially responsible consumers exist, but that they cannot be easily profiled by

criteria such as socio-demographics. Mohr et al. (2001) constructed four consumer segments on the basis of their responsiveness to CSR and described differences between them with respect to respondents’ CSR expectations, their attitude towards socially responsible firms, their general attitude towards business, and their perceived attributions of the firm’s motivation for being socially responsible. While this study demonstrates the high degree of heterogeneity in the marketplace with respect to CSR, it provides little guidance to companies as all variables under study are psychographic. Our results, however, indicate that CSR messages have to be matched to people’s interests. For instance, interest in the sport of cricket does not primarily have anything to do with CSR, but someone who likes cricket may notice that their bank supports cricket in their community, which leads to CSR awareness and, consequently, can be expected to translate into attitudes and even purchasing behaviour favourable to the organisation engaging in such CSR initiatives. Our findings are in line with conclusions drawn by Sen and Bhattacharya (2001) who found that support for the firm’s CSR was linked to people’s support for the CSR domain. Sen and Bhattacharya consequently recommend aligning CSR initiatives with the firm’s competitive positioning and the positions of its ‘key stakeholder groups on alternative CSR issues’ (p. 238). Low general consumer awareness of the many social issues banks and other businesses engage with through their CSR programs must be of concern to businesses seeking advantage from the communication of their good deeds, since this is an important antecedent for consumer appreciation of the firm’s social contribution. However, should CSR simply be about engaging with social issues that are salient to particular market segments the firm wishes to pursue? Should CSR be opportunistic in terms of addressing the social problems bank customers are most familiar with, or should CSR aim at helping where help is most needed, whether or not the public is acutely aware of these problems? The ANZ bank, for example, has made the development of indigenous community financial literacy the cornerstone of its current CSR program, although the majority of Australians are not familiar with the financial literacy problems of indigenous Australians. One way of weakening the trade-off between

Alan Pomering and Sara Dolnicar ‘opportunistic CSR’ and CSR initiatives less effective in promoting the bank’s core business, because customers are not familiar with the social problem addresses, is to educate bank customers and consumers about the importance of social issue they may be less familiar with. This approach – ‘growing the maturity of consumers’ – has been identified by one of the bank managers we interviewed, and has been proposed by Auger et al. (2003) as one solution to the problem of consumers being quite unfamiliar with social, or ethical, issues. Otherwise, information about responsible corporate behaviour may only have little effect on their buying behaviour. If marketing communications managers are to expect greater persuasion effects from their CSR campaigns their role of social-issue educator may need to receive greater attention. This is likely to be new and challenging terrain for marketing professionals, a requisite situation acknowledged by Schultz and Morsing (2003). While banks may not be communicating their CSR achievements effectively at present, there is an identifiable segment of consumers that want to learn what social good their bank is doing. According to one of the executives we interviewed the level of demand for such information may be at odds with banks’ current perceptions. Based on our results regarding source trust for CSR information, how the story is told may be more important than what story is told. One specific area of interest for banks, given the importance of frontline personnel in customer interactions in service settings such as retail banking, is the low level of trust our respondents place in bank employees relative to other CSR information sources. This is also of concern given the bank executives we interviewed indicate the importance of their employees as a key audience for their CSR communications and conduit for the CSR message getting across to customers. Employees, the banks believe, must be sold the message before external customers could be expected to be convinced. It may be that our ‘online’ panel of respondents have been ‘pushed’ online by past unsatisfactory contacts with bank personnel as well as ‘pulled’ online by the convenience and value this low-contact medium offers, but since frontline service staff act as the ‘sales force’ for businesses such as banks, understanding why they are trusted so little should be of managerial interest.

Conclusions, limitations and future work This study investigated Australians’ level of awareness of CSR activities undertaken by Australian banks, and their dispositions towards these activities. We examined consumers’ interest in receiving more information on CSR activities, and the extent to which they trust different sources of information regarding CSR initiatives. We chose the banking sector because of its pioneer role in CSR, likely prompted by banks’ poor reputation and the low level of product differentiation, the sector’s possibilities for both high- and low-contact interactions with customers over ongoing relationships, and because choosing a bank is a high-involvement decision for consumers, calling for effortful cognitive processing in the decision-making process. The study contained a qualitative stage which studied banks’ CSR activities and communication strategies, and a quantitative stage which investigated Australians’ awareness, their information needs, and levels of trust in a range of information sources. The main results show that awareness levels are low; Australians’ information needs about CSR initiatives are currently unmet. Since independent sources of information are more trusted than communication channels controlled by the banks, banks might find it advantageous to direct the emphasis of their CSR communication efforts away from advertising to public relations. If advertising is to be used however, careful thought must be given to the executional factors used in order to reduce scepticism. While consumers are generally sceptical towards advertising, CSR advertising appeals induce specific situational dimensions of scepticism and cynicism to weaken message persuasibility. Given variations in consumers’ abilities to process information, and informational needs, market segmentation could be a promising approach to improve CSR communications and increase the awareness among consumers specifically interested in certain areas supported by CSR initiatives. This awareness should include information about social issues, particularly their gravitas, in order to allow firms’ CSR initiatives to be seen in the context of their contribution to reducing a social problem. Our findings are limited in the following ways: (1) in scope – the study is confined to the Australian banking sector. Replication studies in other countries

Assessing the Prerequisite of Successful CSR Implementation and industries would be valuable, to increase understanding of the gap in awareness for the effective use of CSR in gaining competitive advantage. (2) We collected data through a permission-based Internet panel, which, while representative of Australian population in terms of socio-demographic census data, is biased towards Internet users. The high level of trust and use of the Internet cannot be assumed to hold for the Australian population. (3) The dependent variable of interest in our study was awareness, which does not discriminate between ‘positive’ and ‘negative’ attitude resulting from awareness. Consumers who are aware are often highly sceptical of the CSR messages communicated, and consequently, the successful translation from communication via awareness to purchasing behaviour could be interrupted. (4) Our study does not measure the depth of scepticism or cynicism toward banks’ CSR claims, though, from bank executives’ comments, and growth in the popularity of newer ‘community’ banks and non-bank financial organisations, this is presumed to be quite high. (5) We have not provided an analysis of the ethical obligations of banks to provide information about their CSR activities, but have instead concentrated on the effectiveness of what CSR information is communicated in this sector. Given that customers require CSR information to act as rewarding and punishing authorities, it makes practical sense for those firms that are acting responsibly to do so. With increasing consumer demand for such information, firms might benefit by treating this communication task more strategically, acknowledging the different cognitive abilities and motivations of different segments of consumers in doing so. The prospect of information diffusion by more information-sensitive market mavens, as discussed by Price et al. (1987), endorses such an approach. Socially responsible firms should increase awareness of their initiatives in order to raise the minimum standard consumers learn to expect in a particular product sector. Information, as these authors note (p. 328), is ‘crucial to the operation of efficient markets’, and this is an obvious ethical outcome, as it allows consumers to reward ethical business philosophies and, in doing so, contribute to the sustainability of CSR initiatives because CSR initiatives can be seen as compatible with profit aims. Differentiating resultant attitudes from different methods of awareness creation would provide an interesting area of future research to improve our

understanding of the CSR–consumer nexus. Given the variety of high- and low-contact communication channels open to banks, the ‘what’, ‘when’ and ‘how’ of CSR information for optimum communication effects for different audiences offers fertile ground for future study. Our findings regarding most-trusted media sources and demands for CSR information point to these being useful bases for future segmentation studies. Whether marketing communications managers can educate their audiences about pertinent social issue topics, and the gravitas of these issues, and what methods might prove most beneficial in this challenge, provides another interesting avenue for further research. Adding a social dimension to traditional brand communications is attributed to adding complexity to the consumer’s information processing task (for example, Drumwright, 1996). The field of cognitive psychology, in particular information processing theories related to context and cognitive resource matching, may be fruitful directions for investigating how this complexity might be reduced. Another interesting area of research would be to investigate a less detailed knowledge of banks’ CSR initiatives by simply asking whether consumers are aware of certain banks engaging in CSR. This approach would be in line with brand image studies where the perception matters, rather than the actual knowledge. The results of such a study may help us to shed more light on how consumers store CSR knowledge. Maybe they do so in a more diffuse way then the one investigated in the current study. Given that firms are increasingly seeking to inform and persuade consumers of their CSR initiatives via direct means (as reflected in the CSR advertising campaign undertaken by Westpac just after the completion of our study in which Westpac claimed to be a socially responsible lender to business), ways of improving the advertising effectiveness of CSR messages should be researched in future. One interesting perspective – which reflects the need for bank customers and consumers to be familiar with social issues before CSR initiative addressing those issues can be effective – is that proposed by resource matching theory (for example, Anand and Sternthal, 1989). This theory proposes that advertising effectiveness is highest when people have the cognitive resources available that are

Alan Pomering and Sara Dolnicar required to process the message (Keller and Block, 1997). While in the past the motivation to process the message was used to operationalise the available cognitive resources, future work in CSR should use knowledge about social issues as the measure of available cognitive resources and investigate the effect of such knowledge on CSR advertising effectiveness. A final caveat is the acknowledgement of the possibility that the reason the banks are failing to get their message across is because their approach to CSR is perceived as very mercenary and insincere. The depth of this scepticism and its role in influencing consumer judgments must be of critical importance to the banking sector. Heightened scepticism would indicate that CSR may not be the effective corporate image tool the banks hope it to be, and, as a corollary, banks must pursue more ethical behaviours if they expect their CSR claims to be accepted. Since the banking sector’s reputation has been damaged in recent years, replication studies in other product categories may reveal lower levels of scepticism and, subsequently, greater effectiveness of CSR communication strategies. Such studies could verify Bhattacharya and Sen’s (2004) suggestion that the effects of CSR on consumers may be dampened by their cynicism towards certain industries. We might interpret consumers’ low awareness of banks’ CSR programs as a surrogate for the scepticism and cynicism induced by the banking sector’s perceived inconsistent values, but further research is needed to validate such an interpretation.

Acknowledgements This study was completed with assistance of a Faculty of Research Grant from the Faculty of Commerce, University of Wollongong, Australia. Preliminary results have been presented that the Australian and New Zealand Marketing Academy Conference in 2007.

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