Importance Of Corporate Social Responsibility In Strengthening Brand Equity

Abstract

This study was conducted to explore the influence of corporate social responsibility on the formation of brand equity in the fast food industry. In past researches, only few scholars intended to inspect the linkages between corporate social responsibility and brand equity in Malaysian market. Thus, this paper is planned to contribute to the theoretical and empirical literature by examining the stated variables in Malaysian context. The data in this study were gathered from the visitors of fast food restaurants in Eastern part of Malaysia through a survey instrument and convenience sampling approach. AMOS 18 was employed for the analysis of obtained responses. Overall, the findings showed that corporate social responsibility has a significant positive influence on brand equity. Additionally, the results indicated that the effect of corporate social responsibility on the components of brand equity (brand image, brand preference, brand leadership, and brand loyalty) is positive and significant. These results show that the integration of corporate social responsibility in business strategies could enable firms to generate better brand equity and influence consumer behaviour.

Keywords: Brand equityCSRfast food industryMalaysia

Introduction

Creating a powerful brand has been considered as an important objective for several firms, because a strong brand name enables them to gain favourable competitive strengths in well-defined target markets over time (Hanaysha, 2016). Aaker (1996) stated that the benefits of acquiring a reputable brand include an increased willingness among consumers for choosing the brand overs, building profitable customer relationships, higher revenues and profit margins, greater capabilities to charge high prices, efficient marketing programs, positive word-of-mouth, brand licensing opportunities, and the brand extension will be easier. Furthermore, firms which acquire strong brand names are likely to experience lower effect from competitors’ marketing programs, and the changes in price settings are elastic (Aaker, 1991; Keller, 1993). Another benefits of brand equity were presented by Aaker (1991) who reported that powerful brands enjoy several benefits, such as better customer retention, high revenue growth, ability to sell the products/ services at higher prices, the brand extension possibilities will be easier, business leverage, and sustainable competitive advantage. Therefore, brand equity enables consumers to make better purchase decisions and experience higher degree of satisfaction because they usually choose from brands which have reputable images and strong preference from others (Ross, 2006).

Prior literature confirmed that building brand equity should be the prime focus for organizations, because it forms the basis for securing better competitive advantages and achieving financial objectives (Aaker, 1996; Borghini & Cova, 2006; Yoo, Donthu, & Lee, 2000). Though, in order to build a powerful brand, it necessitates consumers to acquire the right information which may affect their behaviours towards the marketing events of a brand in diverse ways. Nowadays, marketing communication programs which emphasize on corporate social responsibility (CSR) have been considered to be vital in shaping consumer’s attitude. Additionally, social responsibility events play important roles in attracting potential customers and determining the financial value of a brand. In past literature, several researchers found a positive association between the marketing through social responsibility programs and consumer behaviour. Choi and La (2013) examined the effect of CSR on brand loyalty and brand trust among consumers and found positive linkages between them. The authors illustrated that brands which provide significant contributions to the society and environment are likely to benefit from customer loyalty and obtain favourable images.

Problem Statement

The present business scenarios indicate an increased pattern in competition among organizations, and for this reason, the involvement in CSR have become vital for strengthening brand equity (Luo & Bhattacharya, 2006). According to Nastu (2009), implementing the appropriate branding strategies and socially responsible marketing events could enable organizations to improve their brand values, and create positive perceptions among employees and business customers. Although CSR has been considered to be an important strategy in the success of businesses, there are only limited researches which tested its role in affecting brand equity, mainly, in Asian service contexts. Jung and Yoon (2012) reported that most of the past studies on CSR were centred at manufacturing sectors, and few contributions were made in service industry settings (Mukherjee & Shivani, 2016). Additionally, Torres et al. (2012) stated that there are few empirical researches which examined CSR and brand equity for international organizations. Consequently, this paper aims to examine the linkages between CSR and brand equity as well as its dimensions in the fast food market. The following section presents the literature review for this study by describing the selected variables and empirical linkages between them.

Research Questions

Based on above problem statement and research gaps, the research questions are presented as follows:

Purpose of the Study

This study aims to address the following objectives:

Literature Review

Research Methods

As mentioned above, this paper was generally planned to examine whether CSR matters to brand equity development for fast food service providers in Malaysia. To fulfil the stated objective, the quantitative research methodology was employed. Mainly, a total of 384 questionnaires were administered to customer of global fast food restaurants in Malaysia to determine their perceptions towards the service providers. As the size of population in this part of Malaysia exceeds one million, the total sample employed to conduct this research is considered acceptable (Sekaran, 2003). Moreover, the survey method was used by a number of researchers for obtaining the desired data from consumers. Consequently, the utilization of survey tool from collecting consumer data is considered to be adequate for this study. During the data collection process, the convenience sampling approach was adopted due to its advantages which appear in enabling the researcher to easily reach the respondents at minimal cost and shorter time as compared to other sampling methods. Convenience sampling was also employed by several studies for collecting consumer data.

During designing the questionnaire, the measurement items of the constructs were taken from previous research works. A total of four items were adopted from Tong and Wong (2014) to measure corporate social responsibility. In addition, to assess brand equity, four components (brand loyalty, brand image, brand preference and brand leadership) were used. The measurement scale of brand loyalty using four items was established based on previous studies (Gil et al., 2007 & Hameed, 2013), at the same time a total of five items were adapted from Hanaysha, Hilman, and Abdul-Ghani (2014); Jin et al. (2012), and Park (2009) to measure brand image. Moreover, brand preference was measured based on the measurement items which were presented in the study of Sirgy et al. (1997). However, to measure brand leadership, this study relied on five items being used in previous literature (Hanaysha & Hilman, 2015). All of the items were answered by the respondents based a five-point Likert scale that ranges from strongly disagree to strongly agree. The obtained responses were analysed by SPSS and AMOS software.

Findings

The demographic results for the obtained responses indicated that most of the participants are females (66.9%), whereas males who took part in this study are represented by 33.1%. About 19.4% of overall responses were received from those whose ages ranged from 16 to 25 years, while 53.2% came from those in the age group of 26 to 35. But, those whose ages came in the cluster of 36 to 45 years represented 20.5%, and only 6.9% signified the age category of 46 years and above. The demographic results also indicated that almost 26.9% of the respondents have high school qualification, 23.6% possess diploma certificate, 37.9% have bachelor degree, whereas 11.6% acquire postgraduate certificate. On income profile, the analysis showed that 16.3% of the participants obtain RM500 per month, 6.8% had a monthly salary in the range of RM500 to RM1000. Moreover, 21.2% had a monthly income of RM1000 to RM3000, whereas 55.7% obtain RM3000 or more as a monthly income.

After analysing demographic characteristics of participants, the reliability of measures was calculated using the Cronbach’s alpha method. The results showed that the values of Cronbach’s alpha for all constructs surpassed 0.70. For instance, the measurement scale of corporate social responsibility was reported at Cronbach’s alpha value that is equal to 0.794, brand loyalty was reported at 0.852, and brand image also yielded acceptable value of Cronbach’s alpha that is equal to 0.826. Finally, the value of Cronbach’s alpha for brand preference was reported at 0.891 while brand leadership was registered at 0.780. The findings also confirmed that all of the selected measurement scales satisfied the reliability assumptions as the values of composite reliability were calculated using Microsoft Excel and exceeded 0.70. Therefore, the analysis show that the items used to measure each construct achieved a reasonable as suggested by Hair et al. (2003).

To fulfil the validity assumptions, construct validity which includes content validity, convergent validity, and discriminant validity was tested. Primarily, content validity was attained based on the initial review of past literature and obtaining some inputs from few academicians and experts who have industrial experience. On the other hand, convergent validity was verified by calculating the factor loadings for the measurement items. The results showed that the factor loadings for residual items exceeded 0.50, and this means that the assumptions of convergent validity achieved a satisfactory fit (Lin & Ding, 2006). Moreover, the discriminant validity test was calculated for each construct based on the average variance extracted procedure. Fornell and Larcker (1981) stated that discriminant validity can be achieved when the values of square root of AVE under each construct are more than the correlation values of other constructs. On whole, the analysis showed that the discriminant validity assumption among the constructs is achieved.

After analysing the reliability of measurement items by SPSS, AMOS software was used for estimating the measurement and structural models. At first, the measurement model which comprises all of the measurement items was constructed to test CFA and achieve adequate fit for the data. After that, the structural model was estimated based on several fit values. Overall, the outcomes showed that the structural model achieved a chi-square value of 278.436, and this shows that the current structural model has an adequate power. Moreover, GFI was reported at 0.904 which is more than the lower acceptable value of 0.80. The model also achieved acceptable AGFI as the value was 0.863. Moreover, RMSEA achieved a tolerable value of 0.077 that is lower than 0.08. Finally, the comparative fit index (CFI) was registered at 0.979 which exceeded the minimum recommended value of 0.9. Therefore, the fit values for the final structural model indicate that it fits the data very well.

In order to accomplish the objectives of this research, the data were analysed by AMOS after replacing the missing values and removing the outliers. The results as presented in Table 1 reveal that the impact of CSR on brand image is positive and significant (β = 0.918, C.R = 4.563, p < 0.05), thus, H1 is accepted. The findings also showed that CSR has a positive relationship with brand loyalty (β = 0.919, C.R = 4.480, p < 0.05), and this means that H2 is also confirmed. Additionally, the results confirmed that CSR has a positive influence on brand preference (β = 0.807, C.R = 4.771, p < 0.05), hence, H3 is accepted. Furthermore, the findings indicated that the effect of CSR on brand leadership is in the positive direction (β = 0.667, C.R = 4.236, p < 0.05), therefore, H4 is confirmed. Finally, the findings indicated that CSR plays a significant role in affecting brand equity as the relationship between both construct is positive and significant (β = 0.712, C.R = 3.479, p < 0.05), thus, H5 is accepted

Discussion and Conclusion

The key rationale of this research was to investigate the impact of CSR on brand equity as well as its components. The findings pointed out that CSR has a positive and significant effect on brand loyalty creation process and this in line with previous literature (Choi & La, 2013; Raman et al., 2012). Greater support was seen in the research of Keller (2003) who found that the consequences of social responsibility programs on brand loyalty were positive. Lichtenstein, Drumwright and Braig (2004) also concluded that organizations which emphasize on CSR activities are likely to have better consumer loyalty than competitors. Thus, to maintain loyal customers in today’s business markets which are rapidly changing, organizations should not overlook the role of CSR to attain desired outcomes by providing significant contributions to the society and business stakeholders. For this reason, corporate social responsibility should be integrated into business strategies to differentiate the brand from other rivals.

The results also suggested that CSR plays a significant role in building brand image. A number of scholars confirmed that CSR had a positive link with brand image (Albus, 2012; Ahmad, 2006; Reich et al., 2010). These findings received further support by Chung et al. (2006) who declared that the expectations of consumers with regard to the social responsibility programs on the part of a brand provide momentous implications for brand image assessment. Thus, organizations should invest in designing marketing events that emphasize on social responsibility in order to influence consumers’ perceptions in the positive direction. Among the key marketing programs which can be designed include community development, protection of the environment, and fostering strong customer relationships. Mainly, the active involvement in significant marketing programs which emphasize in providing contributions to business stakeholders tend to exert positive influence on consumers’ perceptions and overall brand evaluation.

The analysis of results also confirmed that CSR has a positive influence on brand preference. This is in line with the research findings of past studies which reported that the effect of CSR on band preference was positive (Bhattacharya & Sen, 2004; Torres et al., 2012; Orlitzky et al., 2003). The positive linkages could be attributed to the positive evaluations of customers of the brands which focus on providing care and support to the local communities through organizing favourable social responsibility events. Moreover, the outcomes revealed that CSR plays a vital role in building brand leadership. Further support was reported by Lindgreen, Xu, Maon, and Wilcock, (2012) who concluded that the participation in CSR activities enable organizations to secure better leadership positions in global markets. Kojo and Kingsley (2014) also suggested that CSR can be employed as an important marketing strategy for forming brand image and brand leadership.

Last but not least, the results of this paper confirmed that, in line with the literature, CSR has a positive influence on overall brand equity development (Raman et al., 2012; Torres et al., 2012). According to Pakseresht (2010), the performance and contributions of a brand towards the society and business stakeholders enable it to strengthen its competitive strengths. Balsara (2009) also declared that the involvement in various community development programs enable brands to build positive impressions among consumers and gain greater brand equity. The benefits CSR were acknowledged by Polonsky and Jevons (2009) who reported that business practitioners should design marketing programs which aim at serving the society and utilize them for branding initiatives. Further, the authors stated that the successful management of a brand appears through the ability to satisfy business stakeholder and provide noteworthy contributions to the society.

This paper has some limitations which can be addressed in future researches. First, only one antecedent of brand equity; that is CSR was tested in this research; hence, future studies may examine other marketing factor, such as service innovation and customer relationship management. Second, the sample size which was employed to conduct this study may not be large enough. Thus, it is suggested for future researches to enlarge the scope of respondents and rely on bigger sample sizes in order to verify the empirical linkages between CSR and brand equity. Moreover, a survey tool which comprised structured questions for collecting consumer data was employed. For this reason, it is suggested for future research to use longitudinal data to confirm the results. Finally, only consumers were involved in this study to test the relationships between the selected variables; therefore, future studies should be directed towards testing employee perceptions in order to gain better insights about the role of CSR in affecting brand equity.

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