This research sought to understand whether corporate social responsibility has any impact on consumer loyalty within Nike.
This study aimed at exploring and understanding two research questions.
Firstly, the researcher endeavored to learn about the proven practices that generate positive attitudes among consumers.
Secondly, the study explored the perspectives held by customers regarding CSR initiatives.
These aims were realized through qualitative research with a case study approach.
The different case studies on Nike aided in responding to the research questions.
The findings of the study reveal that corporate social responsibility has a huge role in defining and realizing customer loyalty.
As such, corporations ought to understand the type and form of CSR practice that would yield the greatest returns in the form of customer loyalty.
Key words: CSR, customers, corporations
Impact of Corporate Social Responsibility on Customer Loyalty: Case of Nike
Nike is a multinational organisation that designs, develops, manufactures, and sells athletic footwear and sport apparels across the world (Mahdi, Abbas, Mazar, and George, 2015). The company has been in existence from January 1964 when it was established by Phil Knight and Bill Bowerman and is a publicly traded company completing its IPO in 1980 (Ranjan, 2016). Nike has grown to be one of the leading providers of athletic apparel and footwear in addition to being involved in the manufacturing of sports equipment. In 2014, the Nike brand had a value of 19 billion US dollars, an amount that makes it the leading brand among sports businesses (Mahdi et al., 2014). As of 2015, the company enjoyed revenue of at least 30 million US dollars (Ranjan, 2016). The overall performance of the organisation can be attributed to its ability to attract and retain a loyal base of customers.
Customers looking for sportswear and sporting equipment are presented with a variety of options from established brands such as Nike, Puma, Adidas Reebok, Fila, and Under Armour (Mahdi et al., 2014). As there are many products that a customer can choose from, the choice of one over another is made on the feelings that the customer has towards the brand and the experiences of dealing with either of the options (Ngan, 2015). Customers have always been interested in the innovative products that Nike makes available. This aspect is evidenced by the significant demand for its goods and the huge revenue that the company accrues from sales. An organisation can thus ensure more sales and a bigger market share by being innovative and delivering excellent service that supersedes consumer expectations. The feelings that consumers have towards a particular brand tend to bring about customer loyalty. Over time, Nike has managed to keep up with consumer demands, which has, in turn, allowed the latter to develop a special attachment with the brand.
Organisations realise various benefits by establishing and maintain a loyal customer base. The first one is retention. Retained consumers avail a solid base for success because fewer resources are necessary to service them as they resist offers from competitors (Ngan, 2015). Moreover, the retained customers aid in promotion through referrals. Loyal consumers motivate other people to select a certain product or business over the available ones. In so doing, they not only market one’s business for free, but they also bring about savings for an entity as it did not invest in the acquisition of the new buyers (Ngan, 2015). Previously, word of mouth could impact around a dozen people, but today, someone’s statements via email or on social media platforms can sway thousands of individuals. The third benefit entails augmentation of an entity’s reputation. Ngan (2015) further contends that loyal customers only have good words to say about a firm, and an excellent reputation amplifies public support in addition to eliciting positive interest from investors, future staff members, suppliers, the media, and regulatory bodies. With loyal consumers, Nike is aware that people will be ready to pay a little more for products that have its logo meaning that customer loyalty translates to increased organisational revenue (Mahdi et al., 2014).
Nike like many other organisations has accrued the benefits that come about in having loyal customers in ensuring that its customers are optimally satisfied. However, when a corporation fails to meet consumer expectations, it will attract non-loyal behaviours from customers such as opting for competitor offerings in addition to communicating their dissatisfaction with an entity to a myriad of other existing and prospective buyers. Discontented customers usually share with 10 to 16 persons concerning a negative service experiences (Ngan, 2015). The author further argues that it often takes 12 good service experiences to forget a one bad experience whereas 91 percent of unhappy consumers opt not to buy again from the brand that displeased them. The effects of unhappy customers are thus a threat to a business entity’s current market share, while also being detrimental to its potential future growth. Nike has managed to avoid non-loyal behaviours and benefit from loyal behaviours by engaging in a broad differentiation strategy and market segmentation approach thereby ensuring that each buyer perceives that his or her expectations are met and exceeded.
Problem Statement
Consumer satisfaction is not the only factor that brings about loyalty. Among the consumers that switch to another brand, about 80 percent declare that they were previously satisfied (Ngan, 2015). As such, other factors may be responsible for the defection such as the image of the brand which impact loyalty in one of two ways. The first one is that buyers’ choices may reflect the image they have of themselves. The theory of extended self that was postulated by Belk concludes that people define themselves relative to the objects they have or manage (Gjersoe, Newman, Chituc, and Hood, 2014). As such, people opt for brands that have personality traits that are parallel to theirs. A product that resonates well with a consumer can thus be used by the buyer to enhance his or her self-image. The second method is related to the social identity theory, which finds that people put themselves into different social categories and the features linked to that group guide a person’s behaviour (McKinley, Mastro, and Warber, 2014). The image factor is imperative in understanding why Nike has managed to have loyal customers over the years. To start with, many people already feel that they are personally accountable in resolving social and environmental issues. As such, they also demand that the companies they buy products from not only make profits but that they also act responsibly to deal with the same issues they are passionate about. Hence, when Nike is seen as having a positive impact on society, it attracts positive consumer behaviour. However, when the company is seen as bringing about negative effects on society, it facilitates negative consumer behaviour towards its brand. This study seeks to analyse how Nike utilizes corporate social responsibility to enhance their reputation and hence realise customer loyalty.
Research Aims
The main aim of this research is to explore how corporate social responsibility has been utilized by organisations as a strategy to realise customer loyalty. The study will use Nike Corporation as a case study to understand the relationship between the two variables.
Research Objectives
1. To comprehend the impact of CSR on customer loyalty within Nike.
2. To explore the behaviour of consumers after becoming aware of the participation or otherwise of an organisation in CSR activities.
Research Questions
1. What are the proven CSR practices utilized by Nike that help generate positive attitudes among consumers?
2. What are the consumer behaviours in becoming aware that an organisation is participating or otherwise in CSR activities?
Purpose and Significance
The findings of this study will be valuable to all corporations since consumer beliefs and behaviour tend to have a significant effect on their bottom lines. The need for better financial performance in every entity justifies the adoption of approaches meant to boost customer loyalty. Managers that recognise that practices meant to improve the society and environment bring about a better organisational outcome will endeavour to institute CSR programs. Additionally, this study will augment the existing knowledge base on ways to elicit consumer loyalty.
Paper Structure
In what follows, this paper will demonstrate the link between CSR and customer loyalty. This objective will be realised with the help of additional sections. The literature review, will demonstrate the existing research on the current topic. Secondly, the methodology part will indicate the methods used in answering the research questions. The methodology will also highlight the approach used to analyse the collected data. The findings section will provide the results of analysis of the data which will be followed with the discussion before concluding and offering recommendations to both Nike and for future research.
Different studies have looked at the many aspects related to CSR. This section seeks to review the various researches that have investigated the impact of corporate social responsibility on customer loyalty.
Theoretical Literature Review
Scholars have presented theories to help in understanding why people opt for some products and services over others. One such hypothesis is the theory of reasoned action, which postulates that a person’s behavioural intention is the strongest predictor to a particular pattern of action (Myresten and Setterhall, 2015). Behavioural intention is made up of two independent variables of intention; attitude and subjective norm. When these variables are positive, then an individual is likely to have a more positive intention to make a purchase, and vice versa. Myresten and Setterhall (2015) contend that attitude entails the general inkling of favourableness or un-favorableness towards something that a person possesses. It is determined by one’s beliefs concerning outcomes of performing a particular behaviour dictated by the evaluations of those outcomes (Montano and Kasprzyk, 2015). Therefore, when one has strong beliefs that positive outcomes will emerge after a particular behaviour, then he or she will have a positive attitude toward that action. On the contrary, when an individual has strong beliefs that negative outcomes will be experienced from the performance of a particular behaviour, then the individual will have a negative attitude. Secondly, subjective norm denotes the perception held by an individual of what expectations of behaviour people close to him or her have (Myresten and Setterhall, 2015). It is determined by a person’s normative beliefs and the motivation to comply with the views of those important people (Montano and Kasprzyk, 2015). When one believes that his or her referents think that he or she should adopt a particular behaviour, the person is usually motivated to meet these expectations besides having a positive subjective norm. On the other hand, when a person believes that his or her referents think that he ought not to behave in a particular manner, then the individual will have a negative subjective norm.
Secondly, the theory of planned behaviour augments the ideas posited by the reasoned action theory. It suggests that a particular behaviour is brought about by behavioural intention in addition to perceived control (Denan, Othman, Ishak, Kamal, and Hasan, 2015). When volitional control is low, the perception of control that one has over behavioural performance, in conjunction with intention, is supposed to directly impact behaviour (Montano and Kasprzyk, 2015). However, when volitional control over a certain action is high, the impact of perceived control diminishes, and intention becomes an adequate predictor of behaviour. Consequently, some scholars hold the perspective that perceived control is an independent variable of behavioural intention together with attitude and subjective norm. Holding the other two components constant, the perception of the presence or absence of difficulty that one has regarding the performance of a particular behaviour impacts his or her behavioural intention. Additionally, the more positive attitudes and subjective norms that one has relative to certain action, the higher the perceived control thereby amplifying the intention to undertake a particular behaviour (Ajzen, 2015).
The social cognitive theory postulates that a person’s behaviour is part of a triadic structure in which personal factors, environmental aspects, and behaviour continuously sway each other thereby influencing each other in a reciprocal manner (Carillo, 2010). Personal factors are any cognitive, demographic, personality characteristics that an individual may possess. Environmental aspects involve the external factors that avail prospects and social support including situational features and social pressure. These aspects can be social or physical. The former comprises family, friends, and co-workers while the latter involves such aspects as ambient temperature and availability of particular food items. Individual behaviour is thus influenced by environmental and personal components. Consequently, this theory also revolves around two concepts, self-efficacy and outcome expectations. The first concept entails the confidence that one has in his or her capabilities in undertaking a particular action (Carillo 2010). The second concept involves the perception that some behaviour will bring about valuable or adverse outcomes.
Consumer Behaviour
Consumer behaviour entails the way people choose the personal or household products to buy by utilizing the resources at their disposal such as effort, money, and time (Oke,Kamolshotiros, Popoola, Ajagbe, and Olujobi, 2016). Consumer behaviour can be further understood by looking at the factors influencing the buying process and the decision-making process. Oke et al. (2016) identify four main factors that have an impact on the buying process. The first of those is the cultural factor. A person’s society, family, and friends influence his or her culture, which, in turn, creates basic perceptions, behaviours, demands, and values (Oke et al. 2016). Sandu (2014) further argues that the different regions have diverse cultural influences, which have a huge impact whenever a person wishes to make a purchase. A culture is also bound to have subcultural groupings, which can be differentiated by religion, nationality, geography, or race. Secondly, the social factor comprises family members, peer groups, coworkers, opinion leaders, and friends (Oke et al., 2016; Sandu, 2014). People continuously interact with others thus having a huge effect on each other’s consumer behaviour with some seeking the opinions of others before making purchases. Consequently, as Oke et al. (2016) notes, society tends to create classes which have a particular impact on the people’s intention to purchase. Thirdly, the individual factor recognizes that people are different in terms of gender, age, family life-stage, self-concept, and lifestyle (Oke et al., 2016; Sandu, 2014). These features lead to perception, personal motivation, and preference in addition to defining a person’s opinions, interests, and undertakings. Lastly, the psychological factor entails a customer’s perception, beliefs, and attitudes (Oke et al., 2016). When the perception, beliefs, and attitudes change, the consumers’ purchasing behaviours also transform.
Consumer behaviour is also affected by the consumer decision-making process which is made of five stages (Stankevich, 2017; Oke et al., 2016; Gómez-Díaz, 2016). The first phase is need recognition where a consumer acknowledges an unsatisfied need, which can be functional or psychological. The former denotes the performance of the offering while the latter focuses on the customer’s feelings concerning the item to be purchased (Oke et al., 2016). Motivation is the psychological process present at this stage. Marketers can generate an imbalance between people’s present status and their preferred one through promotional tools (Stankevich, 2017). The imbalance leads to need recognition which influences a purchase in pursuit of the desired status. The motivation can also be internal whereby a need occurs immediately following a basic impulse (Stankevich 2017). The second stage is the information search phase. Here, a customer searches for information about a good or service either internally or externally (Gómez-Díaz, 2016). Relative to the former, a person will remember pertinent information from past experiences in using the offering (Oke et al., 2016). Concerning the latter, a search can be accomplished through seeking information from other buyers, public sources, and commercial sources (Oke et al., 2016). The psychological process that materializes at this stage is perception whereby one develops descriptions of products relative to the information from the different sources (Stankevich, 2017).
The third step entails the assessment of alternatives. At this stage, individuals make an evaluation of different brands before reaching the decision to purchase. Customers will look at the qualities that are likely to fulfil their needs. However, the available information may be too much thereby necessitating the use of heuristics to enable the evaluation of brands and attributes including availability, representativeness, simulation, adjustment, and affect (Gómez-Díaz, 2016). These heuristics avail rules that aid in identifying the advantages over the disadvantages of a product. Biases also play a part in helping to dismiss some of the options. When a brand has an attribute considered to be negative, the customer usually disqualifies it as a possible alternative. The psychological process present in this step is attitude formation. A consumer will ordinarily endeavour to look for the best deal, which is based on the attributes that he or she finds to be the most relevant including pricing, brand, quality, place, product positioning, and effects of using the product (Stankevich, 2017).
The purchase decision phase commences once a person has already evaluated the different offerings made available by all retailers (Oke et al., 2016). The customer then chooses the retailer to make the purchase from. The relevant psychological process is that of integration. Upon choosing one brand, a customer must then implement this decision and make the actual purchase. A time delay between the decision to buy and the actual purchase exists which may allow for additional decisions to be made (Stankevich, 2017). The author further contends that complex items such as personal computers and automobiles require long time compared to nondurable products require shorter delay time. This delay may be brought about by more decisions such as the time and money needed to make the purchase. The final phase is the post-purchase step, which can be subdivided into three stages. The first phase entails buyers consuming the offering. The second phase involves the customers assessing their consumption. The third phase is that of divestment, which entails disposal or recycling of the product (Oke et al., 2016). The psychological process in this stage is learning. The customer assesses if the product or service was appropriate for him or her. If the offering matches or supersedes expectations, the customer will become a brand ambassador motivating those in stage two of the consumer journey thereby increasing the likelihood of more purchases from the brand (Stankevich, 2017). Follow up activities such as recycling also go a long way to boosting consumer loyalty.
Empirical Literature Review
Promotional activities
Corporations elicit positive consumer behaviour towards their brands through promotional activities. Karim and Zhao (2011) define product promotion as the coordination of all seller-initiated endeavours to establish channels of information and motivation to sell offerings or promote an idea. The authors offer different components of a promotional mix that can be employed by the businesses. One of such activities is advertising which involves any form of non-personal communication of an offering or idea that is paid for. The most common channels for this activity are television, newspaper, radio, banners, and billboards. Novak (2011) offers that advertising is essential to businesses as it avails information regarding the new products, new uses of items and changes in prices to the target consumers. Another form of promoting a company is direct marketing, which according to Novak (2011), involves interactive communication with the target market and receiving responses about the products. Direct marketing is accomplished through such means as mobile marketing, email, using catalogues, telemarketing, and using leaflets.
A relatively new form of marketing involves the use of the internet (Karim and Zhao, 2011). The authors argue that with internet marketing, firms readily identify what customers need, the offerings that intrigue them, and the prices they are ready to pay. Novak (2011) identify sales promotion, which entails implementing a direct incentive or extra value to create an immediate sale as another significant form of promoting products and organisations. The authors present such activities as using coupons, sampling, contests, refunds, premiums, loyalty programs, and bonuses as some critical forms of sales promotion. While public relations endeavours are not necessarily a marketing strategy, Karim and Zhao (2011) contend that it does ultimately enhance the organization’s image. Publicity embodies one of the most common components of public relations, which entails the generation of news about a brand. Publicity materials comprise events, speeches, and public-service activities. Since the publication of information about a brand is not funded by the company, it is considered a highly credible and effective strategy (Karim and Zhao, 2011; Novak, 2011).
Corporate Social Responsibility
The concept of CSR has been defined and explained distinctively by different studies and authors. Nijhof and Jeurissen (2010) contend that while some literature views the idea of CSR as referring to philanthropic activities, others view it as a strategic re-positioning of a firm in the community where it transacts its business. Khojastehpour and Johns (2014) contend that the term is also applied in the description of how business undertakes the execution of comprehensive societal functions that exceed the economic criteria of the organisations. CSR involves several corporate activities that focus on the benefit of stakeholder units that include the community as well as the natural environment (Sprinkle and Maines, 2010). Polonsky and Jevons (2009) see CSR as a wide ideology that incorporates several responsibilities in the spheres of society, environment, and ethics. As per the definition of the European Union Commission, CSR describes the intentional compounding of both environmental and social interests in the day to day running of an enterprise and in its association with the stakeholders (Benoit-Moreau and Parguel, 2011). Anselmsson and Johansson (2007) argue that despite the existence of numerous frameworks that conceptualizes and operationalizes CSR concept, the critical facets of the concepts are captured in a 3D framework; human responsibility, “environmental responsibility and product responsibility.” Consequently, it is widely accepted that CSR is a concept that takes on various dimensions whose initiatives are focused on the interests of many stakeholders including regulators, customers, investors, employees and the community.
Studies into corporate CSR suggest that while serving the interests of the shareholders is significant, organizations ought to consider the needs of the customers and the society in which they operate (Oke et al., 2016; Lantos, 2001; Sprinkle and Maines, 2010). One of the most imperative elements for any business is brand reputation, which is a firm’s equity (Oke et al., 2016). Branding helps to differentiate goods and services from those made available by competitors. Oke et al. (2016) argue that this perceived distinction is paramount when a customer intends to make a purchase. The implication of the Oke et al. (2016) study is that people who have little knowledge about a certain products will look into the brand image to help their decision making. Hence, a brand’s CSR activities act as pull factors as they generate consumer demand.
Lantos (2001) established three mutually exclusive, in nature and purpose, forms of CSR utilized by companies. Ethical CSR is one of the most common types that are sought in most organizations. The assumption of this CSR is that businesses have a moral duty to act ethically to the stakeholders and the community where they operate. Lantos (2001) contends that such action is termed as social responsibility because a corporation is seen to be morally responsible to the people that it could inflict actual or potential injury from the implementation of a particular strategy. The author further suggests that this responsibility does not only apply to the persons party to a transaction, but also to any other stakeholders. Any entity not fulfilling its ethical responsibilities can be termed as morally irresponsible. Sprinkle and Maines (2010) suggest that while not all harms are avoidable, they ought to be minimized where feasible. Consequently, the studies contend that ethical principles ought to be given substantive attention even when they are likely to impact the expenses of a corporation and reduce the profit margins. The right approach must be taken even when it is not the most profitable. Sprinkle and Maines (2010) specifically advocate that the focus of manager ought not to be maximising profits for the shareholders at the expense of other stakeholders.
The trade off in ethical CSR, as Lantos (2001) discusses, is between moral behaviour and short-term profitability. For instance, the resources used to enhance product safety may diminish shareholder profits, but the alternative is to unethically compromise the consumers’ wellbeing. However, (Polonsky and Jevons, 2009) found out that socially responsible actions are essential in creating trust and amplifying the brand reputation. Public trust in an institution is critical as it helps in attracting stakeholders and earning public goodwill. Moreover, (Polonsky and Jevons, 2009) discuss that ethical actions tend to lower litigation costs and avoid negative publicity brought about by unethical behaviour. Indeed, the authors argue that this moral responsibility is mandatory as proved by the three usages. The capability usage denotes the capacity to accomplish something such as using resources to resolve societal ills while the causal responsibility dictates that an individual responsible for something happening is accountable for its consequences (Polonsky and Jevons, 2009). An organisation is thus obligated to deal with any harm it has caused or avert possible adverse effects it could bring about. The role-related responsibility entails the duties that coincide with a certain societal role.
The second form of corporate social responsibility is altruistic in nature, indicating the desire to genuinely and willingly care for the stakeholders even when it is accomplished at the expense of the organisation (Lantos, 2001). Anselmsson and Johansson (2007) suggest that altruistic CSR requires that organizations are good corporate citizens by facilitating critical social good without considering whether any financial gains will be made. Altruistic CSR entails actions meant to deal with public welfare deficiencies such as substance abuse issues, urban blight, crime, poverty, illiteracy, inadequate funding for educational institutions, insufficient funds for the arts, and chronic unemployment among many others (Anselmsson and Johansson, 2007). Lantos (2001) insists that this form of CSR is not based on an obligation to offer help, but the conviction of having a social obligation to do so. The altruistic CSR is based on the capability responsibility as many of the companies possess the resources to bring about social good. The role-related responsibility may also be applicable, according to Lantos (2001), as companies are bound by the social contract. However, the author contends that this form of SCR does not entail causal responsibility. One significant feature of Altruistic CSR, according to Anselmsson and Johansson (2007) is the willingness to do more than one is ethically expected even when there is no guarantee that the money used will yield any financial benefits. However, the authors also acknowledge that while the firm may not profit from its altruistic CSR initiatives, the organisation can accrue other the benefits of this expenditure. Some of the common activities among corporations include charitable contributions, environmental-friendly approaches, community service initiatives, employee voluntarism, and quality-of-life endeavors (Lantos, 2001). These actions usually lead to a reduction of the profits that shareholders could enjoy.
The organisations may also employ strategic CSR, which entails engaging in philanthropic missions to further strategic business goals (Lantos 2001). The common perception is that good deeds are not only good for the society as they are also beneficial to the business. Nijhof and Jeurissen (2010) argue that engaging in CSR does not necessarily lead to a reduction in profits because the favourable goodwill and publicity and augmented employee morale could lead to increased profits. As such, stakeholders other than the shareholders are perceived to be a means to the end of maximizing profits. Hence, the short-run sacrifice is done to ensure long-term gain. Accumulating goodwill is also prudent as it can come in handy when the company attracts critics at a later time. Nijhof and Jeurissen (2010) contend that such initiatives as availing shelter to the homeless, the building of a religious centre, or the renovation of a local pack is meant to help others with the expectation that the assisted persons will feel indebted to the brand. The expectation is that the individuals helped will, in turn, recommend the business to others, make purchases from it, or appeal to government regulators to ease regulation in the company’s sector (Nijhof and Jeurissen, 2010). However, there exists some critics that find strategic CSR to be self-serving besides being a destruction of the notion of citizenship, and argue that it is not morally wrong to do well while doing good (Lantos 2001). They argue that such firms only benefit as people are eager to make purchases from brands they perceive to be ethical and have a social conscience. Moreover, strategic CSR incorporates the concept of reciprocal stakeholder responsibilities
