Looking at the IDV index, one comes to understand that India is a good mixture between a collective and individualistic society, a stark contrast from the rest especially China, who lean towards a more collective mind-set. While research has shown that CSR is linked to a collective mind-set (Karaosman et al., 2015), Matten & Moon (2008) showed that individualistic cultures value ‘Explicit CSR’ (corporations addressing social issues through legal actions). Contrasting this, collectivist cultures value ‘Implicit CSR’ (corporations addressing social issues through voluntary actions). Similarly, Katz et al. (2001) showed that people from feminine cultures attach more importance to CSR related issues as they support good causes and preservation of the natural environment. Russia’s MAS index reflects a society driven by largely feminine values, showing that Russian consumers would greatly favour CSR activities. However, a recent article on the Guardian (2011) showed that leadership in CSR activities require a combination of masculine and feminine values. Brazil, India and China show that they are a mixture of masculine and feminine values while competition and rational thinking (masculine values) are important, cooperation and holistic thinking (feminine values) are equally important. 2.3 Consumer Behavior Reactions to CSR Schiffman & Kanuk (2007) defined the 4 major aspects that play a role in consumer behavior as: Consumer attitude, loyalty, product evaluation and Word of Mouth. Research shows that CSR has an effect on the same 4 aspects: Consumer attitude (Becker-Olsen et al., 2006), Consumer loyalty (Sen et. al., 2006), Product Evaluation (Bhattacharya & Sen, 2001) and Word of mouth (Bhattacharya & Sen, 2004). However, as noted by Bhattachrya & Sen (2004), there is significance
Image 1: Hofstede’s Cultural Dimensions for BRIC Nations (Geert-Hofstede, 2010) 5 heterogeneity across consumers and their response to CSR (i.e. one size does not fit all), hence why the four aspects that will be reviewed in this report are: Pricing, Purchasing Power, Consumer attitude (incl. loyalty) and word of mouth. Appendix C has market research provided by Esomar (2006) to back up the findings below. 2.3.1 Pricing Research done by Crawford & Mathews (2001) suggests that the willingness of a consumer to pay a higher price for a product is determined by how fair that price is according to them. The most important factor determining price fairness as shown by Xia et. al., (2004) and Bolton & Alba (2006), is the consumers assessment of the company motives behind the price increase based on information provided by marketing campaigns (Vaidyanathan & Aggarwal, 2003; Xia et. al., 2004). Thus, if consumers conclude that the higher price is due to a positive reason e.g. funding CSR efforts (Mohr & Webb, 2005), it is perceived as less unfair. Backing this is Auger et al., (2003) and Barone et al., (2000) who indicated that consumers are more willing to pay a higher price for products that they perceive as ethical. Moving away from purchase intentions, other behaviors such as switching to competitors or complaining about price increase is also influenced by their perception of price (Xia et al., 2004). Meaning, if a consumer perceives the price increase as unfair, they are likely to switch to a competitor and bad-mouth the company. As consumers of BRIC nations tend me more sensitive to price of product, mainly due to the economic standing of the country (Court & Narasimhan, 2010), they would be more accepting of a CSR-based price increase by deeming it "fair" which would increase the likelihood of them purchasing products from the company, and displaying a lower tendency to switch to a competitor or complain. 2.3.2 Purchasing Power This aspect is deemed as particularly influential, especially in emerging economies like BRIC nations as the reaction of a consumer to a CSR based price increase is heavily determined by their relative purchasing power. Defined by Wakefield & Inman (2003), purchasing power is derived from income and has a direct influence on the consumption of discretionary goods as well as reducing price sensitivity for the consumer. While, the purchase of "lower quality" goods usually stems from the lack of purchasing power because one may not be able to afford goods of "higher quality" (Sivakumar & Raj, 1997). Research by Dubinsky et al., (2005) has shown that consumers in a lower income bracket tend to be more idealistic, and less tolerant of an ethically questionable purchase. This suggests that while a lower purchasing power is a financial constraint in the case of a CSR based price increase, their stringent ethical standards may dampen the influence of price sensitivity on their loyalty to a company. 6 As the purchasing power of consumers in developing economies continues to increase due to the growing middle class (PwC, n.d.), so will their willingness to purchase a more expensive CSR priced product. 2.3.3 Consumer Attitude (Incl. Loyalty) One of the most important insights revealed by research on consumers regarding CSR is that this stakeholder group tends to reward companies that engage in CSR policies (Dawkins & Lewis, 2003). Either through a greater willingness to purchase a company’s products, as noticed by Smith (2003) or longer-term relations (Bird et. al., 2007) (i.e. increased loyalty) and willingness to advertise the product to others (Mahon & Wartick, 2003; Siltaoja, 2006). However, consumers have been known to also punish firms through boycotts and protests, if they have proven to be insincere in their CSR practices (Bhattacharya & Sen, 2001). Personal satisfaction is another major factor that plays an important role in a consumer’s attitude. As noted by Bhattacharya & Sen (2004) and Mohr & Webb (2005) CSR is known to directly affect a consumer’s sense of well-being by making them feel good about themselves. Oliver (1999) and Bhattacharya & Sen (2004) showed that consumer loyalty is influenced strongly by a company’s CSR initiative. This may mean that if a company’s CSR initiatives are adequate, consumers may still purchase other brands. However, if the company pays more attention to its CSR performance, it is possible that it would garner a bigger loyal family. An example of this, as shown by Bhattacharya & Sen (2004), is The Body Shop, which has a large loyal consumer following from animal protectors as they claim to not engage in any animal testing. 2.3.4 Word of Mouth Approach Traditionally defined as "informal communication between private parties concerning evaluations of goods and service", it is a way to reflect a response regarding the company’s performance from the consumers’ perspective (Anderson, 1998). Meaning, if a company’s performance exceeds that of what a consumer expects, it is highly likely that the consumer would recommend the company to someone else and vice versa. Hence, it can be ascertained that the WOM approach plays an important role in consumers buying decision and product evaluation. In a study done by Bhattacharya & Sen (2004), WOM approach has been shown to positively influence a company’s CSR initiatives as when a company performs better, consumers are willing to pay more and recommend the product to their friends. It can also help with raising awareness as, one of the main weaknesses is the existing lack of awareness around CSR.