How much to give? — The effect of donation size on tactical and strategic success in cause-related marketing

Highlights

• We study the impact of donation size on cause-related marketing success.

• We analyze the effect of donation size on both brand choice and brand image.

• For brand choice, the effect of donation size is moderated by a financial trade-off.

• For brand image, the effect of donation size is moderated by donation framing.

• The effect of donation size on cause-related marketing success can be nonlinear.

Abstract

In cause-related marketing (CM), companies promise a donation to a cause every time a consumer makes a purchase. We analyze the impact of the size of this donation on brand choice (tactical success) and brand image (strategic success). Our results reveal different effects of donation size on these success measures. For brand choice, the effect of donation size is moderated by a financial trade-off for consumers, whereas the effect on brand image is moderated by donation framing. Specifically, we show that donation size has a positive effect on brand choice if consumers face no financial trade-off; i.e., if they do not have to choose between triggering a donation or saving money. The effect is negative if a trade-off exists such that higher donations come at higher costs. Brand image is enhanced by larger donations if the framing is nonmonetary (e.g., the campaign promises the provision of vaccinations), whereas donation size has a negative effect if donation framing is monetary (e.g., the campaign states the Euro amount). If campaigns use a combination of both frames, the effect of donation size on brand image has an inverted U shape. Our results suggest that CM enhances tactical and strategic success only if firms select the right donation size, taking into account donation framing and financial trade-offs.

Introduction

In a cause-related marketing (CM) campaign, Tommy Hilfiger featured a promotion in which 50% of the price of a specific bag would be donated to Breast Health International. In another CM promotion, Starbucks donated $1 to the Global Fund to support people living with AIDS in Africa for every pound of East Africa Blend coffee sold. Volvic promoted its “Drink 1, Give 10” campaign in cooperation with UNICEF, stating that for every liter of water sold, the company would provide 10 l of drinking water in Africa. Procter & Gamble (P&G) promised “1 pack = 1 vaccine” in its CM promotion, in which for every promotional package sold, the company would donate .054€ to UNICEF, equal to the cost of one vaccination against tetanus.

In CM campaigns such as these, the firm contributes a specific amount to a cause if a customer buys the firm's product (Varadarajan & Menon, 1988). This transactional element is the main characteristic of CM: The customer must make a purchase to trigger the donation. Corporate sponsorship of social causes has become very frequent, with spendings in North America reaching $1.86 billion in 2011 (IEG, 2011).

CM is both a tactical tool that firms employ to increase their sales and a strategic activity aimed at improving brand image (Ross, Stutts, & Patterson, 1991). However, whether the investment in CM always pays off is unclear. On the one hand, by triggering a donation through their purchases, consumers might derive utility from giving, which is known as “warm glow” (Andreoni, 1989), and thus exhibit favorable purchase behaviors. On the other hand, CM might raise consumer skepticism about the company's motivation because the donation is conditional on sales and ensures the company's own benefit (Barone, Miyazaki, & Taylor, 2000). These consumer considerations can negatively impact brand image. Whether positive or negative effects prevail depends on several success factors (Fries, 2010).

We study one key success factor, donation size, which is particularly interesting because it is a design element that is directly controlled by managers; i.e., they can decide how much to give when implementing CM. Campaigns vary in their donation sizes as indicated by the introductory examples, in which donations range from 1% of the product's price in the P&G example to 50% of the price in the Tommy Hilfiger campaign. The effect of investing in a larger donation is unclear. On the one hand, consumers may derive more warm glow when donation size increases, which should make them more likely to make a purchase. A larger donation could also produce more favorable evaluations of the brand. On the other hand, consumers who face a CM offer with a substantial donation may prefer to receive this money for themselves or may not believe that the company will really donate as much as promised. Thus, donation size could also have a negative effect on sales and brand image.

Previous research has studied the influence of donation size on CM success, but the results are equivocal. Some studies find a positive effect (e.g., Olsen, Pracejus, & Brown, 2003), others a negative one (e.g., Strahilevitz, 1999), and others no effect at all (e.g., Human & Terblanche, 2012). We therefore analyze the effect of donation size on CM success in more depth and extend previous research by focusing on the following three aspects:

First, we acknowledge that firms use CM for both tactical and strategic purposes and therefore study two success measures: brand choice and brand image. Previous research has rarely compared these success measures. We expect the effects of donation size on brand choice and brand image to differ because of different underlying drivers.

Second, we study two potential moderators of the effect of donation size on CM success that have not been analyzed before: the presence of a financial trade-off and donation framing. A financial trade-off occurs when consumers choose between one brand with a CM campaign and another brand with a price promotion. We expect that such a trade-off moderates the effect of donation size on brand choice. The framing of a CM campaign can be monetary (e.g., 5 cents), nonmonetary (e.g., one vaccination), or a combination of both (e.g., one vaccination, worth 5 cents). We expect framing to moderate the impact of donation size on brand image.

Third, we vary our independent variable – donation size – over a wide range and in small intervals, which allows us to test for nonlinear effects.

In a large-scale experimental survey, we systematically vary donation size and the potential moderators, and ask respondents to make a brand choice decision and evaluate the image of the focal brand. In an additional exploratory study, we also measure prospective drivers underlying CM success to shed light on the differences between tactical and strategic success.

We find that the effect of donation size is different for brand choice (tactical success) versus brand image (strategic success). The effect on brand choice is moderated by the presence of a financial trade-off, and the effect on brand image is moderated by donation framing. Furthermore, we find a nonlinear effect of donation size on brand image for a combined monetary and nonmonetary framing. Finally, our exploratory analysis suggests that brand choice is driven by warm glow, whereas brand image mostly depends on what consumers infer about the company's altruism and about the effectiveness of the campaign.

Our results have important implications for managers. We show that spending more money on a larger donation does not always produce more favorable effects, but rather donation size has to be chosen carefully, taking into account financial trade-offs and donation framing.

Our research contributes to the CM literature by clarifying the effects of donation size: We explain why the effect can be positive, negative, or null. In particular, we detect differences in tactical versus strategic success. Furthermore, we investigate the moderating effects of financial trade-offs and donation framing for the first time and provide new insights into nonlinear effects.

We proceed as follows. In Section 2, we review existing research on donation size before presenting our conceptual framework and deriving hypotheses about the effects of donation size on CM success in Section 3. We present the research design of our experimental survey investigating the different effects of donation size in Section 4, and its results in Section 5. To gain insights into the drivers underlying tactical and strategic CM success, we report the data and results of an additional study in Section 6. We conclude by summarizing our work and discussing its implications for both managers and researchers in Section 7.