Full Length ArticleHow much to give? — The effect of donation size on tactical and strategic success in cause-related marketing
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.
Section snippets
Literature review
Much previous research has studied the characteristics of successful CM campaigns (for an overview, see Fries, 2010) and has identified a broad range of success factors, including the characteristics of the cause (e.g., Ross et al., 1991), the company (e.g., Strahilevitz, 2003), the consumer (e.g., Wymer & Samu, 2009), the non-profit organization (NPO) (e.g., Barnes, 1992), the product (e.g., Strahilevitz & Myers, 1998), and the fit among these factors (e.g., Zdravkovic, Magnusson, & Stanley,
Overview
Fig. 1 depicts our conceptual framework. We analyze the impact of donation size on both brand choice (tactical success) and brand image (strategic success). Furthermore, we consider the presence of a financial trade-off (i.e., non-focal brand on price promotion) as a moderator of the effect on brand choice, and donation framing (i.e., monetary, nonmonetary, combination) as a moderator of the effect on brand image.
We expect that the effects of donation size on brand choice versus brand image are
Research design
To test our hypotheses, we conducted a between-subjects experiment based on a large-scale survey. Different groups of respondents considered different CM campaigns, made brand choice decisions, and assessed the image of the CM brand.
Brand choice
Table 5 contains the fit measures for our four brand choice models. Because the models are nested, we use likelihood ratio tests to determine whether more comprehensive models offer a significant improvement over simpler ones.
Model 1 includes the main effects of our experimental manipulations of donation size, donation framing and a financial trade-off. In Model 2, we add the moderating effects of donation framing and a financial trade-off to the effect of donation size. The likelihood ratio
Underlying drivers
To derive our hypotheses about the effects of donation size on tactical and strategic success, we relied on different underlying drivers. In a second study, which is exploratory in nature, we collected data on these potential underlying drivers, and analyzed how they affect brand choice and brand image. For this purpose, we regressed the two success measures on warm glow, perceived altruism, and perceived effectiveness.
Summary and implications
We have investigated the impact of donation size on the effect of CM on brand choice and brand image in a large-scale experimental survey with different product categories. An additional exploratory study provides insights into the underlying drivers of consumer behavior in the context of CM. Our key findings are the following:
- •
The effect of donation size on brand choice depends on the presence of a financial trade-off. If consumers face no trade-off, larger donations increase brand choice
References (66)
- et al.
Heterogeneity and purchase event feedback in choice models: An empirical analysis with implications for model building
International Journal of Research in Marketing
(1999) - et al.
Do social product features have value to consumers?
International Journal of Research in Marketing
(2008) - et al.
Rebate versus matching: Does how we subsidize charitable contributions matter?
Journal of Public Economics
(2003) - et al.
Charitable programs and the retailer: Do they mix?
Journal of Retailing
(2000) - et al.
Bidder motives in cause-related auctions
International Journal of Research in Marketing
(2009) - et al.
Valuing public goods: The purchase of moral satisfaction
Journal of Environmental Economics and Management
(1992) The effects of product type and donation magnitude on willingness to pay more for a charity-linked brand
Journal of Consumer Psychology
(1999)- et al.
Dimensions of fit between a brand and a social cause and their influence on attitudes
International Journal of Research in Marketing
(2010) - et al.
Decomposition of the sales impact of promotion-induced stockpiling
Journal of Marketing Research
(2007) - et al.
Dimensions of consumer expertise
Journal of Consumer Research
(1987)
Foundations of information integration theory
Giving with impure altruism: Applications to charity and ricardian equivalence
Journal of Political Economy
Impure altruism and donations to public goods: A theory of warm-glow giving
The Economic Journal
Embedded premium promotion: Why it works and how to make it more effective
Marketing Science
Determinants of consumer participation in cause-related marketing campaigns
American Business Review
The influence of cause-related marketing on consumer choice: Does one good turn deserve another?
Journal of the Academy of Marketing Science
The impact of fit measures on the consumer evaluation of new co-branded products
Journal of Product Innovation Management
A proposed model of the donation decision process
To donate or not to donate? Product characteristics and framing effects of cause-related marketing on consumer purchase behavior
Psychology & Marketing
Cause-related marketing: Impact of size of corporate donation and size of cause-related promotion on consumer perceptions and participation
The effects of cause-related marketing campaign characteristics — A literature review
Marketing — Journal of Research and Management
Cause-related marketing: Designing successful campaigns
Cause-related marketing: The effect of purchase quantity and firm donation amount on consumer inferences and participation intentions
Journal of Retailing
Spendenbilanz ausgewählter Organisationen 2005–2008
How the scope and method of public funding affect willingness to pay for public goods
Public Opinion Quarterly
Econometric analysis
The discounting of discounts and promotion thresholds
Journal of Consumer Research
Cause-related marketing: Selected effects of price and charitable donations
Journal of Nonprofit & Public Sector Marketing
Observed and unobserved preference heterogeneity in brand-choice models
Marketing Science
Who receives what? The influence of the donation magnitude and donation recipient in cause-related marketing
Journal of Nonprofit and Public Sector Marketing
IEG sponsorship report
Interaction effects in logistic regression
Interaction effects in multiple regression
Cited by (86)
Hotel philanthropy and brand attitudes: Can donation type and amount influence customers' warmth perceptions and attitudes?
2023, Journal of Hospitality and Tourism ManagementDoing good by sharing messages: An investigation of “You Share, We Donate” campaigns and how they can attain viral success
2023, Journal of Business ResearchCitation Excerpt :Among them, the decision related to the amount to be donated is critical as it is directly related to the company's financial exposure (Grau et al. 2007). Extant research has investigated several aspects related to the monetary value of the donation (Fries 2010), such as donation framing (e.g., Chang 2008) and quantification (e.g., Subrahmanyan 2004), the size of the donation per individual participation (i.e., magnitude of the donation, e.g., Müller et al. 2014), and the size of the total donation amount that will be donated at the end of the campaign (i.e., donation cap, e.g., Tsiros & Irmak 2020). However, the question of whether companies should specify a donation cap in their cause-related marketing campaigns has received scant attention in the literature.
How does regulatory monitoring of cause marketing affect firm behavior and donations to charity?
2022, International Journal of Research in MarketingCitation Excerpt :While these studies are based on consumer surveys, theoretical and experimental academic research too has shown that CM can positively influence consumers’ attitudes, brand preferences, purchase intention, and willingness to pay (Arora and Henderson 2007; Haruvy and Leszczyc 2009; Krishna and Rajan 2009; Henderson and Arora 2010). In addition, the outcomes of CM campaigns are influenced by factors such as firm donation amount, donation-related and cause-related customer predispositions, the fit between the firm and the cause, and the co-creation of CM initiatives between consumers and brands (Chen and Huang 2016; Koschate-Fischer et al. 2012; Kull and Heath 2016; Müller et al. 2014; Zdravkovic et al. 2010). While CM has significant impact on firms, consumers, and causes, to our knowledge, there is scant research on the effects of laws and regulations on CM campaigns.
Donating to a good cause: Optimal coordination design of a dyadic supply chain with socially aware consumers
2022, Computers and Industrial Engineering“We Go Together”: Understanding social cause-related purchase intentions of young adults
2022, Journal of Business ResearchCause-Related Marketing as Sales Promotion
2024, Journal of Marketing Research
- 1
Tel.: + 49 40 42838 3748.