Executive summary “Customer responses to the CSR of banking companies”

Citation

(2015), "Executive summary “Customer responses to the CSR of banking companies”", Journal of Product & Brand Management, Vol. 24 No. 5. https://doi.org/10.1108/JPBM-08-2015-912

Executive summary “Customer responses to the CSR of banking companies”

Article Type: Executive summary and implications for managers and executives From: Journal of Product & Brand Management, Volume 24, Issue 5

This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefits of the material present.

The importance of corporate social responsibility (CSR) has increased further during the recent recessionary period. A positive reputation is critical to protect the organization and its brands.

Considerable work has examined CSR in various industry settings, and a key conclusion is that service industries can benefit more than product-related industries from CSR initiatives. However, specific focus on the banking sector has been minimal. The few studies conducted in this area have largely failed to differentiate between savings banks and commercial banks. Given that these banks are respectively driven by socially and profit-oriented motives, customers of these institutions could differ in the way they process CSR information. Findings about how CSR impacts on customer loyalty and its associated behaviors have been mixed.

Previous research has claimed that purchasing behavior involves a multi-stage process. During the cognitive phase, thoughts and beliefs emerge and provide the platform for the various feelings in the affective dimension which follows. The conative dimension reflects consumer actions like buying and making recommendations. These steps are also purported to reflect CSR, and it is claimed that many firms believe that influencing attitudes and feelings represents the most effective way to communicate their CSR activities.

This model is defined as the “hierarchy of effects approach” and Pérez and Rodríguez del Bosque propose a variant in which customer CSR perceptions generate five positive outcomes: customer–company (C-C) identification, satisfaction, recommendation, repurchase activity and customer emotions when evaluating the providing firm. The authors add this final outcome to the more typically used other four because of its relationship to the cognitive and affective dimensions.

The overlap between customer perception of his or her own identity and that of the firm is the essence of C-C identification. This psychological connection intensifies when greater congruence between firm characteristics and personal norms and values is perceived. Customers more closely engage with organizations when C-C identification is high. This can occur when they relate to the firm’s CSR activities, the likes of which are able to enhance the appeal of its identity.

This connection is likely to prompt positive evaluation of the firm as a means of enhancing the consumer’s self-concept. Identifying with the bank helps build up the emotional bond that can be furthered as a consequence of a positive evaluation of CSR.

Customers experience emotions when interacting with their bank through experiencing the brand and its products. These sources and CSR perceptions provide the cognitive foundation which give rise to emotions. The emotional reaction in the consumer’s mind to CSR activities then leads to the firm being evaluated favorably. Analysts recognize satisfaction as a key variable in the banking context. With CSR, satisfaction levels are likely to rise when the company is deemed to be socially responsible. This occurs due to customer perception that CSR efforts have increased the firm’s “utility and value” in both monetary and non-monetary terms.

It is argued that C-C identification influences how customers react to corporate performance. Their “psychological attachment” to the firm should lead to greater satisfaction when performance meets or exceeds a customer’s prior expectations. Furthermore, a strong C-C identification also protects against damaging levels of discontentment in the event of sub-standard corporate performance.

Customer satisfaction is the product of both “cognitive stimuli” and positive emotions generated by the relationship with the company. Such feelings can trigger further purchase activities. One study concluded that consumption of a firm’s products elicits positive emotions which precede satisfaction.

With regard to customer loyalty, an important belief is that individuals are likelier to become loyal to firms which they most closely identify with. When a company is seen as part of a consumer’s “extended self”, it is purported that purchasing and positive recommendations will occur as this helps identity reinforcement. Customers who identify with a firm might also seek to improve its welfare. Different researchers additionally suggest that emotions developed through C-C identification likewise positively impact on repurchase and recommendation behaviors. This likelihood increases when emotions stored in the customer’s memory are positive and strong. Previous work has found satisfaction to have a similar impact on recommendation and repurchase.

Response to CSR can be moderated by the company type. Savings banks are seen in terms of being transparent, sincere, helpful and trustworthy. While commercial banks are associated with greater competency, the emphasis on profit and stakeholders can prompt beliefs that such banks are less caring. It is thus suggested that customer response to CSR perceptions will be more favorable to savings banks than to commercial banks.

Pérez and Rodríguez del Bosque examine the issue in a survey of customers of savings banks and commercial banks in Cantabria, Spain. The final sample of 1,124 was broadly representative of the regional and national population in terms of gender and age. Subjects evaluated their main banking firm and 14 savings banks and 7commercial banks were considered.

Analysis revealed that:

• CSR perceptions directly and positively influence C-C identification and customer satisfaction.

• C-C identification directly and positively influences customer emotions, customer satisfaction and customer recommendation behavior.

• Customer satisfaction directly and positively influences customer recommendation behavior and customer repurchase behaviors.

• The impact of CSR perceptions on C-C identification, emotions, satisfaction and recommendation behavior is more strong and positive for savings banks than commercial banks. There was no difference in the respective effect on repurchase behavior.

In addition, CSR perceptions were found to have a direct and positive influence on customer emotions only in the savings bank sample. And only for customers of commercial banks did emotions influence recommendation behavior.

On this evidence, the authors conclude that CSR perceptions are likelier to prompt recommendation behaviors among customers as opposed to purchase activity. Various affective feelings positively impact on recommendation but only customer satisfaction leads to repurchase behaviors. In their view, this might be a reflection of the fact that recommendation demands less effort, commitment and involvement on the customer’s part.

The crisis context is perceived by Pérez and Rodríguez del Bosque as possibly explaining the lack of relevance of customer emotions on how CSR perceptions influence behavioral loyalty. It is mooted that this situation damages consumer confidence and leads to greater reliance on prior experiences and “verifiable facts” rather than affective feelings.

That CSR perceptions had a stronger overall impact on affective responses and loyalty was greater for savings banks is attributable to traditional involvement of these banks with such as social initiatives. In contrast, financial scandals ensure that consumers remain unconvinced about dedication to CSR among commercial banks. But findings mirror earlier work in revealing that customers will not necessarily purchase products from non-profit organizations simply because they perceive them to be more caring. Competence is also valued by customers.

The authors therefore recommend savings banks to blend efficiency and an increased customer focus with CSR as a means of retaining customers during difficult economic times. For commercial banks, the advice is to maintain areas of strength like personal service and profitability but to enhance CSR efforts to build greater trust and confidence among customers.

Greater analysis of individual CSR dimensions is one idea for future research which could also consider customers who frequent both savings banks and commercial banks.

To read the full article, enter 10.1108/JPBM-12-2014-0759 into your search engine.

(A précis of the article “Customer responses to the CSR of banking companies”. Supplied by Marketing Consultants for Emerald.)