luxeethique

Luxury and ethics: Are luxury and CSR compatible?

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According to a survey conducted by McKinsey, 76 per cent of senior executives believe that corporate social responsibility is critical to long-term share price and 55 per cent say it can improve a company's reputation. CSR also enables companies to differentiate themselves from their competitors, which is an important competitive factor for branded companies. One might therefore conclude that CSR is good for business.

That is not necessarily true. Carlos Torelli (University of Minnesota), Alokparna Basu Mona (University of South Carolina) and Andrew Kaikai (University of Georgia) questioned whether CSR adds more value to some brands than others.

Indeed, brands have different meanings, which allow consumers to identify with them. For example, luxury brands such as Rolex or Lexus are associated with the quest for "perfection". Other brands, such as iTunes, are associated with openness. Similarly, consumers associate brands such as Aunt Jemima with the past and tradition.

Torelli and his colleagues believed that the meanings associated with certain brands could conflict with the meanings associated with CSR - and therefore reduce the value that consumers attribute to products. The quest for "perfection" that consumers associate with luxury brands could conflict with the images of social and environmental consciousness associated with CSR. Researchers investigated this issue in four different studies based on consumer roundtables and the participation of undergraduate students.

"...CSR has the effect of reducing the value consumers place on luxury brands..."

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Researchers have found that CSR has the effect of reducing the value that consumers place on luxury brands associated with the quest for "perfection", such as Rolex or Lexus, with negative results. However, brands associated with openness (iTunes) or tradition (Aunt Jemima) do not lose value for all that. In other words, CSR damages luxury brands because it diminishes the value that consumers attribute to these products.

Implications for Managers

When defining and communicating CSR policies, CSR managers and brand managers of luxury goods companies must carefully consider the messages associated with their brands. Not all luxury goods are associated with the quest for "perfection" - but those that are should re-evaluate their CSR strategies.

Here are some ways to change CSR approaches for luxury brands:

- Differentiate the brand using factors other than CSR

- Associate CSR activities with more compatible sub-brands

- Show consumers images of powerful philanthropists, such as Bill Gates, so as to associate "perfection" with the power to "do good deeds" and improve society and the environment.

All brands can potentially benefit from CSR, whether through increased sales, customers' willingness to pay more, stable share prices, recruitment of talented employees or lower turnover. But, as with any strategic decision, it must be compatible with the brand and appreciated by consumers.

Future research in this area

The short-term negative effects of CSR observed in this study need to be considered in a longer-term perspective. CSR efforts are more likely to be successful in the long term if they increase loyalty or lead to other effects. Future research should therefore investigate the long-term effects of CSR on luxury brands.

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(Source: Torelli, C.J., Monga, A.B., Kaikati, A.M. (2012). Doing Poorly by Doing Good: Corporate Social Responsibility and Brand Concepts. Journal of Consumer Research, 38(5):948-963. Abstract by Thomas Long and the REDD Team, April 2012.)

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