Context
Today’s managers have to consider different consumer expectations that are sometimes difficult to meet simultaneously. Luxury brands face this type of challenge. On the one hand, they are obviously meant to demonstrate prestige, exclusivity, and a high social status. On the other hand, the growing concern about the firm’s social, societal and environmental impacts entices luxury companies to engage in corporate social responsibility (CSR) actions. For instance, this can explain the engagement of luxury brands to rebuild Notre-Dame of Paris or in the Black Lives Matter movement.
However, exclusivity and CSR do not seem to be a match made in heaven. Indeed, luxury brands were first criticized and even vandalized for their lack of reaction after the death of George Floyd. But even after they reacted, they were stilled called out for hypocrisy.
Should luxury brands merely abstain from engaging in CSR to avoid bad buzz and criticism? This is what Sipilä, Alavi, Edinger-Schons, Dörfer and Schmitz investigate in an article recently published in the Journal of the Academy of Marketing Science.
Research questions
Since the traditional objectives of luxury companies seems to be at odds with those of CSR, the authors propose the following research questions:
– What are the impacts of CSR engagement for luxury companies on their sales revenue growth and on consumer loyalty?
– How can luxury companies reduce the adverse effects of their CSR engagement and even recoup the fruits of their labor?
Method
To answer the research questions, the authors conducted five empirical studies:
– Study 1 consisted in an analysis of secondary data from 179 company to find out the impact of CSR engagement on financial performance
– Studies 2 and 3 consisted in experiments to find out the impact of CSR engagement on consumer loyalty. Study 2 was a field experiment in which frontline employees from luxury brands asked their customers to fill out a questionnaire. 136 questionnaires were analyzed. Study 3 consisted in a lab experiment conducted on 102 students, in which participants were faced with a fictional scenario of a brand engaging in CSR.
– Study 4 (conducted on 285 consumers) and 5 (conducted on 116 people) were designed to find out ways for luxury companies to curb the negative effects of their CSR engagement.
Results
– CSR engagement of luxury firms leads to a decline in sales and brand value in the long run.
– Consumers attribute CSR engagement of luxury firms to extrinsic motivations. This means that consumers feel there is a discrepancy between the values promoted by CSR (equality, justice, …) and those promoted by luxury brands (exclusivity, prestige), which makes them doubt the firm’s true motives of engaging in CSR. Consumers thus feel CSR engagement of luxury firms is meant to gain profits rather than for the good of society. In turn, such perceptions decrease consumer loyalty.
– When consumers have the opportunity to deliberate on a luxury company’s “true motives” for engaging in CSR, loyalty intentions decrease even more. This is because consumers are often under pressure at the point of sale, and CSR engagement can even ease the guilt of purchasing luxury goods (which explains why CSR engagement can cause an increase in sales in the short run). However, after giving it some thought, they start attributing extrinsic motivations to the luxury firm, and develop stronger resistance to the messages conveyed by CSR.
– Luxury companies should favor internal CSR to external CSR. The internal CSR approach feels more natural and honest to consumers because luxury firms often rely on their employees’ talent and craftmanship, so it makes perfect sense that they should engage in actions that increase their employees’ well-being. Conversely, the external CSR approach causes consumers to attribute extrinsic motivations to the firm.
– Luxury companies should shift their brand framing from exclusivity to sustainability. This could help better align the values of luxury firms to those of CSR, thus reducing the attribution of extrinsic motivations to the luxury companies and increasing consumer loyalty.
Why is this article relevant for researchers?
Previous research about the effects of CSR engagement were conducted in non-luxury contexts. This article contributes to further unveil the dark side of CSR for luxury brands, with the discrepancy between CSR values and luxury values as a starting point. The authors enrich the literature on consumer behavior following CSR engagement, they notably highlight the determining role of extrinsic attributions in CSR perception. Finally, concrete ways of avoiding CSR pitfalls and legitimating CSR engagement of luxury firms are proposed.
Future research could focus on finding other ways to legitimate CSR engagement of luxury companies and reducing the attribution of extrinsic motivations for CSR engagement to those firms. As shown by this enlightening article, the legitimation of CSR engagement could follow from other factors, such as the firm’s promptness to address the cause, or the consistency between the firm’s strengths and the cause, or its connections.
Why is this article relevant for professionals?
This article gives very concrete and easy-to-implement advice for professionals working in the luxury industry. It shows that:
– external CSR can hurt the company’s profits and brand value if not implemented in the proper manner,
– internal CSR should be favored, because consumers feel this type of engagement is more authentic, honest and in-sync with the values of luxury firms (such as craftmanship). For instance, LVMH’s engagement towards their employees has led to the creation of their own “well-being index”.
– shifting the luxury firm’s brand framing from exclusivity to sustainability can bridge the gap between the values of the luxury firm and those of CSR. Some luxury fashion brands have already succeeded in building a sustainable image that makes their CSR engagements legitimate.