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Cause marketing and customer profitability

Abstract

This research marks the first attempt to investigate the cause marketing–customer profitability relationship, and to assess whether features can moderate the influence of cause marketing (CM) on customer profitability for a focal brand and its main rival. We obtain a panel dataset on 7257 customers to evaluate the Yoplait–Susan G. Komen partnership. On a propensity score matched sample, we estimate a multilevel model and find that Yoplait’s CM initiative positively influences Yoplait’s customer profitability (2.70%), along with a deleterious effect on Dannon’s customer profitability (−13.31%). These findings are theoretically meaningful and pragmatically useful as they: (1) provide behavioral evidence of CM’s profit impact, (2) establish CM as an “offensive” strategy that cultivates the rival’s customers, (3) suggest features can amplify the effect of CM on the focal brand’s customer profitability, and (4) support that managers can add CM to their strategic marketing arsenal as an instrument to strengthen brand equity.

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Fig. 1

Notes

  1. We add that CM differs from the notion of corporate social responsibility (CSR), which also requires a firm to make a contribution to a cause, but the donation does not have to be linked to a purchase; rather, it can be an outright cash donation to some philanthropic entity (see, e.g., Bhattacharya et al. 2008).

  2. “Customers,” “panelists,” and “individuals” are synonymous with “households,” hereafter.

  3. Coupons are another in-store marketing element that was considered given their salience in a consumer packaged goods setting (e.g., Henderson and Arora 2010; Sunder et al. 2016); however, the incidence of coupon drops was very low in our dataset. This prevented us from drawing any (statistically significant) conclusions about its effects, and therefore did not enter into the analysis.

  4. We are grateful to the anonymous Area Editor for providing detailed guidance on the following procedure.

  5. We are grateful to the anonymous referee for this suggestion.

  6. To determine our margins, we draw on personal email correspondence with a former Vice President of Marketing at Stonyfield Yogurt (Karen Fleming Heidelmeier, October 28, 2016).

  7. In our dataset, for example, the price of a single-serve cup to the consumer is $0.65. Assuming a 27% retailer’s margin, the manufacturer’s selling price to the retailer is $0.47. Assuming the manufacturer’s cost per unit is $0.22, the manufacturer’s contribution margin per unit is $0.25 and the manufacturer’s margin is 53.2% ($0.25/$0.47).

  8. We acknowledge that the cost of the CM campaign was not taken into consideration; and that the profit increase reported in this manuscript is based on short-term behavior. Thus, the campaign may have a more lasting impact than what can be calculated here.

  9. We are thankful to one of the anonymous reviewers for pointing this out.

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Acknowledgements

We would like to express our appreciation to the three referees, the Area Editor, and the Editor for their detailed and helpful comments, which led to substantial improvement of this paper.

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Correspondence to Neeraj Bharadwaj.

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J. Andrew Petersen served as Area Editor for this article.

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Ballings, M., McCullough, H. & Bharadwaj, N. Cause marketing and customer profitability. J. of the Acad. Mark. Sci. 46, 234–251 (2018). https://doi.org/10.1007/s11747-017-0571-4

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  • DOI: https://doi.org/10.1007/s11747-017-0571-4

Keywords

  • Brand equity
  • cause marketing
  • marketing strategy
  • multilevel modeling
  • propensity score matching