Should Csr Be Used as a Marketing Tool by Producers in the Cosmetics Industry? - Marketing Essay Example

Should CSR be used as a Marketing Tool by Producers in the Cosmetics Industry? - Should Csr Be Used as a Marketing Tool by Producers in the Cosmetics Industry? introduction?? ABSTRACT The purpose of this paper is to prove that CSR can be used as a positive approach in the area of marketing and promotion, particularly in the cosmetic industry. The paper substantiates this hypothesis by drawing on theory from scholarly articles and literature and analysing data from annual reports.

A portion of the research is dedicated to the Body Shop, based on analysis of their annual reports, as well as the reaction of different stakeholder groups based on several literatures. The paper finds that there are positives and negatives in using CSR and promoting it using marketing depending on the consumers’ perceptions. It also finds that there exists an information asymmetry between producers and consumers in terms of CSR for their products.

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The paper supports previous ideas that CSR is useful in benefitting the company brand and value and that it can also be used to influence a consumer’s purchase decision of the cosmetics. INTRODUCTION In conceptual theory, CSR is how a company incorporates “social, environmental and economic issues into their values and business operations in a transparent and accountable manner” (FAITC, 2012).

In simple terms, CSR is the actions that a company undertakes or doesn’t undertake during their business functions to benefit society and their stakeholders. There are many arguments for and against CSR and also differing views on whether it actually “pays” to undertake CSR. Friedman (1970) essentially argues that the only social responsibility that a business should undertake is to increase profits for the benefit of its shareholders and that CSR should be left to governing authorities that know best which social responsibilities to act upon.

In contrast, Mintzberg (1983) argues that CSR is indeed important for corporations to undertake with benefits including but not limited to; can serve as to enlighten self-interest, there are economic benefits to investing in CSR and finally, it can be used to ‘prevent regulation’ in that if it seems the business community is not seen to be acting to the detriment of the surrounding communities, there will be no need for regulation to be put in place. The economic benefits of CSR continue to be very difficult to measure.

There are those that contend that CSR can indeed provide economic benefits, but there are also those that argue that CSR presents no such benefits. Vogel (2005) is one detractor of the view that CSR provides any form of profitable incentive for business, though, he puts forward the case that “CSR also does not make firms less profitable”, subsequently stating that there is indeed a case for CSR to be enacted upon by businesses, though due to the lack of economic benefits, CSR is not important enough to become a priority for all firms. Conversely, Orliztky et al.

(2003) argues that according to the reputation of a business (particularly if the business has been endorsed by federal agencies), CSR can is, in fact, positively correlated to corporate financial performance, meaning that across studies, it has been found that businesses which have undertaken CSR have in fact reaped economic benefits. This paper presents the view that CSR is in fact beneficial for a cosmetic business, in particular The Body Shop, which uses CSR as a marketing tool, in that value is created via economic benefits to the company and also a customer preference towards the brand is also influenced. METHODOLOGY

This paper explores The Body Shop to form the basis of the research of a cosmetic company using CSR as a marketing tool to create value for the company and its stakeholders. Annual reports and scholarly articles gathered from online databases have been employed to construct a coherent study of the utilisation of CSR as a point of difference in the marketing efforts of cosmetic companies and in particular, The Body Shop. Using The Body Shop as the point of reference, this paper attempts to connect financial performance and consumer mindsets in regards to the use of CSR as a marketing tool by those in the cosmetic industry. LITERATURE REVIEW

Currently, it is very common for corporations to use CSR as a marketing tool to generate social publicity and a better brand image. Since we are living in a much more polluted world than before, many companies have started to apply CSR in their marketing campaigns to enhance their brand image and to gain a better product image, for example: BP changed its classic shield logo in the year 2000, to the current logo, which symbolises the dynamic energy in all its forms. The company’s slogan was also changed to “Beyond Petroleum”. Archie Carroll’s pyramid states that there are four different kinds of social responsibilities that contribute to CSR.

All of these responsibilities have always existed to some extent. One of the basic is economic responsibilities. The profit motive was established as the primary incentive for entrepreneurship. All other business responsibilities are predicated upon the economic responsibility of the firm, because without it, the others become insignificant (Carroll, 1999). It explains one of the motivations for a company to undertake CSR programs; that is because business has the responsibility of maximizing their profit; however it doesn’t mean it’s unethical to demonstrate what the company has achieved in CSR program. Friet.

His opinion was rather naive, because he argues that a company shouldn’t apply and mange CSR within their business. Consumers shouldn’t focus too much on how a company promotes their social achievements and its use as marketing tool, instead they should focus on how much the community really benefitted from the program. As long as the society has benefited and the company doesn’t overstate their achievement, then the company has every right to promote. If the government and the business world can jointly contribute to the community and work systematically then it would create a much bigger social power than just a government working along.

It means more funds, volunteers and public awareness are working for the benefit of society when compared against a society without the involvement of the corporation. In this regards, the relationship between long-term profitability and CSR is a convincing one (Ven, 2008). Furthermore, if corporations can be benefit from CSR, then they are more likely to invest more money into the programs, which becomes a virtuous circle. If the company is the market leader of the industry, then their action may even set a benchmark for the industry, which encourages more companies to follow suit.

A company’s social achievements can be marketed as a part of their augmented product, as firms promoting their ethical credentials may be seen as supplying “augmentations to the basic product offering” (Crane, 2001), which adds additional value on top of the core product when are then sold on to the consumers. Based on Porter’s Generic Value Chain theory, Porter considers that marketing is one of the primary activities that a company undertakes to create products and services that in turn create value for the consumer and earns profit for the company (Porter,

1985). Additionally, the model specifically points out that CSR can in fact be of value. However, marketing covers all the campaigns that a company undertakes which includes CSR. Using The Body Shop as an example, the company has been involved in campaigns against animal testing, so when a consumer chooses the different alternatives of makeup products, they take into consideration of the value and belief of the business or the brand. These values can affect a consumers’ buying decision-making process.

The importance of the brand is engendered by the emergence of an emotion economy, where the basis of purchasing decisions moves away from physical product characteristics to emotional experiences and symbolic product qualities that impart status and distinction (Feldwick, 2002; Pine and Gilmore, 1999). It explains why consumers are willing to pay extra if the brand’s values match their own value. On the other hand, responding to the ethical demands of consumer is something that all sorts of companies might need to do at some stage.

Crane believes that ethical niche consumers can use their purchase power to demand a company to be more socially responsible (Crane, 2001). It does not matter whether a company is pushing to provide CSR or consumer demands CSR to be a part of the value attached with the product, the main drive is that CSR is implemented in marketing for company to gain financial profit. Branding is the element which is most involved with CSR in the recent years. Many companies such as Nike, McDonald’s and The Body Shop are investing large amounts of money to leverage and create good reputation and brand equity.

Nowadays, many brands are more or less aware of the tag “good corporate citizenship”, “social responsibility” and environmental concerns(Lane Keller, 2000). The main objective of the brand building process is to establish a trust with the customer, so it becomes a process of stakeholder/consumer relationship management. There are studies which show that “super brands” are more trusted than government and other brands (Wootliff, 2001). However, the ongoing problem of reporting issues poses big threats to the public relation of corporations with the public.

For example, before the oil spill in Gulf of Mexico, BP had a really good brand image, but this was essentially demolished after the spill, and people were disappointed by the reaction of the company. Again the socially responsible image was questioned. As a result, people were less trusting of socially responsible claims. There are two new directions organisations should considering taking when dealing with branding. The first is cause-related marketing. The biggest issue of the traditional way of branding was visibility.

Marketers often made use of puffery or untruthful claims of a company’s social achievement (Crane, 2003), which normal consumers had no way of gauging the truthfulness of the claim. When the truth is brought to light, such as in the BP Mexican Gulf case, the consumer will consequently lose confidence in those claims. The current branding climate demands companies to be empathetic to the needs of the consumer, that is, it is necessary for communication to be two way instead of one way. The transformation in its decision processes, the company claimed, went from DAD (Decide, Announce, Deliver to DDD (Dialogue, Decide, Deliver) (Livesey, 2002).

Cause-related marketing is one of the most visible aspects of a company’s social responsibility programme (Lewis, 2003). So rather than concentrating on the “high and large” programs, businesses choose to be “community based and visible”, targeting the community and working for the benefits of the community. Following on from Crane’s idea, the second direction would be linking the CSR program with more direct value for the consumer. Lewis (2003) pointed out that visibility would be the key element of future branding along with the argument product theory.

Some of the CSR programs that exist today in fact do not have a direct relationship with the benefits of stakeholders as companies want to reflect their power and position (Garriga, 2004), which drives company to aim big and invest in CSR initiatives that have nothing to do with the company’s core offerings. At the end of the day, if companies that are targeted towards niche consumers want to engage in effective CSR, they must ensure that the mass market are also about to derive value and benefits from their products.

CSR shouldn’t just improve company brand value, it should also improve a company’s long-term competitive potential (Porter, 2002). CASE STUDY: THE BODY SHOP The Body Shop was founded by Anita Roddick in 1976. She started her business from manufacturing naturally inspired products in Brighton, England (The Body Shop Australia, 2012). Some people even called her “The Queen of Bubble Bath” because of her ethical business practices and Anita had proudly said that “I’d rather promote human rights, environmental concerns, indigenous rights, than promote a bubble bath. ” (BRAZZIL Magazine, 1976). According to

The Body Shop’s website, it states that “We’re different because of our values” (The Body Shop Australia, 2012). Unlike one of The Body Shop’s competitors, Clinique, The Body Shop tends to inference buyers’ purchase decision via CSR activities. These activities may include against animal testing, support community fair trade, activate self-esteem, defend human rights etc. On the other hand, Clinique just focuses on its ingredient quality which may not be the main concern of those ethical consumers (Selbes, 2010). Actually, The Body Shop has a long history of being a socially responsible corporation.

The first campaign “Save the whale” started in 1986 and it kept on running a specific campaign in every coming year. For instance, the “Against animal testing” campaign in 1990, “No forests no future” in 1990 and “Stop the violence in the home”. In addition to these campaigns, The Body Shop contributes to charities on a continuous basis as well. It established The Body Shop Foundation as its charitable arm to make grants to people in need around the world (The Body Shop Foundation, 2012). While being the main donor, The Body Shop also provides the office space and off season products to The Body Shop Foundation for free.

Furthermore, it launched “Community Fair Trade” to build up trading relationships with those marginalised communities (The Body Shop Australia, 2012). Most of the companies tend to help those needy people by simply giving money away. Instead, The Body Shop suggests teaching them how to grow their agricultures and how to trade them. Thus, the skills they learned can be an ongoing earning capability to them and they can live on their own. Linking this case study back to the literature review, it is suggested that CSR may not directly make a firm become profitable.

However, it also does not make a firm less profitable (Vogel, 2005). As L’Oreal took over The Body Shop in 2006, those annual report does not contain a detailed financial breakdown for The Body Shop. But, according to L’Oreal’s annual reports from 2007 to 2011, the average operating profit is around 5-7% of the sales (L’Oreal, 2012). It shows that even The Body Shop keeps on spending money on a number of CSR activities; it can still earn a profit. However, the actual linkage between the profits and CSR activities is unknown and it can just concluded that “CSR also does not make firms less profitable” (Vogel, 2005).

DISCUSSION AND RECOMMENDATIONS From the findings in this paper, it can be seen that in the case of The Body Shop, by promoting their core brand values and products as socially responsible, they were able to maintain consistent year to year growth and profits. Although this growth and profit is difficult to link directly to The Body Shop’s marketing initiatives, one can derive from this that whilst they are promoting themselves as socially responsible; they are not incurring any losses and unprofitability.

Differing cosmetics companies have differing levels of corporate social responsibilities and also promote their social responsibilities to differing degrees. Research has shown that there exists information asymmetry between the cosmetic companies and their consumers (Zhao, 2012). Zhao (2012) further suggests that consumers only care for “the products’ quality, price and ingredients when they buy cosmetics” and that “CSR is not an important factor in consumers’ purchase decision of cosmetics.

” In saying this, Zhao (2012) notes that consumers “are willing to pay more for cosmetic products made in socially responsible ways”. Consequently, this paper recommends that cosmetic companies strive to close the information gap between cosmetic companies and their consumers to achieve information symmetry so that consumers who are willing to pay more for socially responsible cosmetics are able to act out on this willingness in purchasing these cosmetics. CONCLUSION Promoting a company’s achievement in its social responsibilities has not been a new tactic for corporations.

In saying this, The Body Shop was one of the first, if not the first, cosmetic company to promote its whole brand from the socially responsible point of view. Through the findings of this paper, cosmetic companies should in fact incorporate their corporate social responsibilities into their marketing efforts as not only does it not negatively affect their growth and their profits, it has also been found that consumers are also likely to be willing pay a premium for cosmetics that are produced in a socially responsible manner.

In saying this, it cannot be said that cosmetic companies promoting their social responsibilities in their marketing initiatives are guaranteed profit and growth as it is difficult to establish a tangible link between using CSR as a marketing tool and the financial performance of the company. Various other important factors of the business contribute to the financial success or demise of the company. LIMITATIONS The information and date contained presented in this paper is of the secondary nature whereby the research and views formed in this paper have been constructed using data and research presented by other sources.

Primary sources such as consumer surveys and data from primary sources was not used in the process of forming the views of this paper. The lack of tangible linkage between marketing using CSR as a point of difference and sales figures as a result of the marketing also limited the arguments which could be made for and against using CSR as a marketing tool. As such assumptions were made to fill in the information gaps. REFERENCES BRAZZIL Magazine. (1976). The Queen of Bubble Bath. Retrieved on October 14, 2012 from http://www. jonentine. com/articles/queen_of_bubble_bath. htm Carroll, A.

(1999). The pyramind of corporated social responsibility: toward the moral management of organizational stakeholders, Routledge. Crane, A. (2001). Unpacking the ethical product. Journal of busines ethics, 30, 361-373. Crane, A. A. D. , J. 2003. are you talking to me? stakeholder communication and risks rewards of dialogue. unfolding stakeholder thinking 2: relationship, communication, 39-52. FAITC. (2008). Corporate Social Responsibility. Retrieved Oct 10, 2012 from http://www. international. gc. ca/trade-agreements-accords-commerciaux/ds/csr. aspx? view=d Friedman, M. (1970).

The social responsibility of business is to increase its profits. The New York Times Magazine, New York, The New York Times News Services Division Garriga, E. A. M. , D (2004). Corporate social responsibility theories: mapping the terriory. IBISWorld . Amusement Parks and Arcades in Australia – Industry Report. Retrieved August 19, 2012 from http://clients. ibisworld. com. au/industry/retail. aspx? indid=665&chid=1 Lane Keller, K. (2000). building and managing corporate brand equity. Oxford University Press, 115-137. Livesey, S. (2002). the discourse of the middle ground: citizen shell commits to sustainable development, .

Management communication quarterly 15, 313-349. L’Oreal Finance. (2012). L’Oreal Finance. Retrieved on October 14, 2012 from http://www. loreal-finance. com/eng Mintzberg, H. (1983). “THE CASE FOR CORPORATE SOCIAL RESPONSIBILITY”, Journal of Business Strategy, Vol. 4 Iss: 2, pp. 3 – 15 Orlitzky, M. , Schmidt, F. L. , Rynes, S. L. (2003). Corporate Social and Financial Performance: A Meta-Analysis. Organization Studies 24: 403-441 Porter, M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New Yor: Free Press. Selbes, A. & Mohamed, S. (2010).

Consumer Behaviour Analysis in Relation to CSR Activities of Cosmetic Brands. Unpublished master’s thesis. Arhus School of Business The Body Shop Australia. (2012). About Us. Retrieved on October 14, 2012 from http://www. thebodyshop. com. au/Content. aspx? Id=5 The Body Shop Australia. (2012). Our Values. Retrieved on October 14, 2012 from http://www. thebodyshop. com. au/ValuesAndCampaigns. aspx The Body Shop Australia. (2012). Support community fair trade. Retrieved on October 14, 2012 from http://www. thebodyshop. com. au/CommunityFairTrade. aspx The Body Shop Foundation. (2012). What we do.

Retrieved on October 14, 2012 from http://thebodyshopfoundation. org/what-we-do/ Vogel, D. (2005). The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Washington D. C.. The Brookings Institution Ven, B. V. D. (2008). An ethical framework for the marketing of corporate social responsibility. Journal of busines ethics. Wootliff, J. A. D. , C. (2001). NGOs: the new super brand. Corporate Reputation Review, 4, 157-165. Zhao, G. S. (2012). CSR and its Impact on Consumer Behavior: A Study of the Cosmetic Industry. Unpublished master’s thesis. Jonkoping International Business School

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