Conscience, consistency and commitment are the essential elements of long-term customer loyalty, while gimmicks and shallow promises are to be avoided at all costs.
So says Esade's Oriol Iglesias, whose latest research has examined the core principles of corporate social responsibility (CSR). Along with co-authors Stefan Markovic, Mehdi Bagherzadeh and Jatinder Jit Singh, Iglesias has identified the elements of CSR that are essential for brand loyalty and provide a positive impact on society and the environment.
"In an ever more transparent, digitalised, and connected environment, customers are increasingly pressuring brands to embrace genuine CSR practices and co-creation activities," he says. "CSR influences customer loyalty both directly and indirectly through co-creation and customer trust. However, the indirect impact is the stronger of the two. Embracing co-creation activities and developing customer trust can make it easier for CSR practices to enhance customer loyalty."
Positive practice: brands with a conscience
Public opinion and customers are increasingly aware of poor brand practices and will walk away from brands whose actions harm the environment and society. Superficial actions that are perceived as a sticking plaster solution over harmful practices aren’t enough to rectify a damaged reputation, with social media acting as an important mouthpiece.
"Strong brands have started to place social responsibility genuinely at the heart of their business strategies, becoming true and sincere brands with a conscience," says Iglesias.
Customers are increasingly pressuring brands to embrace genuine CSR practices and co-creation activities
"When customers perceive this, their loyalty to the brand is likely to increase, as they tend to reward those brands that demonstrate to be beneficial to society and the planet."
Strong relationships build competitive advantages
A digitised and connected environment also offers customers the possibility of interacting much more directly with brands. Lego and Adidas have built much of their recent success on a greater openness, developing relationships of trust and true partnerships with their customers and becoming more relevant as a result.
"This element of co-creation is an active, creative, dynamic, and social process aimed at developing new relevant product or service innovations," says Iglesias.
"Embracing co-creation is attractive for brands, because it can lead to a plethora of organisational advantages, including cost efficiencies, risk reduction, speed-to-market, better insights, and competitive advantage. It also allows customers to establish a warm, deep relationship with the brand and the other members of the co-creation community."
When taking part in a co-creation project, customers often feel that they grow as individuals, learn together with the community, and become more creative, he adds. "In essence, co-creation offers customers opportunities for self-development, as well as social and hedonic benefits that lead them to feel more closely connected to the brand."
Co-creation represents a particularly positive opportunity for services brands, as it can help them to translate their CSR practices into enhanced customer loyalty. "The indirect effect of CSR on customer loyalty – via co-creation and customer trust – accounts for some 74% of the total impact of CSR on customer loyalty," explains Iglesias.
"This means that when brands involve their customers in co-creation activities and are trusted, they can more easily translate their CSR practices into greater customer loyalty. By embracing co-creation initiatives, brands inevitably open themselves to the outside world and listen to their customers. The customers then perceive that brands are genuinely concerned about their needs and desires, and that they listen to them, and act accordingly."
When brands involve their customers in co-creation activities and are trusted, they can more easily translate their CSR practices into greater customer loyalty
For brand managers who want to increase customer loyalty with their CSR activities the message is simple. "They need to promote an authentic dialogue with customers," says Iglesias. "It’s already a well-established principle of business that stakeholder dialogue should be a key priority. We suggest that they should add to this by embracing co-creation to increase customer trust and to effectively translate their CSR activities into enhanced customer loyalty."
But, he warns, businesses should understand that the message needs to run much deeper than a marketing and communications campaign.
"If managers want to realise the full potential of co-creation, they have to encourage a much more open and participatory corporate culture. They have to genuinely appreciate and recognise customer knowledge and expertise and authentically take into account customer idiosyncratic needs and desires. They also need to build long-term, trustworthy collaborative relationships with customers and treat them as true strategic innovation partners. This strategic approach to co-creation is that with the greatest potential to translate CSR practices into enhanced customer loyalty."
Start from within
In order to build on these relationships, the values of an organisation should be shared by the whole leadership team and filtered throughout the organisation. "It has to be more than a communications enterprise," stresses Iglesias. "Genuine and authentic messages have to be embedded at different touchpoints with customers, especially those involving direct customer contact with frontline employees.
"Human resource management policies should support CSR strategies and employee values should be aligned with brand CSR practices. This means designing training programmes to encourage socially responsible behaviour among employees, providing promotion opportunities that depend on employees’ CSR performance and their ability to embody and enact societal values.
"Brands need to take a long-term view of CSR," he concludes. "A brand that wants to transform its impact on society needs to transform internally first. It has to be guided by its principles from within."
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