Relationship between Corporate Philanthropy and Consumer Loyalty - the Mediating Role of Gratitude, Trust and Commitment: South Korean Consumer Perspectives

INTRODUCTIONSeveral years ago, researchers suggested that the main goal of a profit-oriented firm was to attract consumers. Given that the current market has become so competitive, various researchers now claim that the main objective of a firm must be to capture and retain consumers. To achieve this goal, companies must seek ways to retain their consumers over the long term (Boora & Singh 2011). As such, many firms have begun to introduce corporate philanthropy, such as charitable donations, as a business strategy (Godfrey 2005). Specifically, the activity of corporate philanthropy introduces social concerns as an essential part of a firm's strategic marketing. For example, the 2013 expenditure on charitable giving of just 261 companies, including major companies in the Fortune 500, reached over $25 billion, and the proportion of profits given to charitable donation has been significantly increasing over the last few years (Giving in Numbers: 2014 Edition CECP)Presently, corporate philanthropic activities are relatively easy to find. Firms fulfill their philanthropic responsibilities by contributing corporate resources such as financial donations, employee time, and facilities for humanitarian programs or causes. From a legal perspective, these activities are voluntary, not obligatory. However, society expects (or pressures) corporations to be involved in these altruistic activities as a means of "giving back" to the society. These societal pressures compel companies to implement appropriate philanthropic activities. Consequentially, corporations seek to establish a favorable corporate image and create a positive relationship with consumers that contribute to improving corporate value (Yoon, Gurhan-Canli & Schwarz 2006), by responding to consumers' social concerns.With the rising adoption of corporate philanthropic activities by business practitioners, academics are paying increasing attention to corporate philanthropy (Brammer & Millington 2005). However, over the past couple of decades, there has been some debate over the relationship between corporate philanthropic activities and corporate performance (Godfrey 2005). In particular, scholars have focused on the substantial or empirical effect of corporate philanthropic activities on corporate performance in terms of corporate reputation. For instance, Williams & Barrett (2000), examining the influence of corporate philanthropic activities on corporate reputation, found that corporate philanthropy significantly enhanced corporate reputation. Brammer & Millington (2005), analyzing the determinants of corporate reputation among large UK companies, concluded that philanthropic expenditures improved corporate reputation, although the level of reputation enhancement varied from industry to industry. Hsu (2012), studying the persuasive impact of advertisement by focusing on corporate social activities, found that a company's advertisement of its social initiatives had positive effects on customer satisfaction, corporate reputation, and brand equity. This research verified the link between corporate philanthropic activities and corporate reputation.However, the underlying reasons as to why corporate philanthropic activities have positive impacts on corporate performance have not yet been determined, as far as the authors are aware. To understand the effect of corporate philanthropy on corporate performance, understanding the processes of how corporate philanthropy enhances corporate performance will offer more insight than simply investigating the direct link between corporate philanthropy and corporate performance.Therefore, this research addresses the key question of the mechanisms that make corporate philanthropic activities effective in enhancing consumer loyalty toward a firm. Although the ultimate goal of any firm is to maximize profit, consumer loyalty contributes to the attainment of this goal in the long run. The present study investigates the effect of corporate philanthropy on consumer loyalty, which in turn leads to corporate financial success. …