Are Luxury and CSR Compatible?

Corporate social responsibility (CSR) information reduces the value consumers give to luxury brands associated with the pursuit of “perfection.”

A McKinsey survey showed that 76 per cent of executives believe corporate social responsibility (CSR) is critical to long-term share price and 55 per cent report that it can boost a firm’s reputation. CSR also allows firms to differentiate themselves against competitors, which is an important competitive factor for brand firms. This means that CSR is good for business, right?

Luxury and CSR are different brands.

Not necessarily. Carlos Torelli (University of Minnesota), Alokparna Basu Mona (formerly of the University of South Carolina) and Andrew Kaikati(formerly at the University of Georgia) asked whether CSR adds more value to some brands than others.

Different brands have different meanings. These meanings allow consumers to identify with them. Luxury brands such as Rolex or Lexus are associated with the pursuit of “perfection.” Other brands such as iTunes are associated with openness. Similarly, consumers link brands like Aunt Jemima to tradition.

CSR, don’t mesh with perfection.

Torelli and his colleagues thought the meanings associated with some brands might conflict with the meanings associated with CSR, reducing the value consumers attributed to products. The pursuit of “perfection” that consumers associate with luxury brands might clash with the socially and environmentally conscious images associated with CSR. The researchers investigated this through four different studies using consumer panels and undergraduate students as participants.

The researchers found that CSR information reduces the value consumers give to luxury brands associated with the pursuit of “perfection,” such as Rolex or Lexus, leading to negative business outcomes. This reduction in value, however, did not occur for brands associated with openness (iTunes) or tradition (Aunt Jemima). In other words, CSR backfires for luxury brands, since it decreases the worth that consumers assign to these products.

Develop common threads.

When determining and communicating CSR policies, CSR managers and brand managers of luxury firms need to carefully consider the messages associated with their brands. Not all luxury goods are associated with the pursuit of “perfection”— but those that are should rethink their CSR strategies.

Some tweaks to such luxury brands’ CSR approaches include:

• differentiating the brand through factors other than CSR

• attributing CSR activities to a more suitable sub-brand

• priming consumers with images of powerful philanthropists, such as Bill Gates. This associates “perfection” and power with “doing good” and improving society and the environment.

Every brand has the potential to benefit from CSR, be it through increased sales, increased consumer willingness to pay, stock price stability, recruitment of talent or lower turn-over. But like any strategic decision, it has to be consistent with the brand and valued by consumers.

What about long-term compatibility?

The negative short-term effects of CSR observed in this study need to be considered within a longer time frame. CSR efforts are more likely to pay off in the long term through loyalty or other effects. Thus future research should look at the long-term effects of CSR on luxury brands.

Torelli, C.J., Monga, A.B., Kaikati, A.M. (2012). Doing Poorly by Doing Good: Corporate Social Responsibility and Brand Concepts. Journal of Consumer Research, 38(5):948-963.