Advantages of the halo effect in corporate social responsibility (CSR)

In recent times there has been a significant rise in the general belief amongst that companies are earning profits at the cost of the society and environment. This puts the reputation of companies at stake. In order to mitigate this effect, companies strive to enhance their social and environmental initiatives and portray an image of being a benefiter of society. These initiatives are collectively called Corporate Social Responsibility (CSR). These initiatives are being highly promoted through various media channels thus create an expansive halo effect that promotes the brand image and fosters better brand recall.

Most of the researchers have unanimously accepted the need for the development of corporate strategies that accommodate obligations towards the society, natural environment, and business objectives and developing a sustainability centric approach of carrying out business. CSR encompasses concepts of business ethics, corporate social performance, global corporate citizenship, cause-related marketing, and stakeholder management (D’Amato, Henderson and Florence, 2009; Anghel, Grigore, and Rosca, 2011; Baghi, Rubaltelli, and Tadeschi, 2009; Hartmann, 2011).

Use of halo effect in marketing strategies: a history and present scenario

CSR halo is also a useful tool for promoting cross-selling and combatting a negative image of the corporation (Assiouras, Ozgen, and Skourtis, 2011). The concept of the halo effect was coined by Edward Thorndike in 1920. The halo effect delusion is the psychological impact of one or a few positive traits of a person on the overall positive appraisal of the person. Halo effect is a psychological tendency that is evident in almost all aspects of the business including consumer behavior.

It is a fallacy prevalent amongst many people that while assessing a person, they are biased towards one attribute and deduce that the person must have other enticing attributes as well. Thus it constructs a tendency of building a comprehensively positive judgment about a person or thing on the basis of the one preferred characteristics (Grcic, 2008). Even in the commercial scenario, the halo effect is intended to align a consumer’s assessment of a specific product or service with their perception of the brand. Consumers tend to personify the brands and develop an emotional connection with them based on the information they receive through first-hand experience or through secondary sources. This significantly influences their decision making (Chernev, 2007).

Halo effect can be linked to attribute rating which creates a ubiquitous impression of the brand. Marketers are realising the impact of an attribute on the perceptions of other attributes or the universal impression of the brand. Halo effect is more persistent for offering quality of the company than CSR initiatives across brands and geographical markets and is intriguingly intertwined with branding decisions (Madden, Roth and Dillion, 2011).

Use of halo effect as a marketing tool

Halo Effect is of vital relevance in the process of marketing and consumer marketing research especially as a tool for comprehending consumer behaviour (Parasuraman, Grewal and Krishnan, 2007). Marketers can utilize the findings of the impact of the “sister” brands of the brand portfolio of a company to assess how marketing campaigns for correlated brands generate different results (Liodice, 2010). They then compare it with the desired results. The outcomes can be vital for the process of corporate decision making.

Halos can be engendered by multiple aspects of the business. Consumers tend to develop a positive outlook towards profitable companies and believe that it offers superior quality products and its advertising is authentic. Positive halos help in fostering loyalty amongst customers, making the business more immune to competition. Likewise, if the products are appreciated by the consumers then consumers create a positive image of the company’s management and strategies.

CSR initiatives by ITC Limited

ITC Limited, India’s prominent private sector company is indulged in multiple businesses. The company has undertaken many CSR initiatives which have acclaimed global appreciation. They are focused on the economic, environmental, and social development with special emphasis on the rural economy. ITC has made farmer welfare a critical aspect of the business strategy. ITC’s “E-Choupal” has been a phenomenal CSR initiative that helped Indian villagers to get a more efficient supply chain and get justified prices for their produce. This created a halo effect and has given the corporate image and consumer perception a tremendous boost. It helped ITC to generate better sales volume. It also had a positive impact on its other businesses (Sharma and Kiran, 2012).

CSR initiatives by DLF

CSR initiatives of DLF intend to empower communities, especially in rural sections, of north Indian states of Haryana, Punjab, UP and Delhi. DLF runs 30 rural schools with an emphasis on girl education. Slum schools impart free education. There are also primary healthcare centres run by DLF for free medical treatment. Also, DLF runs India’s first state-of-art private veterinary hospital with a mobile vet service for rural areas.

Apart from these, there are scholarships, free meals, plantation initiatives by the company. The CSR halo effect of DLF made a positive impact on the company’s image especially in the northern region and has emerged as a prominent real estate company. People regard it as honest corporate providing genuine offerings. This has a constructive impact on the business of the firm and foster customer satisfaction and loyalty with improved brand equity (SRRF, 2013).

Internal and external benefits of the halo effect of CSR

Nurn and Tan (2010) have highlighted the external and internal advantages of the Halo effect in CSR. External benefits include strengthening of corporate reputation, lowering business risk and improving sales volume, and customer goodwill. On the other hand, internal benefits include fostering learning, better recruitment prospects, and favourable workplace attitude, boosting employee morale and motivation and commitment.

Taylor (2008) stressed upon a very prominent advantage of halo effect of CSR as the sense of immunity it offers to the company from the negative events which may critically damage the financial performance along with the goodwill and corporate reputation. It provides a protective shield which helps the company to tackle past or future misdemeanours. Halo effect of CSR is a reservoir of goodwill which acts a rescue ranger in times of distress.

Halo effect is a critical component of social media marketing

Consumers are highly knowledgeable and well researched today and the market is full of competitors competing in the same product category and consumers are bound to compare the brands and corporate images before making purchase decisions. Thus, it is highly essential for the marketing managers to ensure that they establish a positive image which has a deep-rooted impact on the consumers. However, this impact shall be long-lived. Thus, the halo effect is a critical aspect of marketing strategies. CSR, though, obligatory, is very vital for marketing strategies as it helps in creating a positive impact on the consumers and helps the company to safeguard itself from any negativity arising through undesired consequences.

The role of social media is growing significantly and shall be highly critical in the future. Halo effect can be created through social media wherein the dissemination of CSR information and setting up a forum for customers to initiate a dialogue to support and safeguard companies’ credibility and reputation. Social networking is phenomenally expanding globally especially India and most of the corporates are attempting to get the hold of the market nerves through virtual interaction. All this is intended to have a magnifying effect on the business’ profitability and nurturing competitive shield.

References

  • Anghel, L., Grigore, G. and Rosca, M. (2011). Cause-Related Marketing, Part of Corporate Social Responsibility and its Influence upon Consumers’ Attitude, Amfiteatru Economic, XIII(29), Pp. 72-85
  • Assiouras, I., Ozgen, O. and Skourtis, G. (2011). The Effect of Corporate Social Responsibility on Consumers’ Emotional Reactions in Product- Harm Crisis, AMA Winter Marketing Educators Conference, 18-20 February, Austin.
  • Baghi, I., Rubaltelli, E., and Tadeschi, M. (2009). A Strategy to Communicate Corporate Social Responsibility: Cause Related Marketing and its Dark Side, Corporate Social Responsibility and Environmental Management, 16, Pp. 15-26
  • Chernev, A. (2007). Jack of all trades or master of one? Product Differentiation and Compensatory Reasoning in Consumer Choice, Journal of Consumer Research, 33(4), Pp. 430-444
  • D’Amato, A., Henderson, S. and Florence, S. (2009). Corporate Social Responsibility and Sustainable Business, A guide to leadership tasks and functions, Greensboro: Centre for Creative Leadership
  • Grcic, J. (2008). The Halo Effect Fallacy, Electronic Journal for Philosophy, 2008, Pp. 1-6
  • Hartmann, M. (2011). Corporate Social Responsibility in the Food Sector, European Review of Agricultural Economics, 38(3), Pp. 297-324
  • Liodice, B. (2010). Marketing Mix Modelling and Media inputs, Mediamark Research and Intelligence, White Paper, Magazine Publishers of America, Pp. 5-16
  • Madden, T., Roth, M. and Dillion, W. (2011). Global Product Quality and Corporate Social Responsibility Perceptions: A Cross-National Study on Halo Effects, Journal of International Marketing,  Pp. 1-46
  • Nurn, C. and Tan, G. (2010). Obtaining Intangible and Tangible Benefits from Corporate Social Responsibility, International Review of Business Research Papers, 6(4), Pp. 360-371
  • Parasuraman, A., Grewal, D. and Krishnan, R. (2007). Marketing Research, Boston: Houghton Mifflin
  • Sharma, A., and Kiran, R. (2012). Corporate Social Responsibility Initiatives of Major Companies of India with Focus on Health, Education and Environment, African Journal of Basic & Applied Sciences, 4(3), Pp. 95-105
  • SRRF. (2013).  India CSR Report, New Delhi: Socio Research & Reform Foundation.
  • Taylor, L. (2008). A Study of the Relationship of Three Social Activities and an Individual’s Extrinsic Career Success, Ann Arbor: ProQuest Information and Learning Company
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