Business Research Project

Synopsis
Nikita Garg, Safal Verma, Sunny Singh, Srishti Sharma

IMPACT OF CORPORATE SOCIAL

RESPONSIBILITY (CSR) ON CUSTOMER
LOYALITY

Impact of CSR on Customer Loyalty

Introduction
In a dynamic and competitive world, businesses are looking for strategies that will give them
a sustainable competitive advantage and therefore, it has become more crucial than ever to
earn the trust of customers. Society today is questioning the way business is being done and at
this time, customer retention will act as a major factor in ensuring the sustainability of a
business and that can be enhanced only by customer loyalty. Corporate Social Responsibility
is one such activity will lay the foundation for building this customer loyalty that is vital for
the very survival of business. UNIDO defines CSR as A management concept whereby
companies integrate social and environmental concerns in their business operations and
interactions with their stakeholders. CSR is generally understood as being the way through
which a company achieves a balance of economic, environmental and social imperatives
(Triple-Bottom-Line- Approach), while at the same time addressing the expectations of
shareholders and stakeholders. WBCSD to explain the concept of CSR says, Corporate
Social Responsibility is the continuing commitment by business to contribute to economic
development while improving the quality of life of the workforce and their families as well as
of the community and society at large."
CSR in India was earlier seen as a philanthropic activity, however Clause 135 of The
Companies Act 2013 mandates companies with annual turnover of Rs1,000 crore and more, or
a net worth of Rs500 crore and more, or a net profit of Rs5 crore and more, to spend least 2%
of their average net profit in the previous three years on CSR activities. Most of the big
industrial houses in India are already running their foundations that are contributing positively
to the society, however whether or not that is the reason that their customer base is loyal to
them is still a question that needs to be answered and that is the aim of this paper.

Objective and Scope

The objective of this paper will be to find out the impact that CSR activities create on building
Customer Loyalty for businesses operating in India. For the purpose of this paper, we will aim
to find out expenditure made by companies on their CSR activities along with the activities
that they are undertaking. The paper will also attempt to cover, the awareness of the
consumers about the activities undertaken by business as well as customer reactions to the

same. The areas at which the paper will focus on will be; 1) the expenditure being incurred by
companies on CSR activities ; 2) The activities that the companies are undertaking as part of
their CSR projects ; 3) Customer awareness about activities being undertaken by companies ;
4) the impact of CSR activities on customer loyalty.
The paper aims to understand the reactions of customers in India, for now however the scope
of this research paper will be limited to assessing the impact of customer loyalty in the Delhi
region. After The Companies Act 2013 has made CSR mandatory in India, greater awareness
has been created in the minds of customers and they are conscious with respect to their buying
decisions. The impact of this has been greater awareness in the minds of customers and since
Delhi is the national capital of India and home to the huge businesses and a large customer
base, it is most fitting to conduct the research project there. The project will be undertaken for
a period of two months till March to assess all the points mentioned above.

Literature Review
Customer loyalty has become vital to develop sustainable competitive advantage, it is viewed
as the strength of relationship between an individuals attitude and repeat purchases (Dick and
Basu, 1994). In fact the awareness that a consumer has about a company influences the
reactions towards the products of the company, along with that CSR associations tend to
influence product evaluations by influencing corporate evaluations. Response towards new
products by the consumers is also significantly influenced by CSR associations (Brown and
Dacin 1997). However, CSR efforts of a company can affect the intentions of a consumer to
purchase its products both directly and indirectly, the actions of companies in certain CSR
domains and consumers certain CSR related beliefs can however have a direct impact on
attractiveness of a companys products, therefore the CSR activities a company focuses on,
the quality of products it offers as well as consumer personal support for the CSR issues all
impact the way a consumer will respond to CSR activities of a company, however under
certain conditions CSR activities can decrease consumer intentions to buy a companys
product (Sen and Bhattarcharya, 2001). Thus CSR helps obtain a sustainable competitive
advantage and acts a public relations strategy especially in an environment where customers
may have strong social concerns, however in a situation with lack of innovativeness in the
company, CSR can be harmful to firm performance (Luo and Bhattacharya, 2006). (Singh et
al., 2008) also stress on the importance of the benefit that companies could receive if they
maintain continuous marketing communication for sustaining the level of awareness of

consumers and therefore enhance purchaser preferences for CSR minded companies.
(Bhattacharya et al., 2009) mention The benevolence and integrity that CSR signals has been
shown to stimulate trust. Therefore CSR among many other factors tends to improve the
quality of relationship between a firm and its customers. (Chomvilailuk and Butcher, 2010)
are of the belief that CSR initiative have a modest but significant impact on brand preference;
cultural values too play a role on the affect that CSR has on brand preference, for instance
where there is a high level of individualism, commitment to CSR contributes strongly to
brand preference. On the contrary there is belief amongst (Mandhachitara and Poolthong,
2011) that CSR has a strong and positive association with attitudinal loyalty, a positive
relationship between attitudinal loyalty and repeat purchase intentions was also established.
However in order to make their CSR practices more effective in the market place, companies
should complement their CSR activities along with good service quality and market offerings
(Kolkailah et al., 2012). Therefore (Liu et al., 2014) strongly mention their belief to the fact
that the preference of brand by the customers can be enhanced by CSR performance of a
company. Various CSR domains such as environment, society and stakeholders, all positively
impact brand preferences though the degree may vary. Perceived brand quality is considered
to be a mediator of the relationship between CSR performance of a company and brand
preference.

Methodology:
In this paper, we will be focussing on primary research as well as secondary research. As far
as primary research is concerned, data would be gathered from questionnaires and surveys
which will be conducted all throughout the Delhi region. The questionnaire would be drafted
on the basis of research work published across various journals in the same field to enhance
learning. The sample size would be approximately 500 consumers all across Delhi with the
age group from 18 year onwards, as by then there is awareness about what CSR is and the
activities that companies are undertaking as part of their CSR initiatives, also starting from
this age group consumers start making their own buying decisions. There is no specific
income group that is being targeted as of now, as the purpose of the study is to be able to
understand the impact that CSR initiatives have on customer loyalty.
Also there will be an emphasis on finding out the expenditure that companies incur on their
CSR activities and the CSR activities that companies undertake, to find out this information,
Annual Reports of listed companies would be analysed to get further details on the same.

References:
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Brown, T. J., & Dacin, P. A. (1997). The company and the product: corporate associations and
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Dick, A. and Basu, K. (1994), Customer loyalty: toward an integrated conceptual
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Karem Kolkailah, S., Abou Aish, E., & ElBassiouny, N. (2012). The impact of corporate
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Luo, X. and Bhattacharya, C.B. (2006), Corporate social responsibility, customer
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