Optimization and selection of cause marketing mode with the warm glow effect

Abstract

Cause marketing (CM) is an important way of implementing corporate social responsibility (CSR) strategies. While most related studies explore firms’ implementation of CM campaigns, which involve donation of part of their sales revenue to charity for a social cause, we focus on the case of a firm contributing a specific ratio of its sales quantity to implement the CM campaign and divide the CM campaign mix into four modes according to different CM implementation subjects and the wholesale price (exogenous or endogenous). Unlike firms in the supply chain that use donation amounts to implement CM, the implementation of CM by donation ratio will be influenced by the donation cost, which can further affect their pricing strategies. Therefore, this study takes a two-level supply chain as the research object and builds Stackelberg game models to explore the optimization problem of donation and pricing decisions for different CM modes and choices from CM modes. This study presents three main conclusions. First, when the degree of preference for CM is sufficiently large, the supplier or retailer can implement CM only when the income generated by the increase in sales and retail price can compensate for the donation cost. Owing to the differing donation costs, it is easier for suppliers to implement CM than retailers. Second, in the case of the exogenous wholesale price, when the degree of preference for CM is relatively low, the supplier should implement the CM. However, when the degree of preference for CM is relatively high, the retailer should implement the CM. When the degree of preference for CM is moderate, the supplier can suppress the free-rider behavior of the retailer in implementing CM by sharing donation costs with the retailer, thereby achieving a win-win situation. Third, in the case of endogenous wholesale prices, the supplier should take the initiative to implement CM. Compared with other CM modes, the donation ratio is the largest in this mode.