The Effectiveness of Donation Promises in Charity Auctions as a Cause-Related Marketing Strategy: An Abstract

Abstract

Retailers increasingly use cause-related marketing (CRM) strategies to try to increase sales. It is therefore of great importance to retailers to determine the effectiveness of such strategies, as well as, consumers’ perceptions and responses to such CRM activities. This study examines a CRM strategy where the sale of a product is bundled with a donation to charity. We first conducted a field experiment (Study 1), using auctions, augmented with a laboratory study (Study 2), to determine the impact of donation promise (the amount the retailer will donate in a CRM transaction) on consumer willingness to pay (WTP) and retailer revenue. The controlled field experiment (Study 1) ran auctions with different percentages of the selling price donated to charity. Results indicate that higher donation promises lead to increased selling prices, although at a diminishing rate. Low levels of donation promises incur significant overpayments, suggesting that retailers can profit from their associations with charities. A laboratory study (Study 2) extended these findings to low and high value products, and explores the influence of motivation for giving (warm glow vs. persuasion) on the relationship between donation promise and WTP. This study shows that both warm glow and persuasion positively influence the relationship between donation promise and WTP, where warm glow mediates and persuasion moderates this relationship. At small donation promises, we find support for warm glow motives over efficacy effects or the legitimizing of paltry donations, whereas for larger donation promises we find that consumers trade off between warm glow and the sacrifice from giving. Interestingly, consumers receive a warm glow from the mere act of giving, regardless of the amount of money. However, consumers are more persuaded by higher levels of donation promise. This study provides guidance when designing cause-related marketing strategies. The findings are valuable in outlining the optimal donation amount that should be connected to a product sale – as more is not necessarily better. The study also contributes to the recent research examining how consumer motivation and perceptions impact the performance of cause-related marketing initiatives. Overall results have important implications for the appeal of CRM offerings in fixed-price retail settings and suggest that charity auctions can be a cost-effective part of a retailer’s corporate social responsibility strategy.