Managing Conflicting Stakeholder Interests: A Co-Branding Perspective for How Managers Can Mitigate Negative Shareholder Responses to Cause-Related Marketing

Abstract

ABSTRACT Research suggests that most brand stakeholders react favorably to cause-related marketing (CRM), and CRM positively impacts the brand. However, a divergence of interests can create tension in the principal – agent relationship, as the owners may feel that managers are investing in CRM at the expense of maximizing profits. Along these lines, recent research suggests that shareholders negatively respond to CRM, which reduces shareholder value. Thus, there are concerns about whether expenses incurred via CRM partnerships create value for all stakeholders. Therefore, because CRM can benefit nonprofits and many of the firm’s stakeholders, the authors utilize agency theory and signaling theory to explore co-branding and competitive signals that mitigate the negative impact on shareholder value. The results provide insights into how nonprofit and brand managers can navigate CRM partnerships by designing campaigns that send signals designed to alleviate investor concerns and reduce shareholder disapproval yet still garner support from other stakeholders.