The Differential Effects of CSR and CSI on Consumer Willingness to Pay: Implications for Service Providers and Retailers

Abstract

Service providers and retailers reselling branded have the discretion to set and adapt prices according to customers’ willingness to pay (WTP). Research often notes markup effects, such that WTP increases in response to corporate social responsibility (CSR) and markdown effects, lowering their WTP for corporate social irresponsibility (CSI). Theory suggests attitude changes to (negative) CSI are stronger than to (positive) CSR, but the extent and whether this difference holds for WTP and across various product types are unknown. Using experimental data, an incentive-compatible measure, and an actual purchase, this article reports on three studies that show that consumers mark up WTP for CSR and mark down WTP for CSI. The differential effects arise across brands; compared with WTP for a competitor brand, the acceptable price of a focal CSR/CSI brand is marked down more than it is marked up. Comparing the WTP for a focal brand relative to the average CSR performance of that brand does not produce any within-brand differential effects The evidence also indicates a product type effect: Consumer WTP adaptation for CSR or CSI is stronger for utilitarian than for hedonic products. These findings have implications for service providers, retailers and manufacturing firms, as well as for further research.