Bad service or a defective product can quickly drive consumers to the nearest online review site, with unpleasant consequences for the business that came up short.
But, a new study finds, companies that practice corporate social responsibility -- by giving to charity and supporting local causes -- are more likely to be forgiven.
Writing in the Journal of Public Policy and Marketing, researchers say that corporate social responsibility (CSR) - such as donating money to build a new children's hospital or implementing onsite daycare to accommodate parents - can act as an insurance policy against failure.
"Whereas most studies have focused on reactive strategies, such as apologies and compensation, little is known about the effect of proactive strategies, such as CSR, on consumer behavior following negative events," said Jeff Joireman, marketing professor at Washington State University and lead author of the study. "If CSR buffers firms against service failures, firms may be more willing to adopt preemptive CSR initiatives that maximize return."
The paper is the first to test the effectiveness of value-aligned CSR in response to service failures.
The researchers conducted two studies. The first study revealed that customers are less likely to experience anger and spread negative word of mouth following a service failure when a firm engages in high levels of environmentally focused CSR that aligns with consumers' environmental values; for example, allocating 15 percent of profits to a campaign to promote safe drinking water.
"We found that when a firm donates money to environmental causes, environmentalists 'cut the firm slack' following a service failure, but non-environmentalists don't," said Joireman.
The second study explored the benefits of CSR policies offering customers choice over the firm's allocations. Results showed that a CSR policy that offered customers a choice over the CSR allocations enhanced consumers' perceived value alignment with the firm, reduced negative word of mouth and increased positive word of mouth and repurchase intentions.
"While apologies, compensation and proactive approaches to service failures can yield more satisfied and less vengeful customers, they do little to benefit a broader range of stakeholders," Joireman said. "In contrast, value-aligned CSR with choice is an effective approach to dealing with service failures and also yields positive societal outcomes."
The researchers' efforts coincide with a growing movement to understand what companies can do - before customers complain directly to the firm - to promote more favorable responses to service failure.