Analysis of cause-related marketing effects: the case of duopoly retailing store
Authors: Hui-Wen Cheng, Hsiu-Li Chen
Journal: Chia Da Management Review. Dec. 2013, 33(2): 105-138.
Keywords: Cause-related marketing; Duopoly; Non-Profit Organizations; Circle market model
Abstract:
More recently, many retailing stores employs cause-related marketing strategy to enhance their sales. However,
previous studies on the effects of cause-related marketing strategy remain rather inconclusive. This paper
analyzes the impacts of cause-related marketing strategies by using Salop's Circle Model and two-stage game to
analyze the competition between two main retailing stores, namely, 7-11 and Family Mart. With two types of
cause-related marketing activities (i.e., transaction-based support cause-related marketing; TCRM and
Non-transaction-based support cause-related marketing; NTCRM), the proposed model found that: (1) both NTCRM
and TCRM strategies implemented by the retailing store could make product distinctly different from its
opponent and result in a higher retailing price. (2) The effects of TCRM and NTCRM are different: consumers
have tendency to accept the NTCRM activity. (3) All other things being equal, the retailing store who
implements the NTCRM strategy could increase its sales and reduce the competitor's sales and profits. If the
retailing store continues to increase its charitable or environmental-conscious donation, consumers' purchase
intention would even be stronger. (4) The retailing store who implements the TCRM strategy with the donation
amount per sales below the optimal level could increase its sales and as a result reduce the sale of its
opponent, ceteris paribus. In addition, the profit-shifting effect has been identified. (5) If the retailing
store increases its donation amount per sales, the purchase intention of consumers remains ambiguous. When the
donation amount per sales is greater than the optimal level, it could decrease its sales and profit and
increase the sales and profit of its opponent. In other words, the reverse effect exists.