Hifa boon for financial institutions

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Doing well by doing good

Financial Sector Spotlight with

As the local and international culturati and glitterati descend on Harare to savour Hifa’s delights, going through the festival programme, one can’t help noticing the fair number of what Hifa calls “investors” from the financial sector who have lined up to play a part in making this year’s festival a success. BancABC, CABS, Old Mutual, NMB Bank, Stanbic Bank and ZB Bank, among others, are once again partnering the annual festival, something some of them have been doing for years.

The fact that these companies continue investing in Hifa means there is a tangible return on their investment, otherwise they would simply quit. In its most direct form, the return could be in the form of reciprocal business from the festival and its partners.
However, apart from such tangible financial benefit and the obvious feel-good effect of associating with a big brand such as Hifa, there are other intangible benefits which accrue from corporate social investment (CSI) which drive corporates to sustain their CSI initiatives even when direct financial benefits are not that great.

So what are these benefits? I became aware of new research about such benefits about a month ago and I thought this festive time would be the ideal time to discuss them.

Benevolent halo effect
According to a study by Alexander Chernev and Sean Blair of Northwestern University’s Kellogg School of Management, there is a phenomenon called the benevolent halo effect which refers to how hearing about a company’s charitable donations, or corporate social responsibility, impacts consumers’ perception of the quality of the company’s products.

Apparently, corporate social responsibility can lead consumers to believe that products of companies engaged in socially responsible activities are better performing. The drift is that positive attitudes towards a company translate into positive beliefs about the company’s products. Could this be true in our financial sector where there are other dimensions/factors such as liquidity challenges, limited choices as well as a two-tier system in which foreign-owned banks coexist with locally-owned banks?

CSI and the bottom line
Contrary to the popular view among many executives that corporate social responsibility is unlikely to benefit their company; Chernev and Blair’s findings suggest that in addition to benefiting society, corporate social responsibility can contribute to a company’s bottom line.

CSI and consumer perceptions

Chernev and Blair’s study, titled Doing Well by Doing Good: The Benevolent Halo Effect of Corporate Social Responsibility, was published in April’s issue of the Journal of Consumer Research. For the study, they tested how corporate social responsibility affected consumers’ perceptions of red wine, running shoes, teeth whiteners and hair-loss products. For example, consumers gave a better rating to the wine’s taste after being told that the winery donated to the American Heart Association.

Buying socially responsible brands

The results of Chernev and Blair’s study might explain why a separate study in 2014 by Nielsen established that most consumers say they’re willing to pay more for products and services provided from “companies that are committed to positive social and environmental impact”. The propensity to buy socially responsible brands is strongest in Asia-Pacific (64%), Latin America (63%) and Middle East/Africa (63%).

To blow or not to blow the trumpet?
The research also found, however, that companies diminish the benevolent halo effect when they advertise their good deeds. It suggests that less direct channels, like social media and public relations, are better ways to share charitable contributions and still benefit from them.

So in a nutshell, the findings indicate that social goodwill can benefit consumer perceptions of product performance; which in turn shows that doing good can indeed translate into doing well.
Could the findings of this study apply to our market, or these are just abstract issues that have no bearing on a market that still struggles with more fundamental issues? Whichever way, thinking about it a little further would not do anyone any harm.

Feedback: omen.muza@gmail.com.You can view Omen’s profile on https://www.linkedin.com/pub/omen-n-muza/30/641/3b8.