2. Victor Saha and Abhilasha Sharma
http://www.iaeme.com/IJM/index.asp 94 editor@iaeme.com
1. INTRODUCTION
Corporate Social Responsibility also called social conscience or business
responsibility is a form of corporate self-regulation integrated into a business model.
In the late 1960s and early 1970s, the term “corporate social responsibility or CSR”
came into common use. Holmes and Watts (1999) defined CSR as the continuing
commitment by business to behave ethically and contribute to economic development
while improving the quality of life of the workforce and their families as well as of
the local community and society at large. Some researchers argue that corporations
make more long term profits by operating with a CSR perspective, while others argue
that CSR distracts from the economic role of businesses. However, Matten & Crane
(2005) [12] emphasized that the firms will experience divergent degrees of internal,
external and lateral pressures to engage in CSR, as firms are embedded in different
national business systems. Robbins and Coulter (2007) explained that the
management’s social responsibility goes beyond making profit to include protecting
and improving social’s welfare of its stakeholders and the environment in which the
firm carries out its operations. One of the main reasons for the growing interest in
CSR is because of the idea that CSR influence consumer loyalty at a time when
hospitality companies are facing an extremely business competitive environment and
ever growing customer expectations (Hanet al., 2011). Many hospitality firms are
having difficulty increasing their market share because of rising international
competition, slower growth rates, decreased population growth, and over supplied and
mature markets (So et al., 2013). Thus, firms within this sector have become more
interested in looking after and retaining their customers because the advantages seem
obvious. When customers become loyal, they buy more, are willing to pay more and
recommend more (Harris and Goode, 2004). However, creation of loyalty among
customers represents a challenge for hospitality business since switching hospitality
supplier can represent a risk because it is difficult to estimate the quality of the service
before it is consumed (Nemec, 2010).
Customer satisfaction is a part of customer loyalty or we can say that customer
loyalty is influenced by customer satisfaction. So the report analyzes the relationship
between customer satisfaction and customer loyalty in the banking sector. This will be
seen as implication for managers in banks and guidance on how to enhance CSR in
their firm.
2. LITERATURE SURVEY AND HYPOTHESES
DEVELOPMENT:
“Social responsibility is the responsibility of an organization for the impacts of its
decisions and activities on society and the environment through transparent and
ethical behaviour that is consistent with sustainable development and the welfare of
society; takes into account the expectations of stakeholders; is in compliance with
applicable law and consistent with international norms of behaviour; and is integrated
throughout the organization.” – Working definition, ISO 26000 Working Group on
Social Responsibility, Sydney, February 2007.
Further it is also defined as “the basis on which business renegotiates and aligns
the boundaries of its accountability.”-Responsible Competitiveness: Reshaping Global
Markets Though Responsible Business Practices, Accountability, December 2005).
In recent years, the CSR debate has transitioned from a state of passive
compliance with society’s legal and moral rules to a more proactive engagement with
social issues (Husted and Allen, 2007; Jamali and Mirshak, 2007). This new
3. Investigation of Customer Loyalty and Customer Satisfaction with respect to Corporate Social
Responsibility: A model for the Indian Banking Industry
http://www.iaeme.com/IJM/index.asp 95 editor@iaeme.com
engagement ranges from minimization of negative consequences to tangible and
social value creation, and from whether corporations should act as social agents and
how a business case can be made for corporate social strategy (Margolis and Walsh,
2003; McWilliams et al., 2006). Some of the core questions currently driving the CSR
discussions are what individual, institutional, and environmental dynamics shape
corporate social activities and to what extent corporations’ relationships with the
larger environment depend on these dynamics (Bies et al., 2007).
The concept of CSR is not new in the Indian scenario. CSR is being practiced in
Indian scenario in different manner including the protection of environment, donation
to society, transparency in business transactions. Although post industrialization profit
making motive of the companies sidelined the social responsibility issues in India.
But recently due to globalization, access to the internet and other worldwide
information awareness for CSR issue has increased among the various stakeholders.
Therefore an increasing trend of adoption of CSR practices has been observed among
Indian companies. In company law, 2013 government of India has made spending of
2% of profit compulsory in CSR activities. In India, CSR has had a major influence
on business, government, and society relationships (Balasubramanian et al., 2005).
Companies like Tata Steel (the oldest and best known Indian steel company, whose
founder was more a nation-builder than a businessman seeking profits) were very
involved in trying to tackle many social problems even before the term CSR formally
entered the vocabulary of management texts (Singh, 2008).
2.1. Customer Satisfaction and Customer Loyalty:
Customer satisfaction is a well-established concept in marketing (Fornell, 1987;
Fornell, 1988; Kotler, 1991), Mano and Oliver (1993) said satisfaction is an
evaluation of judgment that is measured after consumption. Customer satisfaction has
judge through feeling of customer about certain goods or services. Customer
satisfaction is the personal feeling about the goods or services after consumption
which he/she compares and gets pleasure (Brady and Robertson, 2001). Marketing
literature shows that if the firm improves goods or services to fulfill the customer
needs, then firm would enhance their customer satisfaction, market value and
profitability (Anderson and Sullivan, 1993;Fornell, 1992; Hauser et al., 1994, 1996,
1997; Rust et al., 1995; Zeithaml et al., 1990).
Boshoff and Gray underlined that satisfaction is not inherent in the product or the
service itself but, instead, satisfaction primarily consists in the consumer’s perceptions
of the attributes of the product or service as they relate to that individual. Thus,
different consumers will express varying levels of satisfaction for the same experience
or service encounter. In the marketing literature, customer satisfaction has been
recognized as an important part of corporate strategy and a key driver of firm long-
term profitability and market value. Thus, it is expected that CSR is positively related
to customer satisfaction. (Chung, Ki-Han., Yu, Ji-Eun, Choi, M.,Shin, M.,2013).
Loyalty is behavioural, because continuous purchase of services from the same
supplier, increasing the scale and or scope of a relationship (Yi, 1990). The term
customer loyalty is used to describe the behaviour of repeated purchases. [11] Loyalty
is built through a positive strategy that is usually obtained by providing high quality
customer service (Javalgi and Moberg, 1997). In banking sectors, customer loyalty is
achieved through better service quality and honest commission and fair interest rate
must have the basic requirement to satisfy and retain customer (Zielke, 2008). Loyalty
develops through different variables like experience (Hess et al., 2003), satisfaction
4. Victor Saha and Abhilasha Sharma
http://www.iaeme.com/IJM/index.asp 96 editor@iaeme.com
(Heitmann et al., 2007), competitive attractiveness (Jones et al., 2000), through
relationship with supply chain (Sirdeshmukh et al., 2002), and exit barriers (Burnham
et al., 2003).
As customer loyalty is considered a vital objective for a firm’s survival and
growth, building a loyal customer base has not only become a major marketing goal,
but it is also an important basis for developing a sustainable competitive advantage
(Dick and Basu, 1994). Understanding loyalty cultivation or retention is thus
considered to be a key element in delivering long-term corporate profitability, as
profits can be increased over the lifetime of a customer through his/her retention.
(Chung, Ki-Han., Yu, Ji-Eun, Choi, M.,Shin, M., 2013).
2.2. Corporate Responsibility and Customer Satisfaction:
Actual corporate philanthropy initiatives had more positive attitudes to the company
and higher brand purchase and investment intent (Korschun et al., 2006). CSR
initiative, mainly on education, balanced growth, health, environmental marketing and
affect customer satisfaction (Narwal, 2007). Customer satisfaction is a fundamental
determinant of long-term consumer behavior (Oliver, 1980; Yi, 1990 &Cooil, 2007).
Various theories such as resource based view if the firm (Barney, 1986), risk
management theory (Godfrey, 2005), and institutional theory (Handelman and
Stephen, 1999) and stakeholder theory (Clarkson, 1995) have used link between
corporate social performance and customer satisfaction. Corporate social performance
(CSP) earned by the organization, involving in cause related marketing, corporate
philanthropy, green marketing, minority support programs) enhances firm
performance. Corporate social performance (CSP) delivers different benefits such as
customer satisfaction, customer-firm identification, and favourable image (Brown and
Dacin, 1997) (Chung, Ki-Han., Yu, Ji-Eun, Choi, M.,Shin, M.,2013).
The hypothesis that has been developed in this case is:
H1: Customer Satisfaction affects Corporate Social Responsibility in the banking
sector in India
2.3. Corporate Responsibility and Customer Loyalty:
Chaffey (2008) defined consumer loyalty as a desire on the part of the customer to
continue to conduct business with a given company over time. Kotler and Armstrong
(2008) [7] uses the idea of repetitive buying patterns of a particular brand as an
indication of consumer loyalty. This also includes a verbal promotion of the currently
used product or services by the incumbent consumer to others who have yet to try a
particular product or service (Kotler and Armstrong, 2008). The author classified
purchase behavioural loyalty into three aspects: (1) The hardcore – those who only
buy one particular brand; (2) The soft core – those who buy only a couple of brands;
and (3) The switchers – those with no loyalty. Grant (2000) stated that a loyal
consumer is seldom discount-oriented. He associated loyalty to recognition and
preference towards a particular company or its brands. The author further asserted that
consumer loyalty can be enhanced though its societal contributions. (Raman, M., Lim,
W., Nair, S.,2012).
The hypothesis that has been developed in this case is:
H2: Customer Loyalty also affects Corporate Social Responsibility in the banking
sector in India.
5. Investigation of Customer Loyalty and Customer Satisfaction with respect to Corporate Social
Responsibility: A model for the Indian Banking Industry
http://www.iaeme.com/IJM/index.asp 97 editor@iaeme.com
3. RESEARCH METHODOLOGY:
The data collected is a random sample since it was voluntary decision to reply to the
responses via social networking sites and e-mail. To evaluate our research we
collected data via questionnaire designed for consumers to know about perceived
customer loyalty and customer satisfaction in the banking sector in India. A total of
1067 responses were received. The participants were mixed composition of bank
customers leading to a random sample for the research. The assessment is based on
two criteria: customer loyalty and customer satisfaction affecting CSR on a 5 point
scale in order to find out relationship between them in order to formulate better CSR
policies for managers in banking sector. The responses were translated in five point
scale and hypotheses were stated.
4. DATA ANALYSIS:
Using the random sample data collected data via the responses we will run the
regression using a path modeling technique, Partial Least Squares (PLS), which is a
variance-based structural equation model. PLS is an appropriate approach for this
study because of its accommodation of a relatively modest sample size and its
predictive capabilities. PLS can evaluate theoretical hypotheses as well as indicate the
existence of relationships for further testing (Anderson and Gerbing, 1988; Chin et al.,
2003; Wold, 1981) [2]. Table 1 summarizes the results of the hypothesis testing.
Table 1 Summary of Results
Latent Construct Items
Variance
Explained
Loadings α
CSR 72.80 0.82
Community
responsibility
(6 Items)
Donates to charity. .875 0.74
Helps the disadvantaged. .854
Disaster relief .793
Anti-drug .898
Provide education scholarship .752
Rural reconstruction .783
Customer Responsibility
( 3 Items)
.753 0.89
.781
.822
Employee Responsibility
(5 Items)
Livelihood training and support. .774 0.76
Day-care centre for women
employees.
.794
Ensure safe working place. .745
Equal Employment opportunity. .736
Offer fair compensation .776
Environmental
Responsibility
(4 Items)
Support environment preservation 11.80 .807 0.77
Waste paper management .844
Carbon management .823
Support forest preservation .797
6. Victor Saha and Abhilasha Sharma
http://www.iaeme.com/IJM/index.asp 98 editor@iaeme.com
Latent Construct Items
Variance
Explained
Loadings α
Customer Satisfaction (5
Items)
Promote consumer rights and
interests
72.78 .755 0.84
Quality of services .769
Prompt service .811
Reliable .754
Warm atmosphere .786
Customer Loyalty You consider your bank as first
choice
70.56 .805 0.80
You will say positive things about
your bank
.843
You consider yourself as loyal patron
of your bank
.811
You will definitely keep using this
bank
.722 0.78
You will use this bank next time you
need new service
.778
You will do most of your banking
with this bank
.746
Table 2 Variables used in the model
Variable Frequency %
Gender Male 800 75
Female 267 25
Age Under 20 139 13
Age 21–35 928 87
Marital status Married 779 73
Unmarried 288 27
Qualification
Masters’ degree 535 50.14
Bachelors’ degree 233 21.84
Professional degree 49 4.59
Diploma 108 10.12
High school and
below
142 13.31
7. Investigation of Customer Loyalty and Customer Satisfaction with respect to Corporate Social
Responsibility: A model for the Indian Banking Industry
http://www.iaeme.com/IJM/index.asp 99 editor@iaeme.com
Table 3 Measurement model results
Latent
Construct
Item Loadings AVE Composite
reliability
Critical
Ratio
CSR 0.76
Provides livelihood training and
support to its employees
.871 0.71 20.145
Day-care center for women
employees
.894
Safe working place for its
employees
.823
Equal employment opportunity .908
Donates to charities. .792
Donates to disaster relief. .773
Local community development .743 0.59 16.467
Poverty eradication programs .739
Anti-drug campaigns .832
education scholarship .827 0.61 14.244
rural reconstruction .834
promotion of socially backward
groups
.764
women empowerment .736
waste paper management .743
environment preservation .748 0.65 16.354
carbon management .864
consumer rights and interests .837
always meets your expectations .784
Customer
Satisfaction
.748 0.60 0.79 12.342
provided offers matches to your
expectations
.738
quality product and services .837
overall banking experiences .792
the right thing in purchasing this
bank services
.764
Customer
Loyalty
.811 0.67 9.73 8.386
main bank in the next few years .829
sense of security .847
Trust on the quality of this bank. .733 0.56 0.84 14.385
quality assurance .740
If the services of another bank is
not different from that of this bank
in any way, it seems smarter to
purchase services of this bank
0.774
8. Victor Saha and Abhilasha Sharma
http://www.iaeme.com/IJM/index.asp 100 editor@iaeme.com
Table 4 Results of Hypothesis testing
Hypothesis Dependent
Variable
Independent
Variable
β CR R2 Results
H1 Customer
Satisfaction
Customer
Loyalty
0.638 8.633 0.73 Supported
H2 Customer
Loyalty
CSR 0.283 6.954 0.267 Supported
H3 Customer
Satisfaction
CSR 0.481 4.234 Supported
5. MANAGERIAL IMPLICATIONS:
Business houses all over the world are realizing their required contribution to the
society and engaging in various social and environmental activities. What’s needed
more now is to formulate effective policies and adopt various instruments according
to the company nature and its relationship with its customers so that CSR can be best
implemented towards its goals – sustained environmental, social and economic
growth. This research explores the existing literature available on CSR. In today’s
scenario, the trends have changed and CSR affects not only the company’s reputation
and goodwill but also govern the financial performance. It was analyzed that the
reporting practices range from the very sophisticated and well-established system to
“a brief mention of CSR” in the annual report. India’s markets continue to exhibit a
profusion of negative externalities where the costs of resource use, environmental
degradation, or community disruption are neither paid by those who incur them nor
are reflected in actual prices. Today’s economic framework gives little
encouragement for companies to consider the long-term – the essence of true
sustainable development. There are several companies in India involved in diverse
issues such as healthcare, education, rural development, sanitation, microcredit, and
women empowerment. Analysis of several surveys in India suggests that though many
companies in India have taken on board the universal language of CSR, CSR seem to
be in a confused state. Individual companies define CSR in their own limited ways
and contexts. The end result being that all activities undertaken in the name of CSR
are mainly philanthropy, or an extension of philanthropy. There is a need to increase
the understanding and active participation of business in equitable social development
as an integral part of good business practice.
5.1. Limitations and Future Research
This report has only considered customer satisfaction and customer loyalty being
affected by CSR activities in the banking sector. Other variables are not taken into
consideration while doing this study. Thus for further research other variables such as
customer trust, patronage etc. can be taken for studies. Since the study here
concentrate only on Indian banking industry it can further be stretched to banking
industries of other nations or various other industries in the service sector such as
hospitality, hotel management, aviation etc.
9. Investigation of Customer Loyalty and Customer Satisfaction with respect to Corporate Social
Responsibility: A model for the Indian Banking Industry
http://www.iaeme.com/IJM/index.asp 101 editor@iaeme.com
REFERENCES
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[6] Kotler, P. Marketing Management, 13th ed. Upper Saddle River, NJ: Prentice-
Hall, 2008.
[7] Kotler, P. and Armstrong, G., Principles of Marketing, 12th ed. Upper Saddle
River, NJ: Pearson Education, 2008.
[8] Lemon, K. N., White, T. B. and Winer, R. Dynamic customer relationship
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[9] Luo, X. and Bhattacharya, C. B. Corporate social responsibility, customer
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[10] Ratanajongkol, S., Davey, H. and Low, M. Corporate social reporting in
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[11] Dr. Hazra, S. G., Piyush, P. and Kumar, T. Customer Loyalty in Indian Banking
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[12] Matten, D. and Crane, A. Corporate citizenship: toward an extended theoretical
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[13] Mattila, A. S. How affective commitment boosts guest loyalty (and promotes
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[14] Mithas, S., Krishnan, M. S. and Fornell, C. Why do customer relationship
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![Victor Saha and Abhilasha Sharma
http://www.iaeme.com/IJM/index.asp 94 editor@iaeme.com
1. INTRODUCTION
Corporate Social Responsibility also called social conscience or business
responsibility is a form of corporate self-regulation integrated into a business model.
In the late 1960s and early 1970s, the term “corporate social responsibility or CSR”
came into common use. Holmes and Watts (1999) defined CSR as the continuing
commitment by business to behave ethically and contribute to economic development
while improving the quality of life of the workforce and their families as well as of
the local community and society at large. Some researchers argue that corporations
make more long term profits by operating with a CSR perspective, while others argue
that CSR distracts from the economic role of businesses. However, Matten & Crane
(2005) [12] emphasized that the firms will experience divergent degrees of internal,
external and lateral pressures to engage in CSR, as firms are embedded in different
national business systems. Robbins and Coulter (2007) explained that the
management’s social responsibility goes beyond making profit to include protecting
and improving social’s welfare of its stakeholders and the environment in which the
firm carries out its operations. One of the main reasons for the growing interest in
CSR is because of the idea that CSR influence consumer loyalty at a time when
hospitality companies are facing an extremely business competitive environment and
ever growing customer expectations (Hanet al., 2011). Many hospitality firms are
having difficulty increasing their market share because of rising international
competition, slower growth rates, decreased population growth, and over supplied and
mature markets (So et al., 2013). Thus, firms within this sector have become more
interested in looking after and retaining their customers because the advantages seem
obvious. When customers become loyal, they buy more, are willing to pay more and
recommend more (Harris and Goode, 2004). However, creation of loyalty among
customers represents a challenge for hospitality business since switching hospitality
supplier can represent a risk because it is difficult to estimate the quality of the service
before it is consumed (Nemec, 2010).
Customer satisfaction is a part of customer loyalty or we can say that customer
loyalty is influenced by customer satisfaction. So the report analyzes the relationship
between customer satisfaction and customer loyalty in the banking sector. This will be
seen as implication for managers in banks and guidance on how to enhance CSR in
their firm.
2. LITERATURE SURVEY AND HYPOTHESES
DEVELOPMENT:
“Social responsibility is the responsibility of an organization for the impacts of its
decisions and activities on society and the environment through transparent and
ethical behaviour that is consistent with sustainable development and the welfare of
society; takes into account the expectations of stakeholders; is in compliance with
applicable law and consistent with international norms of behaviour; and is integrated
throughout the organization.” – Working definition, ISO 26000 Working Group on
Social Responsibility, Sydney, February 2007.
Further it is also defined as “the basis on which business renegotiates and aligns
the boundaries of its accountability.”-Responsible Competitiveness: Reshaping Global
Markets Though Responsible Business Practices, Accountability, December 2005).
In recent years, the CSR debate has transitioned from a state of passive
compliance with society’s legal and moral rules to a more proactive engagement with
social issues (Husted and Allen, 2007; Jamali and Mirshak, 2007). This new](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)