Abstract

The relationship among customers' perception of Corporate Social Responsibility (CSR), Customers' Loyalty (CL), Corporate Image (CI), Customers' Satisfaction (SAT), and Positive Word-of-Mouth p(WOM) has been explored extensively in the literature, however, the mediation effect of these constructs between customers' perception of CSR and CL in a single comprehensive model has least been studied. Therefore, the instant research examined the influence of customers' perception of CSR on CL by mediating the impact of SAT, CI, and p(WOM). A comprehensive survey was conducted for the customers of different hotels in Pakistan in 2023. The data from 299 respondents was analyzed by employing PLS-SEM. The findings revealed that customers' perception of CSR positively impacted SAT, CI, and p(WOM), which in turn influenced Customers' Loyalty (CL). Furthermore, results affirmed that SAT, CI, and p(WOM) mediated the relationship between CSR and CL.

Key Words

Customers’ Perception of CSR, Customers’ Loyalty, Customers’ Satisfaction, Corporate Image, Positive Word of Mouth, PLS-SEM, Hotels in Pakistan.

Introduction

The hotel industry usually indulges in negatively affecting our environment by polluting air and water; creating noise pollution; disturbing biodiversity; and avoiding necessary precautions and basic rules of labor. Hence, there is an increasing realization among hotel managers and owners that the hotel industry's negative impact on the environment and society must be reduced or eliminated  (Chan, 2010). Consequently, there is a realization to update organizational goals and adopt the practice of Corporate Social Responsibility (CSR).

 The CSR addresses the stakeholders' concerns regarding environmental, social, and ethical aspects in order to boost both monetary and non-monetary benefits of the company (Vaaland & Heide, 2008). CSR is perceived as a strategy to get positive acknowledgment about the organization from their customers and it provides comparative advantage to the organization (Latif & Sajjad, 2018). CSR not only includes the societal effect but also the environmental responsibility toward all stakeholders (McDonald & Lai, 2011)

The research on CSR is rooted in the stakeholders theory (Latif & Sajjad, 2018) The stakeholders are generally considered as a group of people with which the company has interaction and influence while doing its operations to achieve goals. The imperative part of stakeholder theory is that it throws light on managerial decisions and is perceived from a business point of view (Jones & Wicks, 1999). Therefore, it is expected for organizations to relate their CSR activities with their customers' perception of CSR so that their choice of particular hotel and loyalty may be strengthened (Liu & Wong, 2014).  

Likewise, CSR perception of customers is taken as a marketing tool to enhance customer loyalty (Kim & Ham, 2016). In the hotel industry, the customers' perception of CSR has become an important research subject. The good opinion of customers about the hotel's policies towards CSR translates into more readiness to choose that hotel (Park & Kim, 2014). The social identity theory underlines the nexus between the CSR perception of consumers and their loyalty to the company. 

As per social identity theory, positive customer perception of CSR on customers' loyalty has been established in some studies (Lu et al., 2017), however, other studies reported an insignificant direct link (Chang & Yeh, 2017). These contradicting findings regarding CSR perception of customers and customers’ loyalty provide justification for instant study.

The Customers' Loyalty (CL) can be referred to as consumers' behavior as well as a point of view about the product/service of an organization and it is manifested through the behavioral intentions and behaviors of patronization and recommendation (White & Schneider, 2000). The literature affirms that happy customers are loyal to their product/service providers (Ali et al., 2018).

Customers satisfaction (SAT) is the overall analysis and interaction of customers with their organization's products and services. Customer satisfaction is considered as affirmative and positive feelings about a company's product or service after gaining experience with it, inspecting and evaluating its many aspects (Van Der Wiele et al., 2002). Similarly, customer satisfaction is regarded as a parameter for evaluating the feedback from customers after they use the products or services (Anderson, Fornell & Lehmann, 1994). 

The Corporate Image (CI) refers to a set of feelings, intentions, information, and experiences gathered about a company (Arendt & Brettel, 2010). A company or an organization usually designs its image in such a way that the general public can relate and develop feelings with its sign. The hotel industry has especially recognized the importance of CL and how the customers' perception of CSR helps in creating feelings and affection for the company (Palacios-Florencio et al., 2018). The literature further noted that the corporate image helps minimize purchase risk perceived by customers (He & Lai, 2012). 

The oral exchange of words among customers, their friends, relatives, and producers regarding the products of an organization has been duly explored in the literature (Chaniotakis & Lymperopoulos, 2009). This is formally called the Word of Mouth (WOM) and is an informal communication between uncommercial receivers and communicators regarding a product or service of a particular organization (Walker-Harrison, 2001). This entails both positive WOM which means good experiences, and negative WOM which may include bad rumors, complaints, and poor experiences by customers (Anderson, Fornell & Lehmann, 1994). However, this research concentrates on the positive WOM of customers about products or services.

Positive Word of Mouth or p(WOM) refers to informing others of the good aspects of a particular company (Brown & Dacin, 2005). The customers who are contented about the organization usually convey positive word of mouth. The p(WOM) happens when customers have trust in this organization (Ranaweera & Prabhu, 2003). Based on the influence of peers' opinions on other consumers' buying decisions, online as well as offline positive word of mouth is considered an inevitable marketing tool (Chen & Xie, 2008).  This research is based on Social Identity Theory, Stakeholder Theory, and Signaling Theory.

In the service industry, the customers' informal communication or p(WOM) is considered an extremely important tool especially when the services are complex and it is difficult to evaluate them.  The lack of p(WOM) creates customers' dissatisfaction on the one hand and widespread negative opinions about the organization on the other hand (Ranaweera & Prabhu, 2003). Likewise, the shortcoming in the spread of p(WOM) from peers about the organizational product or services negatively affects the other consumers' buying decisions about the product or to avail of any service (Chen & Xie, 2008). Therefore, it is desired to investigate the mediating impact of p(WOM) on the relationship between customers' perception of CSR and CL.

Literature Review and Hypothesis Development

Relationship between CSR and CL

The impact of CSR on customers’ loyalty as well as customer satisfaction with moderators such as corporate image between the two constructs was explored. The results confirmed the influence of CSR on customer loyalty and customer satisfaction significantly (Chung et al., 2015). Likewise, the influence of CSR on CL and its link with SAT, CI, and Service Quality (SQ) in impacting CL in the Taiwan intercity bus service context was explored and the outcome of the study revealed that CSR did not influence CL and SAT directly (Chang & Yeh, 2017). In another similar study conducted in the casinos confirmed the positive influence on CL by perceived CSR initiatives (Liu & Wong, 2014). Similarly, the influence of CSR on loyalty, SQ and repeat patronage intention was analyzed and it was found out that the CSR positively influenced CL (Mandhachitara & Poolthong, 2011). 

On the other side, Nyadzayo, Leckie & Mcdonald (2016)  depicted that CSR had not affected CL directly. Similarly, Martínez & Rodríguez (2013) studied the influence of perceived CSR on CL through mediations of trust and SAT. It was held in the contextual settings of Spanish hotel consumers. The outcome indicated that the perceived CSR influenced consumer trust and SAT, and customer trust and satisfaction positively affected customers' loyalty. Therefore, perceived CSR had an impact on customers' loyalty through significant mediations of trust and satisfaction. Therefore, the 1st hypothesis was generated i.e. H1 = Customers' perception of CSR has a significant and positive impact on CL.




Relationship between CSR and SAT

Research held by Su, Pan & Chen (2017) revealed an affirmative influence of customer's perception of CSR on SAT and reputation. In the same way, a study was conducted by Walsh & Bartikowski (2013) to see the influence of CSR and SQ on WOM and CL directly as well as by SAT as a mediator. The findings revealed that CSR significantly affected SAT both in the USA and Germany. Therefore, the 2nd hypothesis was generated i.e. H2 = Customers' perception of CSR has a significant and positive impact on customers' satisfaction.







Relationship between SAT and CL

The SAT has been found to have a significant impact on CL (Chou & Chang, 2014). EID (2013) studied the relationship between SAT CL and CR. The data was collected from 221 Muslim tourists. The findings depicted that SAT positively affected CL. Santouridis & Trivellas (2010) scrutinized the effect of SQ on CL via SAT. It analyzed the relation between SAT and CL, and also the mediation of SAT between SQ and CL. On the basis of the results, it was found that SQ was firmly associated with SAT. In addition to this, SAT also acted as a mediator between the SQ and CL links. Therefore, the 3rd hypothesis was generated i.e. H3 = Customers' satisfaction has a significant and positive impact on CL.




Relationship between CSR and CI

Research conducted by Martínez et al. (2014) revealed the affirmative influence on the functional image and affective image of the brand by perceived CSR. Huang & Lien (2012) investigated that CSR positively influenced CI and the performance of the organization. Hossain et al. (2016) conducted research to analyze the effect of CSR on FP by deploying CI and CG as mediators. The aim of the study was to aid managers and other policymakers by presenting more insight into the CSR-FP link. The empirical findings depicted that CSR positively influenced CI and CG. Therefore, the 5th hypothesis was generated i.e. H5 = Customers' perception of CSR has a significant and positive impact on CI.




Relationship between CI and CL

A study was conducted by (Lai, 2019b) to explore the effect of CI and customer reputation on creating CL in an organization. The findings depicted that image, reputation, and service quality resulted in boosting customer loyalty. A study was conducted by (Kaur & Soch, 2013) to find out the interrelationships among trust, CI, attitudinal and behavioral loyalty in the contextual settings of mobile phone companies. The results showed that the CI affected CL significantly and acted as a mediator between trust and CL. Therefore, the 6th hypothesis was generated i.e. H6 = CI has a significant and positive impact on CL.




Relationship between CSR and p(WOM)

Han et al., 2020) found that ECSR influenced positively customers' p (WOM), service quality, and emotional attachment. In contrast, research by Supriyatno (2018) showed that CSR influenced trust, CR but it had not influenced WOM. Therefore, the 8th hypothesis was generated i.e. H8 = Customers' perception of CSR has a significant and positive impact on p (WOM).




Relationship between P(WOM) and CL

Research conducted by Chen (2011)  showed a positive influence on CL electronic WOM, SAT, and technological readiness. In line with this research finding, the 9th hypothesis was generated i.e. H9 = p(WOM) has a significant and positive impact on CL.




Mediating Effects in the CSR-CL link

The mediating effect in the CSR – CL link was represented by developing the following assumption in the instant study:

H4 = SAT mediates the relationship between customers’ perception of CSR and CL.

H7 = CI mediates the relationship between customers’ perception of CSR and CL.

H10 = p(WOM) mediates the relationship between customers’ perception of CSR and CL.

Theoretical Frame Work

The theoretical framework of instant research is given below:

 




Figure 1 

Theoretical Framework



Research Methodology

The instant research deployed PLS-SEM to test hypotheses. The convenience sampling technique was used for data collection. The respondents were the customers who paid a recent visit to a hotel. The data was collected between June 2022 to December 2022 through personal visits to hotels as well as an online questionnaire form. A total of 350 questionnaires were distributed across different cities like Lahore, Islamabad, Multan, and Peshawar to get representative data of Pakistan's population. However, a total of 310 questionnaires were returned (response rate = 88.5%) and 11 questionnaires were excluded on account of missing data. Consequently, 299 questionnaires were found to be used for analysis. The dimensions of demographics depicted 189 respondents (60%) were men whereas 126 respondents (40%) were women. The age mean was 28years approximately. The unit of analysis was individual in this study. 

Demographics were asked in the first part of the questionnaire like age, education, gender, and marital status. Then, in the second portion of the instrument, items for measuring customer perceptions of CSR, CL, CS, CI, and p(WOM) were included. The Items were measured on a 5-point Likert scale where 1 meant strong disagreement and 5 meant strong agreement. The measure of customers' perception of the CSR of an organization was extracted from the scale developed by Kim & Kim (2016). CSR scale was comprised of reflective items and was one-dimensional. A total of eight items were used to measure customers' perception of CSR to check various aspects of CSR like quality of services and goods. In order to operationalize customers' loyalty, a five-item scale was derived from Zeithaml & Parasuraman (1996). In order to measure customers' satisfaction, a five-item scale was used which was established by Andaleeb & Conway (2006). The perception of customers regarding the corporate image of the hotel was evaluated by a five-item scale developed by Ladhari et al. (2011). Customers' p(WOM) about the organization was measured by a three-item scale established by (Maxham & Netemeyer, 2002). 

Results and Discussions

Conclusion

This study scrutinized the influence of customers' perception of CSR in enhancing CL via deploying SAT, CI, and p(WOM) as mediators. Based on the findings of the study, it was concluded that customers' perception of CSR had a positive influence on increasing CL. As much as hotels adopted CSR practices, it increased the loyalty of their customers to that hotel. This finding was supported by Social Identity Theory. It was concluded that CSR also affected the satisfaction of customers in a positive way which had been endorsed by the Stakeholders Theory. The customers of the hotels practicing CSR would be more satisfied with that hotel. It was found that an increase in CSR also encouraged the CI of that hotel. Moreover, the findings of this study also endorsed Social Identity Theory, Signaling Theory, and Stakeholder Theory. 

In other words, CSR adoption played a role in creating a good image of that organization. It showed that the CSR activities promoted p(WOM) in customers. Likewise, the CSR adoption helped in the generation of good saying about the overall hotel working. The findings of this study also confirmed that SAT influenced CL positively or in other words satisfaction in customers generated loyalty. The more satisfied customers, the more there would be the loyalty with organization from their side. The findings also showed that CI positively affected CL or a good image of the hotel generated more loyalty in customers. Likewise, a study has also revealed that the p(WOM) positively affected CL. Similarly, if customers had a positive opinion about the hotel, it would lead to their loyalty. 

It is concluded that CSR practices assist the hotel industry with good results in terms of customers' dedication. CSR can act as a strategic tool for managers to strengthen their relationships with customers. The implementation of CSR in the current world is not an option but mandatory. Any improvement in customers' perceptions of CSR increases the hotel's intangible assets like CL, SAT, CI, and p(WOM). Consequently, in the long run, these all will contribute to CL.   

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