CHAPTER 2 LITERATURE REVIEW
2.1 Theoretical Basis
2.1.1 Corporate Social Responsibility
Researchers have extensively examined and associated corporate social responsibility with organizational success, but there is a major research gap that has yet to be covered which is evaluating the relationship between corporate social responsibility and consumer loyalty (Matten and Moon, 2020). The European Commission (2002) defined Corporate Social Responsibility as a philosophy in which businesses voluntarily incorporate social and environmental issues into their company operations and interactions with their stakeholders.
Jamali and Sidani (2008) stated that the current definition of Corporate Social Responsibility captures a viewpoint in which a company sees added value in meeting a broader range of community needs and expectations, as well as seeing net gains from socially responsible behavior.
To measure Corporate Social Responsibility, the researcher going to use four indicators, as follows (Brown and Dacin, 1997; Matten and Moon, 2020): To measure Corporate Social Responsibility, the researcher going to use four indicators, as follows (Brown and Dacin, 1997; Matten and Moon, 2020):
1. Sustainable Society
A sustainable society survives over generations and is cautious not to jeopardize the physical or social support systems; it also "serves the needs of the current without endangering future generations' capacity to fulfill their own needs”. A sustainable society's main priority is qualitative advancement, which is achieved by applying principles and relevant knowledge and expertise to make decisions that promote growth, social priorities, and long-term sustainability. A sustainable society, both morally and economically, would provide for decent well-being rather than poverty; it will eliminate despondency, stagnation, and massive unemployment, and many other things.
2. Trustworthiness
The ability to trust is preceded by a series of values called trustworthiness. According to previous studies, presumed trustworthiness has three dimensions: capacity, competence, and benevolence.
3. Charities
An association whose mission is to provide funds, food, or assistance to those in need, or to conduct programs such as medical research to positively impact those in need, rather than to earn a profit. It may also be referred to as "assistance," particularly in the form of funds, provided voluntarily to people in need, such as those who are sick, needy, or homeless, as well as the organizations that offer this assistance.
4. Business Ethics
Ethics refers to moral philosophy or collection of moral values held by an individual, whereas business ethics refers to a set of moral rules used to make decisions that are consistent with the organization's values. The business ethic here refers to whatever the organization or company believes in the ethical business.
2.1.2 Corporate Reputation
Organizational experts have researched corporate reputation extensively and believe it to be one of the company's most valuable intangible properties (Jang et al., 2016). Corporate reputation is used as a tactic by managers because it can give a competitive advantage for organizations (Kanto et al., 2016). Ozdora et al. (2016), for instance, conducted research and described corporate reputation as a core intangible asset for a firm's performance. Additionally, corporate reputation is described as an immediate mental image of an organization that evolves as a result of high quality, operational standardization, and a customer-centric commitment to growth (Roberts and Dowling, 2002).
To measure Corporate reputation, the researcher is going to use four indicators, as follows (Fombrun et al., 2000):
1. Emotional Appeal
Emotional appeal means the ability of the company or organization in attracting customers through their emotions. The emotional appeal will be able to show in customers only if the company has a good reputation
and leads to help the customers to think that the company has an outstanding reputation.
2. Industry Leadership
To be able to be recognized as industry leaders, a company or organization needs to have loyal customers that most likely repurchase the goods or services provided by the company. Industry leaders will be able to be recognized if most customers think the company is well known.
3. Familiarity
Customers are more likely to recognize a corporation or company if their products or services have gained adequate attention and purchase.
Customers will be able to identify with this brand, which will lead to familiarity.
4. Value creation/Quality.
A good reputation can be gained for a business that offers high- quality goods and services while also offering great value to its consumers.
Customers' familiarity with the goods and services that businesses offer to consumers can be used to gauge customer reputation.
2.1.3 Customer Trust
Trust is explained as “the presumption of ethically justifiable behavior”
(Hosmer, 1995). In the customer behavior and marketing literature, confidence is considered a central construct for establishing a long-lasting relationship
(Salindal, 2018; Pratminingsih et al., 2013). Trust is the basis of a long-lasting relationship (Lau and Lee, 1999).
To measure Customer Trust, the researcher is going to use four indicators, as follows (Sirdeshmukh et al., 2002):
1. Operational competence
Customer trust in a brand will rely mostly on products or services offered by the company. Efficient and productivity of a company will boost the operational capability and enhance the competence that will lead to customer trust. It can be measured by how the customer trusts the quality of goods and services offered to the market.
2. Operational benevolence
Customers will likely trust if the company has a good system built inside the corporation. If they can get reassurance on goods and services they bought, customer trust will be able to increase.
3. Problem-solving orientation
Reassurance comes with promises of how to solve the problem that occurs during the transaction happening between customers and also company or organization. To be able to gain customer trust, companies need to be able to provide reliable promises.
4. Customer Satisfaction
Customer satisfaction has an association with customer trust and loyalty. If the customer is satisfied with the goods and services provided
by companies, they will likely trust the brand and become loyal customers.
And it can occur if the company is interested in its customers.
2.1.4 Customer Loyalty
Customer loyalty is a long-term investment that provides a clear indication of relationship management between the customer and telecom operators (Raza et al., 2020). This statement has also supported the idea that customer trust explains customer loyalty (Ball et al., 2004).
To measure Customer Loyalty, the researcher is going to use four indicators, as follows (Sirdeshmukh et al., 2002; Zeithaml, 1988; Zeithaml 2000):
1. Desirability
Customer loyalty can be seen if the customers are showing desirability to the brand. It can be seen and measured through the desire of the customer to continue their connection with this company.
2. Loyalty Competence
Satisfaction and loyalty are connected so if the customer is satisfied, they most likely do word-of-mouth marketing and become loyal customers. Word of mouth marketing is a way to measure the loyalty competence of customers to the brand. If they are likely to encourage the brand or products or services to their friends and family, loyalty competence in customers has been formed.
3. Value
Lately, the value of the products or services offered is an important aspect that companies need to offer. It provides competitive advantages
that will help to maintain customer loyalty. Value can be identified on customers if they wish to contain a long-term relationship with the company.
4. Satisfaction Altruism.
As satisfaction of customers’ experience will lead to word-of- mouth marketing from them, customers will likely say positive things about this brand to other people. It becomes a way to indicate satisfaction and altruism.
2.2 Previous Research
Corporate Social Responsibility (CSR) was widely explored and related by the researchers to the firm's performance. Data are obtained from users of telecoms at three main cities in Pakistan: Islamabad, Lahore, and Karachi to 50 participants who are familiar with the research component, including post- graduate students with general Corporate Social Responsibility credits and marketing courses. The results suggest that corporate social responsibility programs are correlated with corporate reputation, customer loyalty, and customer trust (Islam et al., 2021). This research have the same independent and dependent variable which is CSR, customer trust, corporate reputation, and also customer loyalty. The reason why this research is a good supporting journal is that it also used quantitative methodology to figure out the influence between the dependent and independent variables.
Another research by Pérez et al. (2013) was done to understand the
corporate social responsibility is directly associated with customer loyalty. It is also supported by Mandhachitara and Poolthong (2011), Corporate Social Responsibility is the best approach for increasing customer loyalty. The reason why this study is used as supporting journal is that the research use quantitative methodology, with SEM, and the variable which is CSR and customer loyalty is being measured in this study.
Corporate reputation is the brand's external views, and reputation is the magnitude (or shortage) of confidence in the capacity of a company to fulfill the needs of consumers on a particular attribute. There is clear evidence in the service marketing literature that credibility impacts consumer satisfaction greatly. To examine the impact of corporate reputation on customer satisfaction, a questionnaire was planned and carried out among daily customers in various branches of a major domestic bank in Izmir. The result shows a positive influence of corporate reputation on customer loyalty (Özkan et al., 2019). The reason why this study is used as supporting journal is that the variable which is corporate reputation and customer loyalty is being measured here, using a mediation structure, and result and analysis also explain the variables well.
Research about corporate reputation was also done by Yılmaz et al. (2018) in the Turkish banking sector, where the result shows that there is a direct influence between corporate reputation and customer loyalty. Another study found that corporate reputation appears to influence trust, loyalty, identity, investor satisfaction, and success in cooperatives (Graca and Arnaldo, 2016). The reason why this study is used as supporting journal is that the variables used in this study,
both independent and dependent is the same with this study. It is also provided importance explanation from the analysis that support the hypothesis in this research, where it is measured quantitatively.
Empirical research in the fields of psychology, marketing, and consumer behavior has found that trust has a positive impact on customer loyalty (Harris and Goode, 2004; Jun et al., 2017; Lee et al., 2016). Chiou and Droge (2006) stated that trust is a central determinant of the intent to repurchase. Survey research was done in Malaysia on 117 Muslim fast-food consumers to understand the impact of customer trust on customer loyalty. The result stated that reputation and trust were found to be positively related to customer loyalty (Quoquab et al., 2019). The reason why this study is used as supporting journal is that the variables, both dependent and independent variables (customer loyalty and customer trust), is the same with this study.
2.3 Relationship between Variables
2.3.1 Relationship between Corporate Social Responsibility to Customer Loyalty
Customer loyalty is better developed by Corporate Social Responsibility, according to (Mandhachitara and Poolthong, 2011). Since the goods delivered by competitors in the property development industry are so comparable, creating customer loyalty is difficult. As a result, researchers have discovered a major beneficial connection between a company's Corporate Social Responsibility policies and its buyers' views of the company's products (Balcombe et al., 2013;
Bhattacharya and Sen, 2003; Bhattacharya and Sen, 2009; Luo and Bhattacharya, 2006; Akbari et al. 2019; Islam et al., 2020).
Existing research has discovered a correlation between corporate social responsibility and customer loyalty (Martínez and del Bosque, 2013; Marin et al., 2009; Crespo and del Bosque, 2005). While corporate social responsibility initiatives are one of the most successful ways to expose business practices that resonate with societal values (Polonsky et al., 2005), some analysts suggest they do not improve loyalty. Pérez et al. (2013), on the other hand, discovered that corporate social responsibility is linked to customer loyalty.
2.3.2 Relationship between Corporate Reputation to Customer Loyalty
Dowling (2006) looked at how a company's reputation can impact its ability to have long-term competitive advantages, as well as how it can increase a company's intrinsic value and market share. Some scholars believed that there is a two-way connection between corporate credibility and efficiency (De la Sabaté and Puente, 2003; López and Iglesias, 2010; Park et al., 2014). According to Graca and Arnaldo (2016), the relationship between corporate reputation and loyalty is beneficial and significant only in businesses that are dependable and financially strong.
Several studies have been conducted on the effect of corporate reputation on organizational efficiency (Thomaz and Brito, 2010; Carmeli, 2004; López, 2006; Flatt and Kowalczyk, 2008; Rose and Thomsen, 2004). Consumer satisfaction, trust (predictions of a reputation), loyalty, and word-of-mouth actions are the four variables to consider in Walsh et al. (2009)'s model of customer-based
corporate reputation (consequences of corporate reputation). To sustain customer satisfaction and trustworthiness, which are supposed to contribute to loyalty, companies should concentrate on customer-oriented features and the consistency of available services and goods.
2.3.3 Relationship between Customer Trust to Customer Loyalty
Customer loyalty is positively influenced by trust, according to observational research in psychology, marketing, and consumer behavior (Jun et al., 2017). Chiou and Droge (2016) affirmed that trust is a core determinant of repurchase intention, strengthening this hypothesis. According to Harris and Goode (2004), trust is critical in repurchase decisions because trust is generally recognized as the basis of engagement or exchange in business transactions.
Similarly, Chiou and Droge (2016) stated that loyalty is built based on trust and faith. As a result, it is predicted that in the property industry, the trust would have a positive effect on customers' minds and ultimately contribute to customer loyalty.
Reciprocity claims support the suggested relationship between customer trust and loyalty. When a company behaves in a manner that nurtures customer interest, the perceived risk associated with that particular company is possibly reduced, allowing the consumer to make positive assumptions about the company's potential behavior (Wu, 2013). Trust impacts customer loyalty by manipulating the consumer's view of the company's values to be by their own (Gwinner, Gremler, and Bitner 1998). The customer's embeddedness in a
considered to be identical, fostering reciprocity and adding to relational loyalty (Lee et al., 2016). Customer trust tends to be a key construct responsible for customer satisfaction, according to previous studies (Lau and Lee, 1999).
2.4 Conceptual Framework
Figure 2.1 Conceptual Framework
Source: Processed Data (2020)
2.5 Model of Analysis
Figure 2.2 Model of Analysis
Source: Internal Data (2020)
2.6 Research Hypothesis
H1 : Corporate Social Responsibility has a Positive and Significant Influence on Customer Loyalty of Citinine Property Indonesia
H2 : Corporate Reputation has Positive and Significant Influence on Customer Loyalty of Citinine Property Indonesia
H3 : Customer Trust has a Positive and Significant Influence on Customer Loyalty of Citinine Property Indonesia
