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Procedia - Social and Behavioral Sciences 155 (2014) 42 – 47

The International Conference on Communication and Media 2014 (i-COME’14), 18-20 October
2014, Langkawi, MALAYSIA

The Analysis of Corporate Social Responsibility Implementation

Effects towards Price Fairness, Trust and Purchase Intention at
Oriflame Cosmetics Product in Surabaya
Hatane Semuela*, Sharon Sagita Chandraa
a
Petra Christian University, Siwalankerto 121-131, Surabaya 60236, Indonesia

Abstract

This research aims to clarify the effect of Corporate Social Responsibility (CSR) on price fairness, trust, and purchase intention
to the Oriflame cosmetics brand in Surabaya. This study is causal descriptive, the number of samples are 111 respondents, and
the data analysis technique is the structural equation models. The findings in this study are: while the CSR’s influence on the
price fairness and trust are proven, its effect on the purchase intention is not. The price fairness and trust influence positively the
purchase intention so they can mediate the CSR and the purchase intention to the Oriflame brand products.

©©2014
2014The
TheAuthors.
Authors.Published
Publishedby
byElsevier
ElsevierLtd.
Ltd.This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/3.0/).
Peer-review under responsibility of School of Multimedia Technology & Communication, Universiti Utara Malaysia.
Peer-review under responsibility of School of Multimedia Technology & Communication, Universiti Utara Malaysia.
Keywords: Corporate social responsibility; price fairness; trust; purchase intention

1. Introduction

Corporate Social Responsibility programs are meant to be independent from companies’ marketing orientation
so that they do not fall into a ‘black campaign’ of being used for promotional activities. Nevertheless, CSR
programs, including by Oriflame, have a positive impact on product marketing. Hoeffler and Keller (2002) call this
“social marketing”, and described it in detail in their discussion of social marketing capabilities in building brand
equity. Social marketing can build brand equity because it can build brand awareness, enhance the brand image,

* Corresponding author.
E-mail address: [email protected]

1877-0428 © 2014 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/3.0/).
Peer-review under responsibility of School of Multimedia Technology & Communication, Universiti Utara Malaysia.
doi:10.1016/j.sbspro.2014.10.253
 Hatane Semuel and Sharon Sagita Chandra / Procedia - Social and Behavioral Sciences 155 (2014) 42 – 47 43

build brand credibility, evoke brand feelings, create a sense of brand community, and elicite brand engagement.
Bloom, Hoeffler, Keller and Meza (2006) in their study also find that social marketing has positive implications on
behavior. This statement is valid because social marketing positions social activities as part of a marketing strategy
and is able to draw a positive response. Chattananon, Lawley, Trimetsoontorn, Supparerkchaisaku and
Leelayouthayothin (2007) supports this notion by stating: "Societal marketing can allow corporations to
differentiate from competitors by themselves creating an emotional bond with consumers." Social-based marketing
enables companies to differentiate themselves from their competitors. This difference is positive as it supports
marketing activities. Similar opinions are expressed by Chatterton and Maxey (2009): "... use of CSR to manage
corporate image," meaning that CSR programs can also help corporate image. Corporate imaging can be constructed
from environmental concerns of CSR programs. Although CSR and marketing programs should be separated, both
are mutually interconnected. As sales increase, companies have a greater ability to allocate their resources for the
benefits of the environment or to finance CSR programs. Yet the opposite is equally true because CSR programs can
potentially bring a positive reputation so that consumers receive marketed products better and it ultimately results in
increased sales. This study will examine the relationship between CSR implemented by Oriflame and several
variables such as price fairness, trust, and purchase intention. A research by Ailawadi, et al. (2011) finds that CSR
has a positive influence on price fairness, attitude, and behavior. Similarly, other retailer attributes also have a
positive influence on price fairness, attitudinal and behavioral because they attract consumers to buy. CSR programs
affect consumer confidence (trust) and that trust has implications on consumer buying behavior (Vlachos et al.
2009). Therefore, in theory there is a link between retailers’ CSR programs and trust as well as price fairness, and
all of those variables have an influence on purchase intention.

2. Literature review and hypothesis

2.1. The relationship between CSR and price

The relationship between CSR and price is explained by Onlaor and Rotchanakitumnuai (2010) as CSR
initiatives affect customer satisfaction and loyalty, customer perception about price fairness, service quality, network
quality, and privacy. This statement reveals that the initiatives of CSR influence various issues, including
consumers’ perception that a price set by a company is a fair one. When a company applies CSR, it shows that it
concerns about the environment, including its consumers, so that the consumers see its product price as a reasonable
one. Onlaor and Rotchanakitumnuai (2010) states that Economics is the fundamental component responsibilities for
profitability to stockholders and business growth through producing quality products and services for customers
with reasonable price. Economic aspects of CSR programs can establish price fairness, which means that when a
company has a strong commitment to its CSR programs, it will encourage its consumers to accept its product price.
Therefore, the research hypothesis 1 is:
H1: CSR applied by Oriflame affects price fairness.

2.2. The relationship between CSR and trust

The relationship between CSR and consumer trust is explained by Carroll and Shabana (2010): "Legitimacy
and reputation arguments hold CSR activities that may help a firm strengthen its legitimacy and reputation by
demonstrating that it can meet the competing needs of its stakeholders”. This statement shows that CSR can
strengthen a company’s legitimacy and reputation and demonstrate its ability to meet stakeholders’ expectation. The
reputation built by CSR can strengthen consumer confidence in the company. It is also supported by the opinion of
Filho, et al. (2010): "Social Responsibility strategies are associated with competitive advantages, such as attracting
valuable employees as well as enhancing the company image and reputation”. CSR will provide a competitive
advantage because it can give attractiveness to employees and will able to improve companies’ image and
reputation, and the same things happen with their consumers. In line with that, the research hypothesis 2 is:
H2: CSR applied by Oriflame affects consumers’ trust.
44 Hatane Semuel and Sharon Sagita Chandra / Procedia - Social and Behavioral Sciences 155 (2014) 42 – 47

2.3. The relationship between CSR and purchase intention

Carroll and Shabana (2010) stated that competitive advantage arguments contend that, by adopting certain
CSR activities, a firm may be able to build strong relationships with its stakeholders and garner their support in the
form of lower levels of employee turnover, and customer loyalty. CSR activities undertaken by a company can build
a strong relationship with stakeholders and can draw supports as shown by low turnover and customer loyalty. This
means that when a company applies a CSR, customers’ repurchase will continue and can even increase. CSR is
reported to affect, either directly or indirectly, consumer product responses (Lavorata, 2011). This statement
explains that CSR has a direct or indirect impact on consumers’ response to a product. When a company applies
CSR, consumers will better accept its products. Related to that, the research hypothesis 3 is:
H3: CSR applied by Oriflame affects purchase intention.

2.4. The relationship between price and purchase intention

The link between price and purchase intention is expressed by Ahmad, et al. (2011) as customer perceptions
and judgments of price unfairness will however lead to a negative emotional response like no action, self -
protection, and revenge. This statement reveals that when consumers consider a price unfair, they tend to have a
negative response to the product, protect themselves from buying the product, and do a revenge to the product.
Ahmad, et al. (2011) also expresses a similar opinion as perception of price fairness is significantly related with
emotions. The perception of a fair price would be able to influence emotions, and they influence buying intentions.
The caused unfair price named three customers' response behaviors roommates are exit, voice, and unloyalty. The
assessment of unfair prices could trigger consumers’ three responses: leaving the company's products, making
complaints, and being unloyal to the products. The research hypothesis 4 is therefore:
H4: Price affects purchase intention.
2.5. The Relationship between trust and purchase intention

The trust has also been found to be a significant factor affecting the customer's intention to purchase or
repurchase from the same online vendor (Valvi & West, 2013). The research was done online but the point is the
same that trust has a significant effect on the purchase and re-purchase intention of the customers. This point is
reinforced by Akbar and Parvez (2009) as where the direct paths from customers' perceived service quality and trust
to customer loyalty, meaning that there is a direct relationship between the quality of service and the confidence in
the loyalty of customers. When customers are loyal, there is a chance that they will make a purchase in the future
and the intention to buy is high. For that, the research hypothesis 5 is:
H5: Trust affects consumer purchase intention to Oriflame products.

3. Research methodology

The design of this study is a causal descriptive research because it tests the relationship between the variables
being researched. The variables used in this study include the application of CSR to retail, price, trust, and behavior
to purchase. These variables are classified into CSR application to retail as latent exogenous, price and trust as
mediating variables, and behavior to purchase as endogenous latent. The indicator of all the variables in this
research is measured by likert scale 1 to 5. 1 indicates strongly disagree while 5 indicates strongly agree.
The research samples are 111 respondents and the sampling techniques use snowball sampling. The samples are
all Oriflame customers in Surabaya. To give a comprehensive picture of the effect of independent variables on the
dependent variables, the technique being used is structural equation modeling (SEM) using Lisrel program.
Structural Equation Modeling (SEM) is a statistical tool used to resolve simultaneous multilevel models that cannot
be solved by a linear regression equation. SEM can also be considered as a combination of regression analysis and
factor analysis. SEM can be used to solve the model equations with more than one dependent variable and the
reciprocal influences (recursive). SEM is based on the analysis of the matrix covarians thus providing more accurate
than the linear regression analysis (Ghozali & Fuad, 2005).
 Hatane Semuel and Sharon Sagita Chandra / Procedia - Social and Behavioral Sciences 155 (2014) 42 – 47 45

4. Data Analysis and Interpretation

4.1. Structural Equation

There are three equations in our model, each structural equation is:

Price Fairness = 0.78 CSR, R² = 0.61 (1)

Based on the above equation, it can be seen that CSR contributes positively to the variable of price fairness. The
statistical contribution of CSR variable is 0.78. This means that the more positive the perception on the Oriflame
CSR, the more positive the perception of the prices. This finding reveals that there is a real contribution from the
CSR to the price acceptance. The respondents' assessment to the CSR Oriflame has a 61% influence on the
acceptance of the price. This means that the change in the perception of the price by 61% can be explained from the
change in the Oriflame CSR program.

Trust = 0.87 CSR, R² = 0.76 (2)

Based on the above equation, it can be seen that CSR contributes positively to the trust variable. Statistically,
the contribution of the CSR variable is 0.87. This means that the more positive the assessment of the Oriflame CSR
is, the higher the confidence to the Oriflame products. This finding reveals that there is a real contribution from the
CSR to the trust in the Oriflame products. The respondents' assessment to the CSR Oriflame has a 76% influence on
the respondents’ belief in Oriflame products. This means that the change in consumer confidence in Oriflame
products at 76% can be explained from the change in the Oriflame CSR program.

Behavior = 0.30 Price + 0.56 Trust + 0.18 CSR, R² = 0.93 (3)

Based on the above equation, it can also be stated that the price fairness variable gives a contribution of 0.30 to
the behavioral intention. This means that the respondents' assessment on the competitiveness of prices affects the
consumer buying behavior in Oriflame products. So is it with trust. This variable contributes 0.56 to the purchase
intention. This means that the level of confidence of the respondents to Oriflame influences buying behavior to the
brand. But it turns out that the CSR variable contributes a relatively little impact to purchase intention, which is
0.18. It can thus be said that the respondents' assessment to the Oriflame CSR program is not yet able to influence
the buying behavior. Although the CSR variable do not significantly affect the consumer behavior, but the three
variables can influence the buying behavior change by 93 %.

4.2. Testing the research model

A testing was carried out to ascertain whether the model described in the study was deemed fit. The model
testing was based on several measurements, namely: chi-square and probability, the goodness of Fit Indices (GFI),
Adjusted Goodness of Fit Index (AGFI), the root Mean Square Error of Approximation (RMSEA), expected Cross-
Validation Index (ECVI), the model AIC and CAIC model, and the fit index.

Table 1. Fit model assessment

Criteria Fit Model Grade Provision Explanation
chi-square and probability (P = 0,03) P > 0,05 Model not fit
adjusted Goodness of Fit Index (AGFI) 0,83 between 0 - 1 Model fit
Goodness of Fit Indices (GFI) 0,87 between 0 - 1 Model fit
NFI 0,96 > 0,80 Model fit
Fit Index

CFI 0,99 > 0,80 Model fit

NNFI 0,99 > 0,80 Model fit
IFI 0,99 > 0,80 Model fit

Based on the results of the fit model testing, only chi-square probability did not meet the qualification of the fit
46 Hatane Semuel and Sharon Sagita Chandra / Procedia - Social and Behavioral Sciences 155 (2014) 42 – 47

model testing. Nonetheless, of the 11 test items, there were 10 test results indicating that the model was fit.
Therefore, in general, it can be said that the model is fit because most of the testing criteria declare so.

4.3. Research hypothesis testing

In this study, there are two groups of hypothesis such as direct effect hypothesis testing of each variable. The
results of the test are based on the evaluation of basic model value of t-value assessment and shown in Figure 1.

PRICE 0.30*
0.78**
FARNESS

0.18 PURCHASE
CSR INTENTION

TRUST 0.56**
0.87**

*sig α = 0.05
**sig α = 0.01

Figure 1. Direct influence of independent variables on the dependent variable

Based on the path diagram above, the results of the hypothesis testing are as follows:

Table 2. Research hypotheses testing

Research Exogen Latent Endogen Coeff. Error tvalue Explanation
Hypothesis Lateng variance

Hipt 1 Price 0,78 0,096 8,10 Proven

CSR
Hipt 2 Trust 0,87 0,11 7,58 Proven
Hipt 3 CSR 0,18 0,21 0,86 Not Proven
Purchase
Hipt 4 Harga 0,30 0,11 2,71 Proven
intention
Hipt 5 Trust 0,56 0,18 3,08 Proven

The results of the research hypothesis testing above indicate that hypothesis 1, which states that the CSR
affects the price, is proven. This means that the respondents' assessment to CSR has a real influence on the
respondents' acceptance of the product price. Similarly, the second hypothesis, which states that the CSR affects the
trust, is also proven. The results of the third hypothesis testing show that the CSR’s effect on purchase intention is
not proven. This finding shows that the consumer buying behavior toward the Oriflame products is not affected by
the evaluation to the CSR. The fourth and fifth hypothesis testing show that there is a real effect of price fairness and
trust variables on the purchase intention.

5. Conclusion

The consumer evaluation to the Oriflame CSR programs has been identified as having a real influence on the
consumer perceptions of the price. This means that the consumers are likely to accept the price set by Oriflame
when consumers appreciate the CSR programs. The application of CSR by Oriflame is seen as a concern for the
environment so that the consumers could accept the set price of the Oriflame cosmetics. The CSR also gives a
positive perception to the consumers regarding the good intention of Oriflame to be environmentally responsible.
This has implications on the consumer confidence in the Oriflame product that the product has a commitment to
 Hatane Semuel and Sharon Sagita Chandra / Procedia - Social and Behavioral Sciences 155 (2014) 42 – 47 47

provide only the best for the consumer. The positive perception on the application of CSR is followed by the
increasing consumer confidence in Oriflame products. However, the finding shows that the CSR has no direct
implications on behavior. This means that the positive perception on the CSR is limitedly on the price and trust but
not yet on the purchase behavior. Price has a direct influence on purchase behavior intention and is an important
consideration in product purchase. When the consumers accept the price set by Oriflame, the purchase behavior
intention turn stronger. There is a real effect of the price on the purchase intention variable so that the assessment of
the price influences the consumers’ buying behavior to the brand products. There is a real effect of the trust to the
purchase intention variable so that the assessment of the trust affects the consumers’ purchase behavior toward the
brand products. Trust and price fairness could mediate the effect of CSR to purchase intention. This means that the
existence of the trust and price fairness could strengthen the influence of CSR on purchase intention, as the CSR
does not directly affect the purchase intention.

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