Why do we tend to favor brands that show care for societal issues?
Noble Edge Effect, explained.
What is the Noble Edge Effect?
When companies demonstrate social responsibility that is perceived as genuine by consumers, they are rewarded with increased respect, which in turn leads to greater profits. That’s the noble edge effect.
Where this bias occurs
Whenever we feel more inclined to give a store our business after hearing that it donates to charity or that its products are ethically sourced, that’s the noble edge effect talking. What’s particularly interesting about this effect is that its influence over us depends on the source from which we hear about the company’s social responsibility. For example, if we see an advertisement on television that is promoting a major sale at a certain store and also happens to mention the fact that they donate a portion of their profits to charity, we tend to view it as a shallow marketing ploy. However, if we see an advertisement for a certain charity in which the store is thanked for its kind donations, we may interpret the store’s donation as a genuine act of generosity. In the latter situation, we may be influenced to shop at the store.
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The noble edge effect can have a significant influence on our shopping habits. It can cause us to unconsciously edit the list of companies we are willing to give our business to. For example, if the grocery store that is a fifteen-minute drive from your home donates a certain portion of its profits to the local food bank, you may be more inclined to shop there than you are at the grocery store that is a five-minute drive from your house. This is not necessarily a bad thing; in fact, it’s a good thing to support a corporation’s philanthropy. However, we should always be mindful of the reasons behind the choices we make.
If companies that are engaging in philanthropic work that is perceived as genuine, they may be given an edge over their competitors who are not engaging in any such work, or whose demonstrations of social responsibility are viewed as insincere. As companies become aware of this effect, they may feel more pressed to garner goodwill from consumers through acts of social responsibility. This can have positive repercussions, as it may lead to greater donations to certain charities or more emphasis on purchasing from ethical suppliers. However, if the company is only doing it for clout, they may not reap the full benefits of the noble edge effect, since consumers may see through the charade and believe it to be nothing but a one-off donation to boost sales. That being said, consumers are not all-perceiving. We can be tricked, often through other cognitive biases, such as the affect heuristic and commitment bias, into thinking certain corporate actions are more authentic than they really are.
Why it happens
The noble edge effect arises from a cognitive bias referred to as the halo effect. The halo effect contends that we associate good with good. Put simply, we view corporate social responsibility as a good thing, therefore we associate positive attributes with the goods and services sold by that company, even if we have never shopped there before. Furthermore, the strength of this bias relies on the perceived motivations of the company, such that people are more likely to be influenced by corporate responsibility when they believe the company’s prosocial behavior to be genuine and not driven by self-interest.
The halo effect
According to the halo effect, when our overall opinion of something or someone is positive, we will be more likely to evaluate the aspects of that thing or person positively. For example, physically attractive people tend to be rated as friendlier and smarter than are people who are perceived as less physically attractive. In their 2015 paper, “Doing Well by Doing Good: The Benevolent Halo of Corporate Social Responsibility”1, Alexander Chernev and Sean Blair suggested that when companies engage in corporate social responsibility we adopt a positive attitude towards the company, which leads us to view the company’s products in a favorable way as well. Our newfound positive attitudes towards the company’s products can make us more willing to shop there. Thus, the halo effect gives rise to the noble edge effect.
Importantly, we tend to rely on cognitive biases, like the halo effect, when we are uncertain. Specifically, we are more likely to use the halo effect to form judgments regarding the quality of products sold at a store when we are unfamiliar with that type of product.2 For example, our impression of a car dealership that has made a generous donation to charity will only be affected by the information regarding its philanthropy if we do not know much about cars. However, if we are very familiar with cars, our attitude towards the cars sold at that particular dealership is unlikely to change. When we have the knowledge necessary to make judgments about the quality of a type of product on our own, we do not need to rely on biases to facilitate the process.
Another important factor that leads to the noble edge effect is whether consumers perceive a company’s socially responsible behavior to be genuine or to have been enacted out of self-interest.3 Chernev and Blair suggest that, when it comes to corporate social responsibility, the halo effect results from our moral judgment of a company’s actions. As such, the halo effect, which in turn gives rise to the noble edge effect, is not brought about by mere actions. What drives this effect is our interpretations of the company’s motives. It is not enough for a corporation to simply make a charitable donation. If we believe that a company is only engaging in socially responsible behavior in order to make themselves look good and thereby boost profits, the halo effect and, by extension, the noble edge effect, will not be as strong as if we believe that the socially responsible behavior was truly benevolent.
Why it is important
Knowing about the noble edge effect is important for two reasons. First, it is important for consumers to be aware of it as, even though philanthropy is likely something we would want to support anyways, it is always good to understand why we make the decisions we do. Instead of allowing biases to unconsciously influence our decision-making, we should be able to recognize that the reason we are willing to go out of our way to shop at a specific store is that we respect that it is making a genuine display of social responsibility.
Secondly, it is important for companies to understand the noble edge effect so that they realize that their actions matter. If they do not accept their social responsibility, they will be disadvantaged in comparison to their competitors who do. Even though these businesses may have the ulterior motive of increasing their profits, this is still greatly beneficial to the charities that will receive donations from them.
How to avoid it
Since the noble edge effect results from the halo effect, which leads us to generalize that the entire company must be fantastic based on the one positive attribute of its acts of social responsibility, it opens us up to disappointment. Perhaps the store is very generous in its donations, but the products it sells just are not suited to our needs, and we would be better off taking our business elsewhere. We should not let the noble edge effect cloud our judgment and force ourselves to buy something from a certain store simply because we respect its philanthropy. Thus, it can be to our benefit to avoid the noble edge effect. The first step to doing so is to acknowledge the existence of the bias. After doing so, we can take a more effortful approach to decision-making. That means instead of automatically deciding to make a purchase from a new store, we should weigh the pros and cons of purchasing from that store against purchasing from one of its competitors. Of course, the fact that this store is socially responsible can be a mark in its favor, but if we feel that its products or services leave much to be desired, perhaps it is time to begin looking at alternatives.
How it all started
Although they did not use the term “noble edge effect”, Chernev and Blair provide a detailed description of the concept in their paper “Doing Well by Doing Good: The Benevolent Halo of Corporate Social Responsibility” (2015).4 The focus of their paper was on the halo effect and how it can give rise to the effect we have come to know as the noble edge effect. In addition to presenting the theory behind the concept, they described four experimental studies to provide empirical evidence for their hypotheses.
Example 1 - Wine tasting
The first experiment described by Chernev and Blair in their paper on the effects of corporate social responsibility was designed to demonstrate how a company’s philanthropy causes us to develop more positive attitudes towards their products.5 Participants in this study were asked to take part in a wine-tasting, during which they were given red wine in an unmarked plastic cup, along with a card providing details about the winery from which it came. All participants received the same general description of the winery, but some of the participants were told that the winery donates ten percent of its sales revenue to the American Heart Association, while others were given no information regarding the winery’s socially responsible behavior. Participants were asked to read the description, sample the wine, then rate their enjoyment of it on a 9-point scale. They were then asked to rate how much they know about wine in general on a second 9-point scale, from “very little” to “very much”.
The findings of this experiment were consistent with the noble edge effect such that participants who received information about the winery’s charitable donations rated the wine as tasting better than did those who did not receive that information. The second important finding was that this effect was driven by expertise. Specifically, participants who rated their knowledge of wine as low were more likely to have their rating of the wine be positively influenced by knowledge of the winery’s prosocial behavior than were those who rated their knowledge as high.6 This experiment was key to understanding the mechanisms that give rise to the noble edge effect.
Example 2 - TOMS Shoes
You may remember a few years ago when you couldn’t walk down the street without seeing at least a dozen people wearing TOMS Shoes. The slip-on canvas shoes were considered trendy for both men and women but it’s possible that their popularity isn’t entirely attributable to their comfort and style. When the company was first launched, they made the promise that for every pair of shoes sold, a pair would be donated to a child living in poverty. It is possible that TOMS’ demonstration of social responsibility has contributed to their success. Their sales certainly increased: the number of shoes donated jumped from 10,000 in the first year to 200,000 in the second year.7 In fact, TOMS even inspired other companies to take on the “buy one, donate one” approach.
What is also telling about this example is that TOMS’ reputation took a hit when the company came under fire for their philanthropic efforts. Critics claimed that donating shoes may not be as helpful as it seems, as it could disrupt local economies and because it fails to address the larger issues faced by those living in poverty – why do shoes need to be donated in the first place?8 Since then, TOMS has had to re-evaluate its means of demonstrating socially responsible behavior. As it may not actually be as helpful as it was made out to be, TOMS’ shoe donations may have been interpreted by some as performative, causing them to be called out for it. This highlights how consumers do not accept corporations’ good deeds at face value.
What it is
Companies that demonstrate social responsibility garner goodwill from the population and are then rewarded with increased profits.
Why it happens
The noble edge effect depends on how the consumer perceives the company’s motivation to engage in social responsibility. We are more likely to be influenced by this prosocial behavior when we believe it to come from a place of benevolence, not self-interest. Additionally, this bias results from another cognitive bias, known as the halo effect, which posits that we associate good with good. Put simply, we view corporate social responsibility as good, therefore we feel that the goods and services sold by that company must be of good quality.
Example 1 – Wine tasting
In a wine tasting experiment, participants who were told that the winery that produced the wine donates ten percent of their sales revenue to charity rated the wine as tasting better than did those who were not given that information. Importantly, this effect was driven by the participant’s knowledge of wine, such that those who knew less about wine were more likely to be influenced by the information regarding the winery’s prosocial behavior. This experiment offers key insight into how the noble edge effect is brought about.
Example 2 – TOMS Shoes
TOMS Shoes may be a prime example of the noble edge effect, as the company has dedicated itself to philanthropic efforts. However, this example also demonstrates the importance of how corporations’ socially responsible behavior is perceived. Recently, TOMS came under fire for not having as good of an impact as they claimed to be, which hurt their reputation.
How to avoid it
The noble edge effect can be avoided by taking an effortful approach to
decision-making instead of an effortless, automatic one. Before making a big purchase, weigh the pros and cons of shopping at each store. Social responsibility can be a big pro, but it should not necessarily be the deciding factor.