Operational decisions and stakeholder implications of cause marketing adoption in quality-differentiated product lines

In soft logistics research that incorporates operations management and supply chain management perspectives, socially responsible operations have become increasingly important. One such practice is cause marketing (CM), through which firms integrate support for social causes into product-related operational decisions. For firms managing quality-differentiated product lines, an important operational question is whether to adopt CM and, if so, whether to link some or all products to the cause, and how such choices shape operational decisions and stakeholder outcomes. This paper develops a game-theoretic model to investigate whether and how a monopolistic firm selling two vertically differentiated products should adopt CM, which product(s) to link, and under what conditions. Consumers are socially conscious and derive utility from CM through warm-glow and spillover effects. We analyze the performance outcomes under both exogenous and endogenous donation settings. The results show that the firm’s preferred CM strategy depends on the net surplus of CM under exogenous donation, and on the strength of the warm-glow effect under endogenous donation. Notably, CM may remain profitable even when the net surplus is negative, and CM adoption is always preferred under endogenous donations. When only one product is linked, targeting the high-quality product expands total demand but may erode margins, whereas linking the low-quality product preserves margins and generates stronger spillovers from the larger market segment, at the cost of greater cannibalization. Furthermore, society always prefers linking both products to maximize donations, while consumer surplus and firm profit may be maximized under different CM schemes; nevertheless, there exist regions in which the firm, consumers, and society all benefit from CM. These findings provide implications for CM adoption, product-line operational decisions, and stakeholder outcomes under both short-term campaigns with fixed donation constraints and long-term programs with endogenous donation decisions.