E u r o p e a n I n t e g r a t i o n S t u d i e s 2 0 1 9 / 1 3 90 European Integration Studies No. 13 / 2019, pp. 90-99 doi.org/10.5755/j01.eis.0.13.23437 Abstract Factors that Motivate Latvian Consumers to Purchase Products and Services From Social Enterprises in Latvia: The Case of Socially Responsible Consumption http://dx.doi.org/10.5755/j01.eis.0.13.23495 Kristine Casno, University of Latvia Daina Šķiltere, University of Latvia The purpose of the study is to -determine the relative importance of various factors that motivate Lat- vian consumers to purchase products and services from social enterprises in order to provide practical suggestions and recommendations for Latvian social enterprises that would allow them to improve their performance. The primary method used by the study is quantitative research by the means of an online survey of Latvian consumers of social enterprise products /services. The results of the research indicate that Latvian consumers find the product / service quality aspects, as well as aspects of social responsibility and convenience of the shopping location, on average, as most motivating to purchase products / services of social enterprises. However, the results of factor analysis highlight the importance of emotional aspects during on-site shopping as well as the importance of digital presence. Focus on the aforementioned could lead to optimal performance of social enterprises with limited marketing budgets. Authors also found that such factors as pleasant atmosphere and friendly service have the highest potential to generate repeat purchases among Latvian consumers, as confirmed by a statistically significant correlational relationship between the aforementioned factors and actual purchasing behavior of Latvian social enterprise consum- ers. Online sales also have potential to increase the economic performance of Latvian social enterprises. Consumers who regard online shopping highly on average display a less active shopping behavior which could be improved by offering online shopping opportunities. Authors also found that, while communication of social value is still recommended as vital part of social enterprise marketing, it should not be the only focus of social enterprise marketing activities and associated communication. KEYWORDS: consumer value research, social entrepreneurship, marketing, social enterprise, marketing research Biruta Sloka, University of Latvia Introduction Social entrepreneurship has become a global phenomenon that is widely recognized as a power- ful means of tackling social and economic problems regardless of the lack of a common under- standing of the concept by researchers across the world. Social enterprises, operating under tight budgets and with limited human resources and marketing capabilities, also provide a significant contribution to sustainable economic development. Marketing aspects are especially important for social enterprises as they face increasing competition with commercial entrepreneurs. Given the limited research available regarding social enterprise marketing and the fact that no research has been conducted on this topic in Latvia yet, this study aims to prepare practical recommen- Submitted 06/2019 Accepted for publication 10/2019 Factors that Motivate Latvian Consumers to Purchase Products and Services From Social Enterprises in Latvia: The Case of Socially Responsible Consumption EIS 13/2019 91 E u r o p e a n I n t e g r a t i o n S t u d i e s 2 0 1 9 / 1 3 The social entrepreneurship dations based on scientific findings and empirical research results for social enterprises to take into account by looking at the relative importance of various factors that motivate the consumer purchasing behavior in the social entrepreneurship context. Tasks of research: to analyze the con- cept of social entrepreneurship, its development and role in promotion of sustainable development, to identify the best practices of social enterprise marketing and the role of socially responsible consumption in the social enterprise context and to establish the relative importance of various factors that motivate Latvian consumers to purchase the products and services of Latvian social enterprises. Research methods: analysis of scientific publications, analysis of previous conducted research and survey. For most of aspects that were evaluated by a total of 329 respondents of the survey, a 1-10 point scale was used. Data obtained in the survey were analyzed by descriptive statistics by use of indicators on central tendency or location (arithmetic mean, mode, median), indicators of variability (range, standard deviation and standard error of mean), cross-tabulations, correlation analysis and factor analysis. The study applies quantitative research design to collect the opinions and purchasing behavior data of Latvian consumers who have previously shopped in social enterprises working in the areas of education and culture, charity shops and design prod- ucts. Social enterprise customers were selected as the target audience of the research to achieve higher consumer orientation among Latvian social enterprises. The results of the study highlight the importance of emotional connection with consumers as well as the importance of digital pres- ence and recommend social enterprises to pay significant attention to such factors as pleasant atmosphere and friendly service to increase the share of repeat purchases. The Authors believe the research results have the capability to provide significant added value and support in research on Latvian social enterprises by the means of enhanced economic performance and resulting in finding best options for creating sustainable social impact. The social entrepreneurship: its conceptual understanding and role in promotion of sustainable development – analysis of theoretical findings Social entrepreneurship, whose origins can be traced back to the end of the 20th century, has turned into a dynamically growing global movement within the last twenty years. Social entre- preneurs are generating new job opportunities creating significant social impact by changing behavior and consumption patterns across the world (Nicholls, 2006). Social entrepreneurship is growing in both developed and less-developed countries. In the case of the latter, social en- trepreneurship initiatives are supported by government, but in the case of the former – it is rather a reaction of the society to its specific needs (Tkacz, 2016). Several research centers and support foundations across Europe and North America are devoted to promotion of social en- trepreneurship on a global scale. There is a selection of universities across the world that are eager to share the best practices of social entrepreneurship with the future social entrepreneurs (Nicholls, 2006). By 2010 social entrepreneurship was already spreading in Europe, USA, East Asia and Latin America (Defourney & Nyssens, 2010). In 2015, according to the Global Entre- preneurship Monitor: Special Report on Social Entrepreneurship, in most regions of the world (except Latin America), the number of young social entrepreneurs (age 18-34) exceeded the number of commercial entrepreneurs of the same age group (Bosma, 2016). Although social entrepreneurship in the context of the aforementioned report is defined rather widely, it nevertheless confirms the acceptance of this movement, led by the so-called Millen- nium generation, on a global scale (Tkacz, 2016). It must be noted that, up to today, there is no universal understanding about the concept and what can or cannot be defined as social entre- preneurship (Dacin et al, 2010). Nicholls (2006) have explained the ambiguity of the term with the dynamic nature of social entrepreneurs, however, Kerlin (2010) argues that the differences in understanding of the concept and the specific character and form social entrepreneurship takes E u r o p e a n I n t e g r a t i o n S t u d i e s 2 0 1 9 / 1 3 92 from country to country can be attributed to the weakness or strength of such factors as civil society, role of the state, market economy and international aid. Nevertheless, most researchers agree that the common feature shared by all social entrepreneurs is their dual nature which manifests itself in their ambitions to primarily achieve their social mission while simultaneously maintaining orientation towards economic activity (Saebi et al, 2019). As Greblikaite (2012) have pointed out, what matters most is that social entrepreneurs are capable to deliver successful results at both their social as well as economic missions. Social entrepreneurs are solving social and economic problems with innovative, original and mod- ern products and services that not only increase the overall well-being of the society but also pro- mote the growth of the economy (Tkacz, 2016). As Dobele (2013) has explained, the contribution that social enterprises provide to sustainable economic development is a result of both quantita- tive functions (such as promoting employment, especially among most vulnerable social groups, tackling poverty and promoting entrepreneurship) and qualitative functions (such as increasing the social status of vulnerable groups, generating innovations and developing entrepreneurial capa- bilities) that, in addition to the aforementioned, also support balanced regional development. Greb- likaite et al (2017) also have highlighted the potential of social entrepreneurship to balance out the differences among regions in terms of poverty rates and social exclusion. Frank and Shockley (2016) analyzed social entrepreneurship from the point of view of knowledge economics and polit- ical economics and conclude that its greatest source of strength is its local nature because social entrepreneurs have the best knowledge of the social problems faced by their local community and thus are more capable than the state or local governments in generation of innovative solutions. Currently, the social economy of European Union unites 2 million social organizations that provide jobs for more than 11 million people (European, 2019). The capacity of social entrepreneurship to solve social and economic problems is recognized and appreciated within the European Union by offering different support programmes for social organizations (Dobele, 2013). Social enterprise marketing and the case of the socially responsible consumer The increasing popularity of social entrepreneurship has resulted in vast amounts of research regarding the concept, its possible definitions (Mitchell et al, 2015) as well as individual circum- stances that motivate individuals to engage in social entrepreneurship, organizational factors that affect the potential of social entrepreneurs to acquire capital and its positive effects on the well-being of society (Saebi et al, 2019). However, research covering such important aspects as marketing in social enterprises is comparatively scarce (Mitchell et al 2015) regardless of the fact that marketing capabilities in social enterprises are especially important, if not most important, since their success and survival depends on their ability to influence the behavior of a multitude of target audiences – consumers, grant managers, volunteers, media, employees, legislators etc. (Andreasen and Kotler, 2008). Existing research regarding marketing aspects in social entrepreneurship suggest that product or service quality rather than social value is of utmost importance to consumers (Liu et al, 2015; Choi and Kim, 2013; Srivetbodee et al 2017; Mitchell, et al, 2015). Mitchell (2015) and Madill and Ziegler (2012) have pointed out the benefits social entrepreneurs could gain from the synergy of social marketing and social entrepreneurship, however they also note that the discipline of social marketing requires a strong focus on the customer and a well-crafted strategy, which require mar- keting skills that social entrepreneurs often lack. Mendoza –Abarca and Mellema (2016) discuss the benefits of “pay-what-you want” pricing in the social entrepreneurship context. Dees (2012) has recommended social entrepreneurs to ensure their created social impact and economic results are made transparent to the wider society. Dees (2012) as well as Roundy (2014) also recommended social entrepreneurs to apply an emotional and personal approach in communication with their 93 E u r o p e a n I n t e g r a t i o n S t u d i e s 2 0 1 9 / 1 3 customers. Another interesting field of research, that is also applicable and must be considered in the social entrepreneurship marketing context, is socially responsible consumption. Juscius and Sneideriene (2013) have highlighted the increasing global trend of socially responsi- ble consumption and define a socially responsible consumer as one who is fully conscious of the effects of his/her private consumption choices and/or endeavors to bring about social change through personal purchasing power. Although Juscius and Sneideriene (2013) characterized so- cially responsible consumers as well-informed about social problems, active in their social life and having faith in their ability to bring about positive changes through consumption, they note that during the decision making process such factors as the product price, quality, convenience and information about the brand prevail. Devinney et al. (2010) have explained such contradiction between consumer attitudes and actions, which they call “the myth of the ethical consumer,” with the importance of the context present in the specific purchasing situations. Since in Latvia no research has been previously conducted regarding marketing aspects in social enterprises, Au- thors aim to uncover the factors (including social responsibility aspects, product price and quality etc.) that motivate purchase of social enterprise products / services most and also evaluate to what degree the relative importance of these factors results in more frequent purchasing behavior. Empirical research methodology and results F ri en dl y se rv ic e C o nv en ie nt sh o pp in g o nl in e C o nv en ie nt lo ca ti o n o f th e so ci al en te rp ri se O pp o rt u ni ty to s u pp o rt so ci al c au se s In fo rm at io n in t he s o ci al ne tw o rk s an d w eb si te P le as an t at m o sp he re P ri ce o f th e pr o du ct / se rv ic e Q u al it y o f th e pr o du ct / se rv ic e U ni q u en es s o f th e pr o du ct / se rv ic e Mean 8,03 7,12 8,44 8,49 8,13 8,33 8,24 8,53 8,09 Mode 10 10 10 10 10 10 10 10 10 N 164 157 160 163 160 162 160 160 161 Range 9 9 9 9 9 9 9 9 9 Std. Error of Mean 0,171 0,220 0,138 0,144 0,157 0,147 0,158 0,151 0,161 Median 9 8 9 9 8 9 9 9 9 Standard deviation 2,189 2,760 1,744 1,837 1,985 1,874 1,999 1,916 2,043 Table 1 Main statistic indicators of respondents’ evaluations on various factors motivating to make purchases from social enterprises Source: Authors’ construction based on questionnaire developed by Kristīne Casno and survey conducted in 2019, evaluation scale 1-10, where 1- not motivating; 10 – very motivating, n=329 Quantitative research was used in order to collect the data. Over a period of almost 2 months an online survey was distributed with the aim to reach consumers of social enterprise products through social networks with the help of Latvian social enterprises as well as Latvian Social Entrepreneurship Association. The respondents, among other questions, were asked to indicate how many times during 2018 they had purchased products or services of Latvian social enter- prises. They were also asked to indicate on a scale from 1 (not motivating) to 10 (very motivating) to what degree various factors motivated them to make purchases from social enterprises. The survey was completed by 329 respondents (the number of fully completed surveys was 224), 84% of them female, 16% male of whom more than 80% were of age 16-45 and held either a master’s or bachelor’s degree. The number of respondents who had not made any purchases of social enterprises’ products or services during 2018 was only 63. Most respondents (46.8%) had made purchases 1-4 times during 2018, 11% of respondents – 5-8 times, 5.9% - 9-12 times, and 9.7% of respondents – 13 times and more. Overall, the respondents indicated all of the factors provided by the Authors as rather motivating, as reflected in Table 1. E u r o p e a n I n t e g r a t i o n S t u d i e s 2 0 1 9 / 1 3 94 Consumers find the quality of the products / services as well as the opportunity to support social causes and convenient location of the social enterprises to be motivating the most. The high score for quality of the product / service as a motivational factor is consistent with the existing research regarding the utmost importance of product quality for social enterprises. However, the results also indicate a rather high importance of social responsibility aspects as motivational among respondents which allows to conclude that communication of social value must be an important part of social marketing enterprise in order for them to perform well and is also con- sistent with the existing research on the topic. Taking into account that social enterprises operate under circumstances of limited human and financial resources, which makes it difficult for them to focus on all factors at once, Authors applied factor analysis (results are reflected in Table 2) to see if it was possible to find a smaller number of more general components that would make it easier for social enterprises to set priorities to achieve optimal performance. Rotated Component Matrixa Complex Factors Feelings and emotions while shopping in-store Convenience in the digital environment Friendly service 0,619 0,399 Convenient shopping online 0,023 0,715 Convenient location of the social enterprise 0,322 0,668 Opportunity to support social causes 0,313 0,626 Information in the social networks and website 0,144 0,772 Pleasant atmosphere 0,736 0,425 Price of the product /service 0,742 0,160 Quality of the product / service 0,802 0,269 Uniqueness of the product/ service 0,782 -0,020 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 3 iterations. Table 2 The results of factor analysis Source: Authors’ construction based on questionnaire developed by Kristīne Casno and survey conducted in 2019, evaluation scale 1-10, where 1- not motivating; 10 – very motivating, n=329 With the help of factor analysis, Authors were able to identify two general factors that would be most important for social enterprises to focus on. The first factor combines aspects associated with the feelings and emotions generated during the in-store shopping experience. This indicates that social enterprises should strive to create a personal shopping experience aiming to make a positive emotional connection with consumers through the marketing aspects of price, product and service. The second factor combines aspects associated with convenience available to con- sumers in the digital environment. This indicates that social enterprises must be also actively present, communicating their social value and, if possible, also selling their products online to be able to address the needs of the digitally-oriented consumers who value their time and demand fast feedback to the questions or comments they post on social networks and other digital com- munication channels. 95 E u r o p e a n I n t e g r a t i o n S t u d i e s 2 0 1 9 / 1 3 Authors were also interested to discover if the degree of importance respondents indicated for the various factors correlated with the actual shopping behavior (frequency) among consumers. Notwithstanding the large share of respondents who indicated that they find the opportunity to support social causes to be very motivating (41.1% of respondents in total), Authors did not observe any statistically significant correlational relationships between the importance of the respective factor and shopping frequency indicated by respondents (the results of correlation analysis are provided in Table 3). Correlations How many times did you purchase products / services of social enterprises in 2018? Opportunity to support social causes How many times did you purchase products / services of social enterprises in 2018? Pearson Correlation 1 0,071 Sig. (2-tailed) 0,370 N 174 163 Opportunity to support social causes Pearson Correlation 0,071 1 Sig. (2-tailed) 0,370 N 163 163 Source: Authors’ construction based on questionnaire developed by Kristīne Casno and survey conducted in 2019, evaluation scale 1-10, where 1- not motivating; 10 – very motivating, n=329 Table 3 Correlation analysis results (shopping frequency and opportunity to support social causes) Such results are partially consistent with the current research on the topic of socially responsi- ble consumption, since, even though consumers do make socially responsible purchases, the consumers who indicate the opportunity to support social causes as a very important motivat- ing factor for them, do not necessarily shop more often. On the other hand, Authors observed statistically significant positive correlational relationship between the motivational importance of such factors as pleasant atmosphere and friendly service and actual purchasing behavior and a statistically significant negative correlational relationship between the motivational importance Correlations How many times did you purchase products / services of social enterprises in 2018? Pleasant atmosphere How many times did you purchase products / services of social enterprises in 2018? Pearson Correlation 1 0,246** Sig. (2-tailed) 0,002 N 174 162 Pleasant atmosphere Pearson Correlation 0,246** 1 Sig. (2-tailed) 0,002 N 162 162 **. Correlation is significant at the 0.01 level (2-tailed). Source: Authors’ construction based on questionnaire developed by Kristīne Casno and survey conducted in 2019, evaluation scale 1-10, where 1- not motivating; 10 – very motivating, n=329 Table 4 Correlation analysis results (shopping frequency and pleasant atmosphere) E u r o p e a n I n t e g r a t i o n S t u d i e s 2 0 1 9 / 1 3 96 Correlations How many times did you purchase products / services of social enterprises in 2018? Friendly service How many times did you purchase products / services of social enterprises in 2018? Pearson Correlation 1 0,198* Sig. (2-tailed) 0,011 N 174 164 Friendly service Pearson Correlation 0,198* 1 Sig. (2-tailed) 0,011 N 164 164 *. Correlation is significant at the 0.05 level (2-tailed). Source: Authors’ construction based on questionnaire developed by Kristīne Casno and survey conducted in 2019, evaluation scale 1-10, where 1- not motivating; 10 – very motivating, n=329 Table 5 Correlation analysis results (shopping frequency and friendly service) Correlations How many times did you purchase products / services of social enterprises in 2018? Convenient shopping online How many times did you purchase products / services of social enterprises in 2018? Pearson Correlation 1 -0,281** Sig. (2-tailed) 0,000 N 174 157 Convenient shopping online Pearson Correlation -0,281** 1 Sig. (2-tailed) 0,000 N 157 157 **. Correlation is significant at the 0.01 level (2-tailed). Source: Authors’ construction based on questionnaire developed by Kristīne Casno and survey conducted in 2019, evaluation scale 1-10, where 1- not motivating; 10 – very motivating, n=329 Table 6 Correlation analysis results (shopping frequency and convenient shopping online) of the factor ‘convenient shopping online’ and actual purchasing behavior (the results of correla- tion analysis are provided in Tables 4-6). The statistically significant positive correlational relationship between the importance consumers assign to the factor ‘pleasant atmosphere’ and actual consumer shopping frequency, as reflected above,suggests potentially high returns for investments in shop ambience arrangements. Friendly service is also an important motivational factor that results in actual increased shopping behavior, as confirmed by a statistically significant positive correlational relationship, as reflected above. Such results suggest that additional staff training may yield positive economic returns for Latvian social enterprises. Another factor that statistically significantly correlated with consumer purchasing behavior was ‘convenient shopping online. 97 E u r o p e a n I n t e g r a t i o n S t u d i e s 2 0 1 9 / 1 3 The statistically significant negative correlational relationship reflected above highlights the po- tential for an online store to increase Latvian social enterprise sales. Apart from the aforemen- tioned, Authors did not find any statistically significant correlational relationships between pur- chasing frequency and other factors. Taking into account the results of the correlation analysis, Authors conclude that pleasant atmosphere (indicated by 38.3% as very motivating (score 10) and, overall, by 75% as motivating (score above 8, including)) and friendly service (indicated by 37.2% as very motivating and, overall by 67.1% as motivating (score above 8, including,), are important factors for social entrepreneurs to consider as they have a significant potential to generate a higher number of repeat purchases. Also, social enterprises may want to eval- uate their capabilities to set up online shopping opportunities as this factor has a significant negative effect on purchasing frequency of consumers. However, social enterprises should not focus merely on communicating their social impact in their marketing communications, as it may not result in more frequent purchase behavior. Overall, Authors find the results of factor analysis consistent with the correlational relationships which further underscore the conclu- sions made by Authors. Conclusions and recommendations _ Latvian consumers indicate that such factors as product /service quality, opportunity to sup- port social causes and convenient location of the social enterprise, on average, motivate them to purchase the products / services of social enterprises the most, which partially corresponds with previous research and theoretical findings _ Based on the survey results, Authors conclude that, given the limited resources available for marketing purposes, Latvian social enterprises should pay most attention to such marketing aspects as generation of positive feelings and emotions during in-store shopping experience and ensuring convenient access to information in the digital environment (including online shopping if possible). Survey results also point out that Latvian socially responsible consumers who find the op- portunity to support social causes as very motivating, do not actually shop more frequently. Consequently, Authors recommend that communication of social impact created by social entrepreneurs as well as their social mission, while holding a vital position in marketing com- munications, should not be the only focus of Latvian of social enterprise marketing. In order to generate more repeat purchases, social enterprises should focus their marketing efforts at enhancing the shopping experience for consumers, focusing on pleasant atmosphere and friendly service in particular. If possible, social enterprises should also consider selling their products online as it may result in more frequent purchases. Current research is limited to social enterprises working in the Latvian B2C market and in- cludes social enterprises working in such areas as education and culture, charity shops and design products. 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Voluntas, 21, 162-179. https://doi.org/10.1007/s11266-010- 9126-8 99 E u r o p e a n I n t e g r a t i o n S t u d i e s 2 0 1 9 / 1 3 About the authors CASNO KRISTĪNE Cand. Mg.sc.admin., cand.for doctoral student University of Latvia Fields of interests Social enterprises, quantitative analysis Address Aspazijas bulv. 5, Riga, LV - 1050, Phone. + 371 27836333 kristine_casno@yahoo.com ŠĶILTERE DAINA Dr.oec. Professor University of Latvia Fields of interests Expert surveys, expert eval- uations, social enterprises, quantitative analysis Address Aspazijas bulv. 5, Riga, LV - 1050, Phone. + 371 67034753 Daina.Skiltere@lu.lv SLOKA BIRUTA Dr.oec. Professor University of Latvia Fields of interests Multivariate data analysis, social enterprises, quantitative analysis Address Aspazijas bulv. 5, Riga, LV - 1050, Phone. + 371 67034753 Biruta.Sloka@lu.lv