Business School
Consumer Brand Trust in a Brand Crisis: A Comparison between Accidental and Preventable Product-Harm Crisis
Hanna-Kaisa Kolehmainen, 248746 Master’s Thesis Service Management 14.03.2020
ABSTRACT
UNIVERSITY OF EASTERN FINLAND Faculty
Faculty of Social Sciences and Business Studies
Department Business School Author
Hanna-Kaisa Kolehmainen
Supervisor
Tommi Laukkanen Title
Consumer Brand Trust in a Brand Crisis: A Comparison between Accidental and Preventable Product-Harm Crisis
Main subject
Service Management
Level
Master’s Thesis
Date 14.03.2020
Number of pages 92 + 18
Abstract
Brand crisis can make consumers question their brand trust towards the affected brand. Product- harm crisis is a particular type of brand crisis, and product-harm crises have become increasingly common in today’s markets. There can be different causes behind product-harm crises others being accidental and others preventable. Product may contain a flaw accidentally created by the company or a deflection intentionally made by the company. Consumers can react differently regarding their brand trust to these kinds of product-harm crises with two distinct backgrounds, whereas companies have different options that they can use when responding to crises.
Companies can deny the whole crisis, reduce the offensiveness of it or use corrective action strategy. These crisis response strategies can have their own effects on consumer brand trust after a brand crisis, such as product-harm crisis, has occurred.
The aim of this study is to examine and compare consumer brand trust between accidental and preventable product-harm crisis and to find out the effects of different crisis response strategies used by the company facing the crisis on consumer brand trust. This study was executed with quantitative methods, and six different online questionnaires with experimental design were used in data collection for which six different scenarios were created, one per each questionnaire.
There were 100 respondents per each questionnaire/scenario. The data was collected from Finland by market research company in the spring of 2019 from a total of 600 current car owners of that time, and the data was analyzed with non-parametric tests.
The results of this study indicate that both accidental and preventable product-harm crisis negatively affect consumer brand trust, but consumer brand trust level has decreased more after preventable product-harm crisis when compared to accidental crisis. Denial and reduction-of- offensiveness negatively affect brand trust that has been harmed by accidental crisis. In the case of preventable crisis, these response strategies do not seem to have significant effects on brand trust. Corrective action positively affects consumer brand trust in both crisis types repairing the previously harmed brand trust. Although corrective action strategy is used by a company, brand trust level does not, however, reach its original pre-crisis level after this crisis response. Based on these results, companies should prevent product-harm crises from occurring and not try to meet the demands of the markets with illegal ways. Companies can lose competitive and economic advantages if consumer brand trust is harmed, which may lead to other consequences for the companies. If trying to repair harmed brand trust, companies should use at least some of the actions of positively affecting corrective action strategy.
Key words
Brand crisis, consumer brand trust, product-harm crisis, trust repair
TIIVISTELMÄ
ITÄ-SUOMEN YLIOPISTO Tiedekunta
Yhteiskuntatieteiden ja kauppatieteiden tiedekunta
Yksikkö
Kauppatieteiden laitos Tekijä
Hanna-Kaisa Kolehmainen
Ohjaaja
Tommi Laukkanen Työn nimi
Kuluttajien brändiluottamus brändikriisitilanteessa: vertailu tahattoman ja ehkäistävissä olevan tuotevahinkokriisin välillä.
Consumer Brand Trust in a Brand Crisis: A Comparison between Accidental and Preventable Product-Harm Crisis
Pääaine
Palvelujohtaminen
Työn laji
Pro gradu -tutkielma
Aika 14.03.2020
Sivuja 92 + 18 Tiivistelmä
Brändikriisit voivat saada kuluttajat kyseenalaistamaan brändiluottamuksensa asianomaista brändiä kohtaan. Tuotevahinkokriisi on erityinen brändikriisityyppi, joka on tullut yhä yleisemmäksi tämän päivän markkinoilla. Tuotevahinkokriisien taustalla voi olla erilaisia syitä toisten ollessa tahattomia ja toisten ehkäistävissä olevia. Tuotteessa voi olla virhe, jonka yritys on aiheuttanut vahingossa, tai poikkeama, jonka yritys on tehnyt tarkoituksella. Kuluttajat voivat reagoida eri tavoilla brändiluottamuksensa kannalta taustoiltaan kahteen erilaiseen tuotevahinkokriisiin, kun taas yrityksillä on eri vaihtoehtoja, joita ne voivat käyttää vastatessaan kriiseihin. Yritykset voivat kieltää kriisin, vähentää siihen liitettyä vahinkoa tai käyttää korjaavan toiminnan strategiaa. Näillä kriisivastausstrategioilla voi olla omat vaikutuksensa kuluttajien brändiluottamukseen brändikriisin, kuten tuotevahinkokriisin, satuttua.
Tutkimuksen tavoitteena on tarkastella ja vertailla kuluttajien brändiluottamusta tahattoman ja ehkäistävissä olevan tuotevahinkokriisin välillä sekä selvittää kriisin kohdanneen yrityksen käyttämien kriisivastausstrategioiden vaikutuksia brändiluottamukseen. Tutkimus toteutettiin kvantitatiivisilla menetelmillä ja aineistonkeruussa käytettiin kuutta erilaista sähköistä eksperimentaalista kyselylomaketta, joita varten luotiin kuusi eri skenaariota, yksi jokaista kyselylomaketta kohti. Vastaajia oli 100 per kyselylomake/skenaario. Markkinatutkimusyritys keräsi aineiston Suomesta 600 senhetkiseltä autonomistajalta keväällä 2019, ja aineisto analysoitiin ei-parametrisilla testeillä.
Tutkimuksen tulokset osoittavat, että sekä tahaton että ehkäistävissä oleva tuotevahinkokriisi vaikuttaa negatiivisesti kuluttajien brändiluottamukseen, jonka taso on laskenut enemmän ehkäistävissä olevan tuotevahinkokriisin jälkeen verrattuna tahattomaan kriisiin. Kieltäminen ja vahingon vähentäminen vaikuttavat negatiivisesti brändiluottamukseen, jota tahaton kriisi on vahingoittanut. Ehkäistävissä olevan kriisin tapauksessa näillä strategioilla ei vaikuta olevan merkitseviä vaikutuksia brändiluottamukseen. Korjaava toiminta vaikuttaa positiivisesti kuluttajien brändiluottamukseen molemmissa kriisityypeissä korjaten aiemmin vahingoitettua brändiluottamusta. Vaikka yritys käyttää korjaavan toiminnan strategiaa, brändiluottamus ei kuitenkaan saavuta alkuperäistä, kriisiä edeltävää tasoaan kyseisen kriisivastauksen jälkeen.
Tuloksiin perustuen yritysten tulisi ehkäistä tuotevahinkokriisien sattuminen eikä yrittää täyttää markkinoiden vaatimuksia laittomin keinoin. Yritykset voivat menettää kilpailullisia ja taloudellisia etuja, mikäli kuluttajien brändiluottamusta vahingoitetaan, mikä voi aiheuttaa muita seurauksia yrityksille. Mikäli vahingoitettua brändiluottamusta yritetään korjata, yritysten tulisi käyttää ainakin joitain toimia positiivisesti vaikuttavasta korjaavan toiminnan strategiasta.
Avainsanat
Brändikriisi, kuluttajan brändiluottamus, luottamuksen korjaaminen, tuotevahinkokriisi
CONTENTS
ABSTRACT ...2
ABSTRACT IN FINNISH ...3
1 INTRODUCTION ...7
1.1 Background and objectives of the research ...7
1.2 Research questions and limitations ... 10
1.3 Theoretical framework ... 12
1.4 Concepts and definitions ... 13
1.5 Structure ... 14
2 PRODUCT-HARM CRISIS AS A BRAND CRISIS... 15
2.1 Definitions of brand crisis and product-harm crisis ... 15
2.2 Behind the product-harm crisis ... 17
2.3 Effects of product-harm crisis ... 21
2.4 Company’s response to crisis ... 23
3 CONSUMER BRAND TRUST ... 31
3.1 Trust as a phenomenon ... 31
3.2 Definition of brand trust as consumer brand trust ... 34
3.3 Decline of trust and trust repair ... 38
3.3.1 Decline of trust ... 35
3.3.2 Before the actual trust repair ... 39
3.3.3 Trust repair efforts ... 41
3.3.4 Crisis response strategies and trust repair ... 43
4 EXECUTION OF THE EMPIRICAL RESEARCH ... 46
4.1 Research methods and data ... 46
4.1.1 Survey as a research method ... 46
4.1.2 Experimentation ... 47
4.1.3 Data analysis ... 52
4.1.4 Questionnaires ... 54
4.1.5 Manipulation check ... 58
4.2 Data collection ... 60
4.3 Data ... 61
4.3.1 Background information and brand trust levels ... 61
4.3.2 Brand trust variables ... 59
5 RESULTS... 66
5.1 Brand trust scale reliability and manipulation check for crisis type and response.66
5.2 Hypotheses testing with non-parametric tests ... 68
5.2.1 Consumer brand trust after product-harm crisis ... 68
5.2.2 Consumer brand trust after denial ... 70
5.2.3 Consumer brand trust after reduction-of-offensiveness ... 72
5.2.4 Consumer brand trust after corrective action ... 73
5.2.5 Paired comparisons ... 75
6 DISCUSSION AND CONCLUSIONS ... 78
6.1 Summary of the research ... 78
6.2 Conclusions ... 79
6.2.1 Theoretical conclusions ... 79
6.2.2 Managerial implications ... 83
6.3 Limitations ... 85
6.4 Future research ... 87
REFERENCES ... 88
APPENDICES APPENDIX 1. Questionnaire 1 in English APPENDIX 2. Questionnaire 1 in Finnish APPENDIX 3. Questions and scenarios of the questionnaires summarized in English APPENDIX 4. Questions and scenarios of the questionnaires summarized Finnish FIGURES AND TABLES Figure 1. Forms of trust...33
Figure 2. Theoretical framework...45
Figure 3. Respondents’ brand trust levels...63
Table 1. Research on product-harm crises...18
Table 2. Crisis response strategies and their groupings applied and/or described in the previous literature...24
Table 3. Crisis types and response strategies of the scenarios...55
Table 4. Background information about the respondents...61
Table 5. Variable overview...64
Table 6. Hypotheses testing with non-parametric tests...75
Table 7. Paired comparisons...76
1 INTRODUCTION
1.1 Background and objectives of the research
Igniting smartphone batteries, software that manipulates cars’ emission measurements, dishes unknowingly made from horsemeat, food contaminations… Headlines tell about different kinds of brand-related crises regularly. These cases in question seem to have gotten increasing attention as they spread with their effects easily and quickly all over the world due to the globalized markets. There can be various reasons in the background of these crises, others being accidental mistakes and others, in turn, intentional actions that are related to brand and its operations. These kinds of cases may develop into a brand crisis, which can threaten the brand (Dutta & Pullig 2011) and, therefore, even the whole organization. For example, Volkswagen emission scandal, which began in the autumn of 2015, can be mentioned as a case where a brand crisis occurred due to intentional hoax made by the company itself, and in the case of Volkswagen, the company had to pay, for example, 830 million euros as a settlement to the Federal Association of Consumers at the beginning of 2020 (BBC 2020) along with previous costs that had already exceeded 30 billion euros (The Guardian 2019). Being a large and famous brand, Volkswagen and its emissions manipulation drew a lot of attention while the effects of the manipulation spread widely. Electronics company Samsung, in turn, suffered from unintentional product-harm crisis in 2016 because of the Samsung Galaxy Note 7 smartphones’
overheated and even ignited batteries, which caused the recall that was thought to have cost approximately 5 billion euros for the company (BBC 2017). These two cases are examples of brand crises that have occurred to world-famous brands during recent years. Both cases represent an incident where there is a flaw or other kind of a deflection in a product.
Some of the brand crises can create a risk for consumers’ safety, such as accidents occurring in the food and pharmaceutical industry. According to Liu, Shankar and Yun (2017), along with these industries, also toys and automobiles face product recalls caused by product-harm crises repeatedly. However, harmful effects of product-harm crises may not always be physical (Cleeren, Dekimpe & van Heerde 2017), and it is reasonable that brand trust may be questioned by consumers, as Dawar and Lei (2009) have also expressed by stating that brand crisis may damage consumer trust towards a brand. Thus, it is probable that various brand crises can have far-reaching effects on consumer brand trust, which can, in turn, impact the brand and its reputation, which is, according to Dutta and Pullig (2011), usually threatened during the brand crisis, too.
Companies should pay attention to what kind of effects these crises have on consumer brand trust, which is also discussed as “brand trust” in the previous literature (for example Chaudhuri
& Holbrook 2001; Delgado-Ballester & Munuera-Alemán 2005) and in this study, how to act in a crisis and how to repair the possibly lost consumer brand trust. This is because brand trust can be perceived as an important asset for companies due to the benefits it provides, such as its effects on brand loyalty (Chaudhuri & Holbrook 2001). According to Xie and Peng (2009), the ability and need to repair trust are remarkable factors for the organizations because of their considerable amount of both theoretical and practical value. The actual trust repair actions have still been studied less than expected (Kim, Dirks, Cooper & Ferrin 2006). Xie and Peng (2009) have also stated that instead of the significance of the topic, the amount of the research on consumer trust repair after a detrimental corporate incident from the perspective of the relationship between a consumer and a company has, however, been limited. Moreover, Schweitzer, Hershey and Bradlow (2006) have highlighted the slight amount of research on the actual changes of trust due to trust violations and restoration efforts over time.
The amount of the research concerning product-harm crises has, in turn, increased during the last decades after these cases having received more and more attention in the marketing field (Cleeren et al. 2017). Cleeren, Dekimpe and van Heerde (2017) have presented an overview of the research regarding product-harm crises. They have examined designs and frameworks of the previous research when simultaneously presenting general theory of product-harm crises and their effects on organizations and their stakeholders. Cleeren et al. (2017) have also considered the perspectives of the media and executives in their article and made recommendations for future research. According to them, it would be interesting and justifiable to study new kinds of product recalls, which differ from the previously experienced ones, created by the present empirical world. Therefore, they suggest comparing consumer responses in two different product-harm crisis scenarios to be a potential perspective for future research.
Cleeren et al. (2017) highlight the possibility to compare consumer responses in a situation where the company has knowingly fiddled with its products and, on the other hand, in a case where it has unknowingly and unintentionally developed a mistake or a flaw in the product, leading to a product recall in both cases. Because the overview of the marketing research on product-harm crises by Cleeren et al. (2017) is comprehensive and recent, the research gap about consumer responses in different product-harm crisis situations is a starting point for this study.
Although the previous research has examined several issues related to product-harm crises, for example consumer reactions when a product-harm crisis occurs by examining the effects of trust, blame and perceived risk on consumers’ purchase intentions (Vassilikopoulou, Lepetsos
& Siomkos 2018), impacts of product-harm crises on brand evaluations (Dawar & Lei 2009), and brand equity (Dawar & Pillutla 2000), effects of company’s response, reputation and responsibility for a product-harm crisis on consumer reactions (Dean 2004), effects of base-rate information on consumer attributions of product-harm crisis (Lei, Dawar & Gürhan-Canli 2012) and company’s response to a product-harm crisis (Laufer & Coombs 2006), a little is known about the real effects of these crises on consumer brand trust. Although Yannopoulou, Koronis and Elliott’s (2011) qualitative research covers the effects of brand crisis on consumer brand trust considering how consumers’ own experiences of brand crisis affect brand trust versus when the crisis is covered publicly in the mass media, more research is needed on the effects of product-harm crises on brand trust. Therefore, the objective of this study is to examine the real causal relationship between a brand crisis and brand trust. In order to research this kind of a relationship between variables, experimentation is an advisable research method because it is a strong method when studying cause–effect relationships due to solid evidence it provides for cause and effect (Zellmer-Bruhn, Caligiuri & Thomas 2016), and, therefore, experimentation enables also the research on the real causal relationship between brand crisis and brand trust. Moreover, company’s crisis response strategies have been studied for example from reputational (Coombs 2006, 2007), image-based (Benoit 1997) and attitudinal perspectives (Dutta and Pullig 2011), but the question about what kind of effects the crisis response strategies may have on consumer post-crisis brand trust is an issue worth studying, too, and, thus, this aspect is also included to this study.
To be precise, the purpose of this study is to research consumer brand trust in brand crisis situations that are, in this case, product-harm crises with two different backgrounds. In other words, the aim is to find out the real causal relationship between consumer brand trust and different kinds of brand crises with experimentation, which means that the interest is in the question about how consumers react to different kinds of crises, these consumer reactions concerning brand trust. Also, the effects of company’s crisis response strategies on post-crisis consumer brand trust are examined. These strategies are communicative resources (Coombs 2006) that companies can utilize when responding to a crisis and, according to Coombs (2007), trying to diminish negative effects after a harmful incident. By implementing crisis response strategies, companies can, for example, try to protect and manage their reputation (Coombs &
Holladay 2002; Coombs 2006, 2007), repair their possibly tarnished image (Benoit 1997) and/or recover brand equity (Dutta & Pullig 2011).
The topic of this study is both practical and current. In today’s markets, there are product-harm crises everywhere (Cleeren, van Heerde & Dekimpe 2013). Therefore, there are also numerous examples of product-harm crises happened in several industries over time, and, according to Khamitov, Grégoire and Suri (2019), research has re-focused on the knowledge of consumers’
reactions to companies’ failures due to recently occurred negative corporate events.
Consequently, it can be stated, as Cleeren et al. (2017) also emphasize, that no brand is safe from product-harm crises in the today’s markets, which have developed into more and more complex over time. Although many aspects regarding product-harm crises and other brand crises have been studied previously, as briefly presented above, this study aims to contribute to the previous research on product-harm crises as brand crises by examining their real effects on consumer brand trust and how the companies’ crisis responses further affect the possibly harmed brand trust. Therefore, this study aims to provide significant information about the effects these crises and responses can have on brand trust.
1.2 Research questions and limitations
As stated before, the research problem in this study is based on the research gaps made in the previous literature. Even though the research problem is theory-based, the topic still has practical value due to actual cases happening in the market regularly. In this study, the consumers’ reactions in different brand crisis situations have been limited to include only the reactions concerning brand trust. Therefore, the main research problem, which will be researched in this study, is the following:
- How does consumer brand trust vary in the case of a preventable product-harm crisis and an accidental product-harm crisis?
The first and second sub-problem of this study are:
- How do a preventable product-harm crisis and an accidental product-harm crisis affect consumer brand trust?
- How does a preventable product-harm crisis versus an accidental product-harm crisis affect consumer brand trust?
Also, because the action of a company in a brand crisis is a remarkable factor when repairing the possibly lost consumer brand trust, the third sub-problem is:
- How do the effects of the company’s crisis response strategies on consumer brand trust vary across accidental and preventable product-harm crisis?
Thus, in this study, the focus is on product-based brand crises, that is product-harm crises, and they are examined from the consumer perspective. Hence, service-based crises are not covered here. Based on the crisis types’ grouping by Coombs and Holladay (2002), both preventable (intentionally made deflection in a product) and accidental (unintentionally created flaw in a product) brand crises are considered in this study. Consequently, brand crises created by some external factor, for example natural disaster, where a company, as well as its stakeholders, is also a victim of a crisis (Coombs & Holladay 2002), are excluded from this study. Adding more practicality to this study, car industry is used as a context in this study’s data collection because of its above-mentioned relevance when discussing product-harm crises.
Consumer brand trust is examined from the perspectives of trust decline and recovery (/repair) because the aim of this study is to research the effects of two kinds of brand crises and company’s crisis response strategies on consumer brand trust. Trust formation where trust is formed for the first time between the parties is, therefore, mainly excluded from this study.
Also, the focus is on the psychological and emotional harm caused by the crisis because this research concerns potentially occurred trust violation. Consequently, physical and financial harm are omitted from closer examination in this research. Physical harm is only a part of the product-harm scenarios used in the empirical part of this study, whereas possibly violated brand trust as emotional and psychological harm is the main interest in this study.
Based on the research questions and objectives stated before, the empirical part of this study is executed by using quantitative methods. Previous marketing research on product-harm crises in the 21st century has mainly used lab experiments and real cases -based empirical data as empirical settings, and ANOVA (analysis of variance) has been the most common analysis method in the experimental studies (Cleeren et al. 2017). Moreover, experimental manipulations for company’s crisis responses as the potential method in future research have been emphasized by Rea, Wang and Stoner (2014). Previous research has used experimental designs in order to examine, for example, consumers’ views (Dean 2004), reactions (Rea et al.
2014), evaluations (Dutta & Pullig 2011), choice behavior (Zhao, Zhao & Helsen 2011) and perceptions (Xie & Peng 2011) regarding product-harm or negative publicity faced by a
company. Due to the nature and objectives of this study, it is reasonable to use these kinds of designs and methods also in this study, and, therefore, the empirical part will be executed with survey that is based on the experimental research method mentioned above and analysis methods that compare the possible differences between participant groups.
1.3 Theoretical framework
The theoretical part of this study is mainly based on the theories of brand crises, focusing on product-harm crises, and the theories of brand trust. Therefore, the theoretical part covers crisis management, brand management and trust management theories. The theories of brand crises are covered from the perspective of product-harm crises emphasizing two different crisis types.
When discussing brand crises, company’s potential crisis response strategies and general effects of a crisis on both a company itself and its stakeholders are considered, too. The crisis response strategies are, additionally, linked to the company’s trust repair actions.
Consumer brand trust can be seen as a crucial issue when talking about the impacts of a brand crisis on consumers and their attitudes towards the company’s brand. When considering consumer brand trust, the focus is on lost (or declined) trust, which belongs to the decline phase of trust (Rousseau, Sitkin, Burt & Camerer 1998), and trust repair including the repair efforts.
In this study, the general concept of trust and its features are also reflected and applied to brand trust in order to form more comprehensive theory base about the topic. The focus is on consumer brand trust and, therefore, the other party of the relationship is a brand and the other is a consumer. For consumer’s part, brand trust as a phenomenon is, however, well-comparable to the interpersonal trust from which there are a lot of theories to support the discussion of the concept. In this case the “trustee” is a brand instead of another human while the phenomenon of trust with its elements is still similar compared to the relationship between two people. Xie and Peng (2009) have also applied the general theories of trust and trustworthiness to consumer trust in their research, which indicates the relevance of those theories in the context of this study, too. However, it is important to note, as Whelan and Dawar (2016) have also highlighted, that when compared with a human, brand is a different kind of relationship partner although several relationship behaviors of the interpersonal domain have been applied to the consumer domain.
1.4 Concepts and definitions
The most essential concepts of this study are brand, brand crisis, brand trust as consumer brand trust, crisis response strategies and product-harm crisis.
Brand is often defined as a name, term, sign, symbol, design or a combination of them and the purpose is to identify one seller’s or a group of sellers’ products or services and distinguish them from the competitors’ similar ones (Kotler 1991, 442). According to de Chernatony (1999), brand can be more comprehensively seen as a set of values that covers both functional and emotional values. Moreover, the organizational values can be expressed with band’s values (de Chernatony 1999). Aaker (2010, 78–84) also emphasizes that brand can be perceived as a product, an organization, a person and/or a symbol.
Brand crisis is a harmful incident that creates a threat to brand reputation (Dutta & Pullig 2011). This kind of case occurs due to a well-publicized claim about a fundamental brand proposition being false or unproven (Dawar & Lei 2009). According to Coombs and Holladay (2002) and Coombs (2007), crisis is abrupt by its nature and can create also a financial threat for a company simultaneously being able to harm company’s stakeholders physically, emotionally and/or financially (Coombs 2007).
Brand trust is defined by Chaudhuri and Holbrook (2001, 82) as “the willingness of the average consumer to rely on the ability of the brand to perform its stated function”.
Consumer brand trust can exist as overall brand trust or towards a specific aspect of the brand (Li, Zhou, Kashyap & Yang 2008). Due to the definition of brand trust as “the willingness of the average consumer to rely…” (Chaudhuri & Holbrook 2001, 82), brand trust can also justly be perceived and called as consumer brand trust.
Crisis response strategies are communicative resources that aim to protect a reputation of an organization in a crisis (Coombs 2006) with actions performed and things said by an organization or a management after a crisis has occurred (Coombs 2002, 2006, 2007, 2015;
Coombs & Holladay 2002, 2008, 2009, 2014; Laufer & Coombs 2006). Dutta and Pullig (2011) have named denial, reduction-of-offensiveness and corrective action as the main crisis response strategies.
Product-harm crisis is defined by Cleeren et al. (2017, 593, 594) as “a discrete event in which products are found to be defective and therefore dangerous to at least part of the product’s customer base”. Product-harm crises can threaten company’s stakeholders but also company’s
or brand’s equity and reputation. Besides being physical, the harm caused by product-harm crisis can also be psychological or financial by nature. (Cleeren et al. 2017.)
1.5 Structure
In the main chapters 2 and 3, essential theories of product-harm crisis as a brand crisis and consumer brand trust are introduced based on the publications mainly from the marketing field, but also other fields of study are utilized. Different types of brand crises are discussed first, but the focus is on product-harm crisis including its backgrounds, effects and companies’ crisis response strategies. Before consumer brand trust is covered, the theory of trust as a phenomenon is presented in general. In this study, the theory of brand trust covers also trust decline and recovery phases and companies’ possible trust repair actions via crisis response strategies in a brand crisis. After the theoretical part of this study, there is the empirical part that proceeds from the research methods and data to the chapters covering data analysis and results. Finally, the summary of the research, conclusions, limitations and suggestions for future research are stated.
2 PRODUCT-HARM CRISIS AS A BRAND CRISIS
2.1 Definitions of brand crisis and product-harm crisis
There are differing opinions of the linkage between the definition of brand crisis and product- harm crisis in the literature and, therefore, various concepts are considered here. Benoit (1997) uses the concept of “corporate crisis” in his research. The same term is also applied by Dean (2004), but he has tested image restoration strategies experimentally describing a product-harm crisis regarding a fictional brand, whereas Coombs and Holladay (2002) and Coombs (2007) talk about ”crises” generally when examining crisis communication and protection of organization’s reputational assets. Dean’s (2004) research is about “corporate crises”, and he uses the cases of Firestone’s defective tires and Taco Bell’s contaminated products as practical examples. Coombs (2007), in turn, has named some of the crisis types as product harm, while Marcus and Goodman (1991) have identified scandals, accidents and product safety incidents as examples of corporate crises. Moreover, Dutta and Pullig (2011), Dawar and Lei (2009) and Dahlén and Lange (2006), for example, talk about brand crisis in their research. A concept of
“scansis”, in turn, refers to the intersection of scandal and crisis (Coombs & Tachkova 2019).
However, all these different terms cover mainly the same phenomenon but only from varying perspectives, extents and frameworks. Being aware of the different concepts used in the literature, this study focuses on the concept of product-harm crisis as a brand crisis. To get a more comprehensive theory base for these concepts, Coombs and Holladay’s (2002) and Coombs’ (2007) studies are still used in the discussion about product-harm crisis as a brand crisis based on their relevance regarding this study although they cover crisis generally from the organization’s reputational perspective.
A harmful incident that threatens brand reputation is defined as a brand crisis (Dutta & Pullig 2011). Coombs and Holladay (2002) and Coombs (2007) also emphasize that organizational reputations can be threatened by a “crisis”. “Crises” can be seen as abrupt incidents that can disturb organization’s operations (Coombs & Holladay 2002; Coombs 2007). Instead of being only reputational, the threat a crisis creates can also be financial to the organization (Coombs 2007). According to Dawar and Lei (2009), in the background of this kind of an incident is a well-publicized claim about a fundamental brand proposition being false or unproven. Dutta and Pullig (2011), in turn, separate brand crises into two different types of which the other relates to performance and the other type to values. The performance-related crises concern usually products with flaws, whereas values-related crises cover ethical or social matters
regarding the values that the brand supports (Dutta & Pullig 2011). According to Dutta and Pullig (2011), the expected functional brand benefits are threatened in the first case and brand’s psychological and symbolic benefits in the second. Although Coombs and Holladay (2002) and Coombs (2007) use only the word “crisis” in their research, their studies are in the organizational context and, therefore, the crisis that concerns an organization can be named more accurately as corporate crisis, brand crisis or even organizational crisis. Whatever the crisis’ name is, if it threatens organization and its reputational assets, it usually threatens the organization’s brand, too, creating a brand crisis. Along with product-harm crisis, brand crisis can also relate to service failures (Gijsenberg, van Heerde & Verhoef 2015; Cleeren et al. 2017), social failures, communication failures or have a digital form, such as social media firestorms do (Hansen, Kupfer & Hennig-Thurau 2018). Hansen, Kupfer and Hennig-Thurau (2018) emphasize the importance of the insights of causes behind a brand crisis because some causes seem more likely to unfold a brand crisis than others.
When defining product-harm crisis, Siomkos and Kurzbard (1994) and Dawar and Pillutla (2000) are usually referred to. The definition of product-harm crises as “a discrete, well- publicized event in which products are found to be defective or even dangerous” is frequently used (Cleeren et al. 2017, 594). Still following the previous one, Cleeren et al. (2017) have presented a more recent definition from which the term “well-publicized” is excluded. They have also specified the harm potentially caused by the crisis to concern “at least part of the product’s customer base” instead of all potential consumers. According to Cleeren et al. (2017), product-harm crises differ from other types of brand crises because in the case of product-harm crisis the product has to be defective, which often, but not always, causes a product recall.
Therefore, if the conceptualization of different brand crisis types by Dutta and Pullig (2011) is followed, it can be stated that product-harm crisis is a performance-related brand crisis.
When considering other brand crises, the brand associations have become amiss usually without the product having a flaw (Cleeren et al. 2017) and, thus, these crises may potentially be named as values-related brand crises (Dutta & Pullig 2011). Rea et al. (2014) state that it is possible that product-harm crisis harm established brand associations held by consumers. According to Dawar and Lei (2009), product-harm crises harm the abstract associations of the brand, for example quality, whereas the other brand-related crises damage the specific associations, such as being “natural”. Dawar and Lei (2009, 513) refer to product-harm crises as “a different type of brand-related crises” using also the definition by Dawar and Pillutla (2000). Therefore, it can be stated that product-harm crisis is one of the different brand crisis types (performance-
related crisis) but it can still be referred to as a brand crisis because it can create a threat to company’s/organization’s brand. However, some of the crises may not be as clearly defined and categorized. For example, Volkswagen’s emissions scandal may be both performance- related and values-related brand crisis due to the software that intentionally manipulates cars’
emission measurements, and, therefore, the product does not meet with the functional and the brand with the psychological or symbolic benefit expectations held by consumers. The research on product-harm crises from 21st century is gathered into Table 1 with the research methods and main results of the studies. Table 1 may not be perfectly comprehensive, but it provides the perspectives from which the recent research on product-harm crises has been done including also Cleeren et al.’s (2017) article that covers the previous literature on the subject. It should be noted that although the significance of the study by Siomkos and Kurzbard (1994) is recognized in this study, it is excluded from Table 1 due to the time frame used.
2.2 Behind the product-harm crisis
Product-harm crises have become increasingly common in today’s markets (Cleeren et al.
2013), and there can be different factors in the background affecting the formation of a product- harm crisis. Consumers are more demanding, and, also, products become more and more complex in the market (Dawar & Pillutla 2000; van Heerde, Helsen & Dekimpe 2007; Cleeren et al. 2017). The pressure of competitive markets and various governmental legislations and regulations (Cleeren et al. 2017) combined with the demands and complexity can make it challenging for the companies to meet all the expectations and requirements. Moreover, policymakers and manufacturers are executing closer examinations (van Heerde et al. 2007;
Cleeren et al. 2017), production is more global, outsourcing is increasing, and, therefore, quality control becomes more difficult (Cleeren et al. 2017). According to Ahluwalia, Burnkrant and Unnava (2000), the negative publicity about brands and companies is extensively common in the market, and, due to a raised attention in the media, crises are more apparent to the general public, as well (van Heerde et al. 2007; Cleeren et al. 2017).
As mentioned before, some of the causes behind a crisis concerning company’s products are purely accidental and unintentional, whereas others have occurred because of intentional actions by the company itself leading to a product-harm crisis. Coombs and Holladay (2002) have grouped different types of organization-related crises into three clusters based on the attributions of responsibility that, in turn, lead to reputational threats with different levels of
Table 1. Research on product-harm crises
Authors Research methods Main results/conclusions (in literature
reviews) Ahluwalia, Burnkrant and Unnava
2000
Experimentation
Regression analysis
Consumer response to negative information is moderated by commitment. Companies should use different response strategies for different target groups.
Dawar and Pillutla 2000 Telephone interviews Experimentation Regression analysis ANOVA
Consumers’ prior expectations moderate their perceptions of company’s crisis response.
Dean 2004 Experimentation
Factorial ANOVA
If the company responds appropriately to the crisis, it is regarded more highly than the company with an inappropriate response.
Dahlén and Lange 2006 Experimentation MANOVA
Brand crisis can harm competitors’ similar brands whereas dissimilar brands can benefit from it.
Laufer and Coombs 2006 Literature review When choosing a crisis response, consumer- based cues and corporate reputation should be considered, too.
van Heerde, Helsen and Dekimpe 2007
Case study Model estimation
A product-harm crisis may cause a quadruple jeopardy regarding company’s sales and marketing-mix instruments.
Cleeren, Dekimpe and Helsen 2008 Case study Hazard model
Strong equity before a crisis creates a buffer against product-harm crises and makes company’s communication after a product recall more effective.
Chen, Ganesan and Liu 2009 Event study analysis T-test
Wilcoxon rank-sum test Cross-sectional analysis Heckman two-step estimation
A proactive product recall strategy affects company’s financial value more negatively than a passive product recall strategy.
Proactive recall strategies are applied more likely by companies with lower reputation.
Dawar and Lei 2009 Experimentation Moderated mediation ANOVA
Perceived seriousness mediate and brand familiarity moderate the effects of a brand crisis. Product-harm crises are likely to affect negatively consumers’ brand evaluations.
Dutta and Pullig 2011 Experimentation ANOVA
The nature of the crisis affects the relative effectiveness of crisis response strategies.
Rubel, Naik and Srinivasan 2011 Market data State-space model
When the probability of a crisis increases, the optimal advertising before the crisis decreases, whereas the advertising after the crisis increases.
Yannopoulou, Koronis and Elliott 2011
Case study Depth interviews
Interpretive thematic analysis Content analysis of the media material
Consumer experiences affect less negatively brand trust than a public perception of risk does.
Zhao, Zhao and Helsen 2011 Scanner panel data set Model estimation Experimentation
Product-harm crisis can add consumers’
uncertainty about the affected brand in the category. Strong reputation helps brands overcome a crisis more effectively than weak reputation. A company can manage a product- harm crisis effectively with a proactive approach.
Table 1. (Continued)
Authors Research methods Main results/conclusions (in literature
reviews) Lei, Dawar and Gürhan-Canli 2012 Experimentation
ANOVA
Crises affect less brands with positive beliefs. Attributions for brands with positive prior beliefs are more affected by base-rate information than brands with negative prior beliefs.
Cleeren, van Heerde and Dekimpe 2013
Scanner panel data Regression model
There will be more price sensitivity of the category if the media attention increases.
Advertising becomes more effective with increased media attention.
Rea, Wang and Stoner 2014 Experimentation T-test
After a product-harm crisis, brands with high equity are likely to be perceived more favorably than brands with low equity.
Hsu and Lawrence 2016 Secondary data Event study
During a product recall, negative online word-of-mouth affects weak brands more than strong brands.
Liu, Liu and Luo 2016 Secondary data Probit model
When the product hazard is more serious, companies tend to use full remedy more probably. Making decisions about remedies is interfered by CEOs personal interests.
Whelan and Dawar 2016 Experimentation Moderated mediation
The fearful attachment style reduces attributions of stability, while the secure attachment style reduces attributions of controllability. Both attachment styles decrease the amount of blame attributed to the brand.
Cleeren, Dekimpe and van Heerde 2017
Literature review No brand is safe from a product-harm crisis.
Product-harm crisis can have various effects on different stakeholders. More research about different issues regarding product-harm crises is needed.
Falkheimer and Heide 2017 Case study Interviews Document analysis
Auto-communicative approach and sensemaking may explain the success of the trust recovery campaign.
Liu, Shankar and Yun 2017 Secondary data Event study
Calendar-time portfolio analysis
Recall volume has a long-term effect on company value.
Hansen, Kupfer and Hennig-Thurau 2018
Secondary data Survey Event study Regression analysis
Generalized estimating equations
Triggers of social media firestorms involving a product failure impact on consumer brand perceptions and memory effects.
Vassilikopoulou, Lepetsos and Siomkos 2018
Real scenario Factor analysis
Structural equation modeling
Trust and blame are affected by perceived severity of the crisis. Consumers’ purchase intentions are affected by perceived risk, blame and trust.
Khamitov, Grégoire and Suri 2019 Literature review Literature on brand transgression, service failure and recovery and product-harm-crisis complement each other, and the general discipline of negative events in marketing could go beyond these three streams.
severity (Coombs 2007). The three clusters are the victim cluster, the accidental cluster and the preventable cluster (Coombs and Holladay 2002), which Coombs (2007) has alternatively named as intentional cluster, too. The victim cluster includes the crises in which not only the stakeholders but also the organization itself is a victim of the crisis (Coombs and Holladay 2002; Coombs 2007). According to Coombs and Holladay (2002) and Coombs (2007), workplace violence and natural disasters are examples of the crisis within the victim cluster. In this study, these kinds of crises are, however, excluded from the closer inspection due to the different perspective used. Organization’s unintentional actions that can lead to a crisis belong to the accidental cluster, which includes the cases where the company is moderately responsible for the crisis (Coombs and Holladay 2002; Coombs 2007). Coombs (2007) names technical- error accidents, challenges and technical-error product harm as crisis types belonging to the accidental cluster. Coombs and Holladay (2002), in turn, use the concepts of technical breakdown-accidents, megadamage, challenges and technical breakdown-recalls when talking about crisis types of the accidental cluster. Consequently, it can be stated that the product-harm crises caused by unintentional actions by the company are part of the accidental cluster. In the technical-error product harm or technical breakdown-recall, product recall is caused by equipment or technology failure (Coombs and Holladay 2002; Coombs 2007).
Crisis types included to the preventable/intentional cluster are caused by the intentional actions by the company that knowingly places stakeholders at risk, takes inappropriate actions or violates laws and regulations (Coombs and Holladay 2002; Coombs 2007). In this case, the company is strongly responsible for the crisis, and, therefore, the reputational threat is serious (Coombs 2007). The preventable cluster includes crises types of organizational misdeed with no injuries, organizational misdeed – management misconduct and organizational misdeed with injuries (Coombs and Holladay 2002; Coombs 2007). Human-error accidents and human-error product harm (Coombs 2007), or human breakdown accidents and human breakdown recalls, as Coombs and Holladay (2002) name them, are also included to the preventable cluster because those errors could have or might have been avoided.
Cleeren et al. (2017) also mention Volkswagen in their article as an example of the case in which a company tries to meet the governmental regulations in an illegal way. Volkswagen tried to meet the emission standards by manipulating the emission measurements with a software that was installed to its diesel cars. Samsung, in turn, faced problems with its Galaxy Note 7 model’s batteries. According to Cleeren et al. (2017), this incident occurred due to Samsung’s attempt to develop even more thinner smartphone and lead the competition when
trying to meet the consumer demands in an environment where competitive pressure is remarkable. Thus, there are various causes leading to product-harm crises. Accidents happen occasionally, but sometimes companies do wrong knowingly. Whatever the cause is, these incidents can have many consequences. On the other hand, it is interesting to examine the differences and similarities in the effects caused by the crisis types with different backgrounds.
2.3 Effects of product-harm crisis
Perceived risk is a matter closely attached to product-harm crisis situations (Vassilikopoulou et al. 2018). Product-harm crises can have various consequences for the company and its brand, its stakeholders, including consumers, its investors and competitors, too (Cleeren et al. 2017), frequently leading to product recalls, which consists of several actions by the company, such as informing the consumers about the risk, halting the product sale and helping the consumers handle the defective product properly (Liu, Liu & Luo 2016). Company’s market share may also be eroded by a product-harm crisis (Siomkos & Kurzbard 1994). Along with above- mentioned stakeholders, company’s employees and suppliers can be affected by the crisis, too (Coombs 2007). Coombs (2007) highlights that crisis will develop negative impact, particularly if there are intentional actions behind it. Along with the company’s particular brand, consumers can also start to boycott all the other products and services marketed by the company in question if they think that the good-faith standard, which they expect from the company, has been violated (Siomkos & Kurzbard 1994). The threat to brands and companies is reputational (Cleeren et al. 2017), as also the definition of brand crisis by Dutta and Pullig (2011) emphasizes. According to Coombs (2007), if nothing is done, the threat can be defined as the amount of harm a crisis can cause to company’s reputation, which is perceived as a remarkable intangible asset in this case. The reputational threat develops because the crisis gives general public a reason to negatively regard the company, and, therefore, the positive effects of favorable reputation can be lost (Coombs 2007). For example, social media firestorms linked with a product (or service or social) failure can have both short- and long-term negative effects on brand perceptions (Hansen et al. 2018). According to Coombs (2007), reputation is largely based on stakeholders’ evaluations of the company’s capability to meet consumers’
expectations, and the stakeholders may spread negative information about the company through word of mouth and/or sever their ties with the company if its reputation becomes unfavorable.
Besides the emphasis of the reputational aspect of the threat a crisis creates, Coombs (2002) also argues that there must be operational threat for the company, too, in order a “true crisis” to
exist, the loss of revenue being either tolerable or intolerable. Moreover, Cleeren et al. (2017) state that brands’ and companies’ equity is threatened in a product-harm crisis, too. Dawar and Pillutla (2000) also emphasize the negative effects product-harm crises can have on brand equity, which they state being crucial but fragile asset for companies. Brand equity, brand trust being a part of brand equity’s “composite construct”, is based on consumers’ perceptions and can be inclined to abrupt changes out of management’s control (Dawar & Pillutla 2000).
According to Coombs (2007), crises can harm company’s stakeholders physically, emotionally and/or financially, which is parallel with the statement by Cleeren et al. (2017) that product- harm crises can cause physical, psychological and financial harm for consumers. Physical harm is evidently experienced if the product is dangerous for a consumer due to, for example, malfunction, contamination or wrong ingredient. However, there is not always a need for physical harm to occur in order for consumers to lose trust and/or feel otherwise offended (Cleeren et al. 2017), but Vassilikopoulou, Lepetsos and Siomkos’ (2018) research shows that consumer trust is still affected by perceived severity of the crisis. According to Dawar and Lei (2009), brand crises can also damage consumers’ confidence along with trust towards the brand.
Lei, Dawar and Gürhan-Canli (2012) highlight harmed brand evaluations and lost trust potentially being more serious consequences for the company than the expenses resulted from the compensations and product replacements. It is possible that the decreased trust and conversely increased risk perceived by consumers have negative effects on their purchase intentions (Vassilikopoulou, et al. 2018). Because consumers’ values are also important factor in consumer behavior (Manchiraju & Sadachar 2014), values-related brand crises may have differing effects on consumer reactions and behavior depending on the values consumers support. Rea et al. (2014) state that different consumer reactions can be negatively affected by product-harm crisis; it is more probable that consumers hold declined brand attitude, maintain less brand trust, do not prefer using the brand and finally may avoid purchasing the brand. Based on these views, the presumption that product-harm crisis negatively affects consumer brand trust is the theoretical basis of this study. However, this hypothesis is not tested directly in this study but the effects of two different crisis types are examined instead assuming those effects still being negative. Therefore, the following hypothesis is suggested:
H1: Both accidental and preventable product-harm crisis negatively affect consumer brand trust.
Because the damage covers trust and confidence in this case, it can be categorized as psychological/emotional harm by nature. One example of psychological harm is also psychologically or religiously harmful food (Cleeren et al. 2017). Financial harm, in turn, may be experienced, for example, in the stock market. Coombs (2007) emphasizes that the crisis type, crisis history and previous relationship history are factors which help the company anticipate stakeholders’ reactions and perceptions regarding the crisis and the company.
Moreover, the understanding of stakeholders’ perceptions and reactions to the crisis and the company in crisis, in turn, eases the company’s choice between different crisis response strategies (Coombs 2007).
2.4 Company’s response to crisis
When a crisis occurs, company should know how to respond to it effectively. As defined earlier, crisis response strategies are the actions performed and things said by an organization or a management after a crisis event has occurred (Coombs 2002, 2006, 2007, 2015; Coombs &
Holladay 2002, 2008, 2009, 2014; Laufer & Coombs 2006). Crisis response strategies can be regarded as communicative resources (Coombs 2006) and alternatives available for management when a company is responding to a crisis (Coombs 2015). Coombs (2007) emphasizes that company should consider its stakeholders’ physical and psychical needs first and protect them from harm before it can focus on its reputation. Liu, Liu and Luo (2016) state similarly by saying that the company needs to prevent possible additional damage perceived by the consumers by taking corrective actions. Furthermore, according to Benoit (1997), a company with multiple audiences should prioritize them and pacify the most important one first before concentrating on others. Company’s response to crisis must be in line with crisis type, which means that the effectiveness of the response strategy depends on the nature of brand crisis, and, therefore, it is not optimal to apply the same strategy to every crisis (Dutta & Pullig 2011). The purpose of crisis response strategies is to repair image (Benoit 1997), brand equity (Dutta & Pullig 2011) and reputation along with diminish negative effects and avoid negative behavioral intentions (Coombs 2007). In the case of the optimal crisis response, both reputational and operational threats can be reduced (Coombs 2002).
Based on the theories of crisis response strategies, it can be said that there is no clear consensus about naming and grouping different strategy options. Table 2 presents an overview of different strategies and their groupings applied and/or described in the previous research papers. The
