Under a Cloud: The Impact of Corporate Reputation Harm on Brand Equity and Consumer Value Perceptions (An Abstract)

Abstract

What do Nestle, Apple, Tesla Motors, Shell, Walmart, NFL and FIFA have in common? These companies encountered severe corporate reputational crises due to various reasons. The stories of their crises circulated on social media, compounding the brands’ reputational damage. Such crises often precipitate a range of effects that negatively impact the company’s image and corporate reputation, market share, financial stability, public trust, its brand equity and the way consumers value the brand (Spiteri and Dion 2004). Specifically, the company under a crisis could end up with severely damaged brand equity and customer value perceptions (Spiteri and Dion 2004). Coombs (2000) suggests five types of crisis—corporate misdeeds, health challenges, ethical issues, human errors and technical failures. Although crises cannot be predicted or pre-empted, knowledge on how brand equity and value perceptions change according to the crisis type can help companies in brand communication strategy towards managing reputation following a crisis. Despite the insights provided by stand-alone studies on crisis types (Coombs 2000), corporate reputation (Raithel and Schwaiger 2014), brand equity (Kim et al. 2003) and customer value (Payne and Holt 2001), the relationship between brand equity and customer value perceptions following a crisis is not yet understood. Aiming to address the above gap, the study examines the relationship between brand equity and customer-perceived value dimensions, and customer purchase intentions, for different types of corporate reputation harm. Consistent with previous studies on reputation harm (Dean 2004, Grappi et al. 2013), this study employed a scenario-based quasi-experiment consisting of real-life corporate crises based on the typology provided by Coombs (2000). For data collection, a self-administered questionnaire was designed embedding five different scenarios to represent each crisis type. Prior to the main study, a manipulation check (n = 35) revealed significant differences between the five scenarios. In the main study, respondents included a convenience sample of UK consumers (n = 323) which were evenly distributed between professionals with a degree and postgraduate university students (62 % female, 38 % males, all aged 18+). In order to reveal the differential impact of crisis types on customer value perceptions, Partial Least Squares Structural Equation Modeling (PLS-SEM)-Based Multigroup Analysis was conducted. The study’s findings show there is a significant difference in the relationship between brand loyalty and functional value/price among the different types of crisis. In two out of five crisis types—misdeeds and ethical challenges—the above relationship is significant and positive. The findings also illustrate that across different types of crises, there is a positive relationship between brand loyalty and social value and emotional value. Further, results show differences between the relationship of perceived quality and functional value/price between the crisis types. In particular, there is no significant relationship between the above for misdeeds and ethical challenges, suggesting that these two crisis types influence the consumers’ appraisal and the impact on the perception of value for money. Moreover, the results suggest that there is significant difference in the relationship between emotional value and purchase intention among the different types of corporate reputation crisis. The study makes two important theoretical contributions. First, it investigates the relationship between brand equity and customer-perceived value dimensions in the light of company crises, which has been largely overlooked in extant research. Second, it furthers knowledge on the link between organisational crisis and brand management. The interface of the two streams of literature—brand equity and value perceptions—offers a robust platform for understanding corporate reputation and its impact on a brand’s evaluation following a crisis. From a managerial perspective, given the prevalence of corporate crises, the study’s results are crucial for marketers seeking to design effective brand communication strategies after a crisis.