Weathering Product-Harm Crises

Product-harm crises can seriously imperil a brand's performance. Consumers tend to weigh negative publicity heavily in product judgments, customer preferences may shift towards competing products during the recall period, and competitors often increase their advertising spending in the wake of a brand's misfortune. To counter these negative effects, brands hope to capitalize on their equity, and often use advertising as a communication device to regain customers' lost trust. We develop a multiple-event hazard model to study how consumer characteristics and advertising influence consumers' first-purchase decisions for two affected brands of peanut butter following a severe Australian product-harm crisis. Buying a recently affected brand is perceived as highly risky, making the trial purchase a first hurdle to be taken in the brand's recovery. Both pre-crisis loyalty and familiarity are found to form an important buffer against the product-harm crisis, supporting the idea that a brand's equity prior to the crisis offers resilience in the face of misfortune. Also heavy users tend to purchase the affected brands sooner, unless their usage rate decreased significantly during the crisis. Brand advertising was found to be effective for the stronger brand, but not for the weaker brand, while competitive advertising delayed the first-purchase decision for both brands affected by the crisis