Marketing Cluster seminar: Brand Damage from Corporate Social Irresponsibility – Does it Matter and for How Long?
Tediously established brand equity can suffer severely during a brand crisis. Managers understand the threat of a product or service failure to their economic assets and performance. However, they are less concerned about brand damage effects if it relates to news about corporate social misbehavior such as bribery.
The academic literature is rich on product harm crises but not much is known about the effects of corporate social irresponsibility events. This is the focus of this study. Specifically, using an error correction model we conduct a systematic investigation of the dynamic effects of brand crisis events on consumer brand rating based on a unique dataset of 214 crisis events across 12 industries, 69 brands, and 5 years of weekly data. These crises events refer to both product failure and corporate social misbehavior. We estimate the immediate brand damage effect and the duration of the effect. Furthermore, we identify key drivers that show under which conditions a crisis event may develop into a severe brand crisis.
Surprisingly, our results show that overall brand damage is larger for corporate social behavior than for product failure. Furthermore, broader media coverage significantly amplifies the brand damage. But higher brand familiarity/strength serves as a shield to protect brands in the long run. These findings help better forecast the brand image drop during a crisis and give guidance to managers for appropriate reactions.
Marc Fischer (PhD, University of Mannheim) holds the Chair for Marketing and Market Research at the University of Cologne and is affiliated faculty member of the Marketing Discipline Group at UTS Business School, Sydney. His expertise includes the measurement and management of marketing performance, brand management and the optimization of the marketing mix. His articles have appeared in Journal of Marketing Research, Marketing Science, Management Science, International Journal of Research in Marketing, Quantitative Marketing and Economics, Interfaces, and other academic journals. He won the 2009-2010 Gary L. Lilien ISMS-MSI Practice Prize and was finalist for the 2010 Franz Edelman Award competition on achievements in operations research. He has been awarded with the "VHB Best Paper Award 2011", the highest research honor from German Academic Association for Business Research. Dr. Fischer has been co-editor of Business Administration Review since 2013 and department editor marketing of Business Research. In 2001 and 2002, Dr. Fischer suspended his academic career to assume a position as associate at McKinsey & Company. Since then he has been consulting with many firms from diverse industries such as automotive, logistics, media, retail, financial institutions, pharmaceuticals, telecommunications, etc.
In 2010, he joined the Marketing Accountability Standards Board (MASB) in Chicago where he serves on the Advisory Council. Dr. Fischer is member of the advisory boards of cpi consulting (Berlin), YouGov AG (Cologne), and the Center for Brand Management and Marketing (ZMM) in Hamburg. He was executive director of a German-speaking business study program at the State University of Management at Moscow and served as executive director of the Center for Market Research at the Institute for Market and Economic Research in Passau.