The impact of a product-harm crisis on marketing effectiveness

The impact of a product-harm crisis on marketing effectiveness

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Article ID: iaor20082235
Country: United States
Volume: 26
Issue: 2
Start Page Number: 230
End Page Number: 245
Publication Date: Mar 2007
Journal: Marketing Science
Authors: , ,
Keywords: Brand management
Abstract:

Product-harm crises are among a firm’s worst nightmares. A firm may experience (i) a loss in baseline sales, (ii) a reduced own effectiveness for its marketing instruments, (iii) an increased cross sensitivity to rival firms’ marketing-mix activities, and (iv) a decreased cross impact of its marketing-mix instruments on the sales of competing, unaffected brands. We find that this quadruple jeopardy materialized in a case study of an Australian product-harm crisis faced by Kraft peanut butter. We arrive at this conclusion by using a time-varying error-correction model that quantifies the consequences of this crisis on base sales, and on own- and cross-brand short- and long-term effectiveness. The proposed modeling approach allows managers to make more informed decisions on how to regain the brands’ pre-crisis performance levels.

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