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MKT 452 - Special Session
Crisis Management / Brand Building
Prof. John Stockmyer
Typical Crisis Mangement “Expert” Reaction
Crisis Management !!!
• What companies are supposed to do (common wisdom) following a product crisis
• Where this “common wisdom” came from
• Some newer thinking on crisis management
Crisis Management Model*
• Get a crisis management team in place before a crisis.
• Quickly (within 24 hours) acknowledge the problem and show concern.
• Voluntarily recall all harmful products if there is a perceived threat.
• Provide direct information about harm to consumers.
• Increase promotional efforts after the crisis has passed.
Adapted from Siomkos and Malliaris (1992):
* Still widely accepted, but being seriously questioned by some researchers
Source of the C/M Model
• Anyone remember the Tylenol incident?• Cyanide / 7 deaths / 1982• “Experts” of the time wrote off Tylenol…
• What did Johnson & Johnson do?• Crisis Management Model• Tylenol back to full market share
within 1 year
What got me interested in C/M
• Summer of ‘93 - Principles of Mktg.– Pepsi “Crisis”
• Pepsi didn’t do a recall (or even admit fault)
• Many cases violate “Common Wisdom”– market share almost always came back
(or more) no matter what the company did
• Stove-Top / Coca-Cola, etc.
“Alternative” C/M Research
• Following a company crisis incident:*• Timing of company response (Media) NOT
significant to purchase intent
* Jorgensen - 1996 Advances in Consumer Research
• Following a No-Fault tampering incident:*
• N/S link between Product Recall and Perceived Risk of continued product use
• N/S link between Product Recall and Repurchase Intention
• Brand Loyalty drove the results. . .
“Alternative” C/M Research
* Stockmyer - 1996 Advances in Consumer Research
Following a tampering incident, consumers who are loyal to the brand: *
• Rate the brand as more deserving of their business
• feel more sympathy for the brand• report higher PI for the brand• perceive less risk associated with
continued use of the brand– Consumer comment on next slide
* Stockmyer - 1996 Advances in Consumer Research
Sample Consumer Comment(after acetaminophen metal shavings incident of 2006)
Implications of “Alt.” Research
• Complex Issue (Case-by-Case basis)
• Don’t do a recall unless really necessary– Extremely costly / Doesn’t reduce risk/PI
• Don’t give in to terrorists• Brands with brand-loyal customers given
benefit of doubt (again and again)– BUILD THE BRAND!!!
• Brands without brand loyal customer have extreme difficulty recovering from crisis…
“Alternative” Research Becoming More Mainstream
• Cleeren, Dikimpe and Helsen (2008)– Journal of the Academy of Marketing
Science– “To counter the negative effects of a product-harm crisis,
brands hope to capitalize on their equity, and often use advertising as a communication device to regain customers' lost trust.”
• Coombs and Holladay (2006)– Journal of Communication Management
“The prior reputation can create a halo effect that protects an organization during a crisis. The prior reputation/halo might work as a shield that deflects the potential reputational damage ... “
“Alternative” Research Becoming More Mainstream
• Chen, Ganesan and Liu (2009)– Journal of Marketing
– “… proactive strategies have a more negative effect on firm value than passive strategies.”
– “When a firm proactively manages a product recall, the stock market infers that the consequence of the product-harm crisis is sufficiently severe that the firm had no choice but to act swiftly to reduce potential financial losses.”
Final Thoughts:
• When a crisis happens, ask yourself two questions:
1) Can we take action that will help prevent/minimize harm to consumers?
2) Can we take action that will help prevent/minimize harm to the Company/Brand Image?
What happened to Valu-Jet?
What happened to Valu-Jet?
James Lewis
• Man convicted of attempted extortion (J & J)