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.
* Still widely accepted, but being seriously questioned by some researchers
Adapted from Siomkos and Malliaris (1992):
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
“Alternative” C/M 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. . .
* 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)