Study of the heterogeneous impact of product-harm events : findings and implications

Abstract

Though the impact of product-harm events on brands has widely been documented, several interesting questions concerning the impact’s heterogeneity still remain: (1) What is behind the difference of the impact of a product-harm event on different brands? (2) What explains the difference of the impact of a product-harm event on different products under the same umbrella brand? (3) How does the impact of a product-harm event on consumers vary along with the extent to which the focal category is necessary to them? (4) If there is any difference between the impact of product-harm events of different natures (an officially confirmed crisis vs. an unverified rumor), what would it be and what explains it? We use a quasi-experimental approach and design three quantitative studies based on a Nielsen dataset on the Infant Milk Formula category covering sales on all hypermarkets in Shanghai, China between 2008 and 2009 when a product-harm crisis and a product-harm rumor happened successively. We address these questions and propose that those differences can be explained by consumers’ high product-quality uncertainty and their reliance on different information to infer products’ quality after a product-harm crisis or a product-harm rumor. We obtain several findings: (1) The differential impact of a product-harm event on different brands can be explained by several kinds of information that effectively signal brands’ quality; (2) Price-Quality cue largely explains the differential impact on products under the same umbrella brand but not the differential impact on brands; (3) The degree of consumers’ reliance on product quality signals is moderated by the extent to which the focal category is necessary to them; (4) A product-harm crisis and a product-harm rumor can differ not only in terms of the degree of impact, but what is more important, in terms of different product quality signals that consumers would rely on.

Date of Award	2013
Original language	English
Awarding Institution	The Hong Kong University of Science and Technology