The Impact of a Product-Harm Crisis on Marketing Effectiveness

Harald Van Heerde (), Kristiaan Helsen () and Marnik G. Dekimpe ()
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Harald Van Heerde: Waikato Management School, University of Waikato, Private Bag 3105, Hamilton 3240, New Zealand
Kristiaan Helsen: Department of Marketing, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong
Marnik G. Dekimpe: Tilburg University, Waarandelaan 2 (P.O. Box 90153), 5000 LE Tilburg, The Netherlands

Marketing Science, 2007, vol. 26, issue 2, 230-245

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.

Keywords: brand management; product recalls; brand equity; marketing and public policy; error-correction models; time-varying parameters; time-series models; missing-data problems; Gibbs sampling methods (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (115)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:26:y:2007:i:2:p:230-245

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