Consumer reaction to negative publicity: effects of corporate reputation, response, and responsibility for a crisis event.

Corporate crises often result in negative publicity, threatening the image of the company. The present study investigated the effects of company reputation for social responsibility prior to a crisis event, response to a crisis event, and responsibility for the event on overall consumer regard for the firm. The study is, in part, an experimental test of image restoration strategies conceptualized in the literature. Each of the three factors was found to exhibit a significant main effect. For the crisis scenario used in this Study, responsibility explained the largest proportion of variance and response explained the least. An unexpected finding was that an inappropriate response by a "bad" company resulted in an increase in regard toward the firm, whereas the same response by a "good" company resulted in a decrease in regard for the firm.

Keywords: negative publicity; crisis communication; corporate image; fairness theory; attribution theory

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Corporate crisis is defined as an unexpected, nonroutine event that creates uncertainty and threatens an organization's priority goals (Seeger, Sellnow, & Ulmer, 1998). Examples of recent corporate crises include questionable accounting ethics at Arthur Andersen, alleged defects in tires manufactured by Firestone, and gene-spliced corn contamination of Taco Bell products. Whatever the specifics of the situation, crises typically result in negative publicity, which threatens the corporate image. Managers facing crises may have a number of questions. Will the way the company responds to the negative publicity make a difference? Will the company's reputation for social responsibility (good vs. bad) affect how consumers perceive the response? How will the factor of blame for the event (responsibility) be weighted by consumers relative to the factors of corporate reputation and response to the event? The present study addresses these questions, focusing on the factors of response, reputation, and responsibility. Previous investigations of negative publicity (Ahluwalia, Burnkrant, & Unnava, 2000; Bradford & Garrett, 1995; Dawar & Pillutla, 2000) have not studied these particular factors together, but they appear to constitute an intuitively related set of conditions.

In the current investigation, response, reputation, and responsibility appear as factors in an experimental design. Drawing on the expectations-evidence framework, fairness theory, and attribution theory, predictions of subject response were made. Data were collected sequentially during the experiment after each factor was presented (total of three data collections using the same measures).

BACKGROUND

Negative Publicity

Publicity is generally acknowledged to be more credible and more influential than company-controlled communications (Bond & Kirshenbaum, 1998). Negative publicity, in particular, has the potential to damage corporate image. This is due to its high credibility as well as the negativity effect, a tendency for negative information to be weighted more than positive information in the evaluation of people, objects, and ideas (Mizerski, 1982). Because the media has a preference for reporting bad news (Dennis & Merrill, 1996), companies are more likely to receive bad press rather than positive press.

The Corporate Crisis

Crises often result in negative publicity for corporations. Examples include benzene contamination in Perrier bottled water, racial discrimination by Texaco in the promotion of employees, taco shell contamination with a gene-spliced corn strain at Taco Bell, manufacturing defects in Firestone tires, and the accounting scandal at Arthur Andersen. Whatever the specifics of the event might be, Ulmer and Sellnow (2000) have conceptualized the corporate crisis as raising three important issues. First, the crisis is a threat to the firm's social legitimacy. The corporation will lose social legitimacy if it is seen as being irresponsible, dishonest, breaking the law, or acting in a manner that exhibits little concern for the community. To counter any loss of legitimacy, the organization must reestablish congruency between the values implied by its actions and accepted societal norms. Second, the crisis will result in evidence being scrutinized to determine what happened. This may become a lengthy scientific or legal process. Questions of evidence are often so complex that typical consumers are dependent on the media to interpret the findings of the investigation for them so that their meaning may be comprehended. Third, there is a question of who to blame. The public need to identify cause and assign blame is said to be in direct proportion to the severity of the event and the firm's apparent responsibility for the event (Benoit, 1995). Each of these three issues suggests that corporate communication at the time of crisis assumes strategic importance.

Past Research

Most studies addressing corporate crises have used a case study method, drawing conclusions about what managers should and should not do when they face a crisis situation (for a typical example, see Murray & Shohen, 1992). This literature is somewhat limited in that it does not provide a theoretic understanding of the communication situation during crisis. However, three conceptual perspectives of crisis communication have appeared in the literature (Fishman, 1999). Fink (1986) views the crisis chronologically, characterizing the pattern of crisis communication into four stages (prodrome, acute, chronic, and resolution). This natural history approach offers a comprehensive and cyclical view of a crisis. Benoit (1995) has developed a classification of communication strategies that can be employed during a crisis event to manage the image of the affected organization. Birkland (1997) has looked at the public policy implications of a crisis event. He argues that an event may focus public attention on a particular issue and act as a catalyst to bring about change. All of these conceptualizations of crisis communication are worthy contributions, but there is also a need to isolate factors and quantify effects that may be operative during a crisis. Toward this end, there are three articles of interest that have addressed corporate crises from an experimental perspective.

Bradford and Garrett (1995) investigated the effectiveness of five different corporate responses to a crisis event under each of four different sets of prevailing conditions; the dependent variable was consumer perception of corporate image. The possible responses were (a) no response, (b) denial, (c) offer an excuse, (d) agree that the firm caused the event but argue that the severity of the event is less than publicized, and (e) agree that the event is severe and accept responsibility for the event. The possible conditions were (a) the firm can provide evidence that they committed no unethical action, (b) the firm can provide evidence that they had no control over the event, (c) the firm can provide evidence that the event is less severe than suggested in the media, and (d) the firm accepts responsibility for the event. Across the different conditions, the "accept responsibility" response was found to be the optimal communication strategy.

Dawar and Pillutla (2000) studied consumer expectations about the firm as a moderator of the effects of negative publicity. Drawing from the expectations-evidence framework, these authors argued that identical firm responses would have different effects, depending on consumers' expectations. That is, consumers with a preexisting favorable opinion of a firm now in crisis would discount negative information about the firm, whereas consumers who lacked a preexisting favorable opinion of the firm would draw more negative conclusions. This general hypothesis was strongly supported across three different types of firm response: (a) notice of product defect with apology, recall, and restitution; (b) notice of product defect without apology, recall, or restitution; and (c) no response in the face of negative publicity.

Ahluwalia et al. (2000) investigated consumer commitment to a brand as a moderator of the effects of negative publicity. Commitment was chosen as a variable of interest because it has been shown to play a critical role in determining resistance to counterattitudinal information. The authors argued that low-commitment consumers would exhibit greater attitude changes in response to negative information as compared to positive information (a negativity effect), whereas high-commitment consumers would not exhibit a negativity effect. Support for the hypothesized interaction was found.

THE PRESENT STUDY

The current study focuses on three factors that may affect consumer reaction to negative publicity: company response to the event, company reputation for social responsibility prior to the event, and company responsibility for the event. These three factors appear to constitute an intuitively related set, but they have not previously been investigated together. The first two factors have already been identified in the literature as important in a time of crisis; the third factor was selected for its likely effect on corporate image. For example, the stonewalling response of Exxon in the wake of the Valdez oil spill was found to have contributed to damaging the company's image (Tyler, 1992). On the other hand, the sterling reputation of Johnson & Johnson appears to have aided the corporation during a postmanufacture product tampering and poisoning incident in the 1980s (Murray & Shohen, 1992). Finally, determination that a firm's actions or inactions are directly responsible for a tragic event is likely to severely affect consumer regard for the firm.