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REPUTATION MANAGEMENT

How companies can craft a more appropriate response to a crisis

By our News Team | 2022

Recent baby formula shortage in the US emphasises that businesses need to respond quickly and decisively, academic research finds.

Research led by a marketing professor could help organisations assess how quickly they should respond to negative publicity to help their bottom lines.

Traci Freling, Associate Professor in the Department of Marketing at the University of Texas in the US, is co-author of the paper titled “When Do Product Crises Hurt Business? A Meta-Analytic Investigation of Negative Publicity on Consumer Responses”, which was recently published in the peer-reviewed Journal of Business Research.

Her report synthesizes 30 years of empirical work examining the impact of product crises on consumer evaluations. 

Reputation Management

Photo by Werner Pfennig from Pexels

Prior research suggests that a product crisis will negatively affect consumer responses to that product. Extending this stream of research, the research team shows that the magnitude of negative information effects is dependent on characteristics of the crisis, the product and the target consumers.

“When threat severity is high, and if the product is health-related or directly involved in the crisis, negative publicity is likely to have a lasting impact,” Freling said. “In those instances, businesses need to respond quickly and decisively.”

Freling cited a 2022 baby formula shortage in the US (as a result of the global supply chain crisis compounded by a large-scale product recall) linked to problems at a manufacturing facility. 

Company failed to prepare for negative publicity

The company involved knew back in October 2021 that there was the potential for a problem, but failed to prepare for negative publicity connected to the recall and subsequent plant shutdown, she said.

“Now here we are several months down the road with shortages and panic,” Freling stated. “Given that this crisis is high in threat severity, is health-related and involves a performance-related product failure, our research suggests that Abbott Laboratories should have immediately initiated an aggressively proactive crisis response strategy.”

Freling noted that her research team was not fully able to examine spillover effects in its study, but the baby formula incident shows that competitors, the industry and even governmental organisations can be affected by one firm’s missteps.

According to the research paper, the key steps are to detect trouble early on; diagnose the characteristics of the crisis, product, and consumers; and then determine what action to take when companies find themselves in crisis mode.

Elten Briggs, Chair and Associate Professor in the Department of Marketing at the university, said the paper shows that companies should not approach all product crises the same way.

“Organisations will always be composed of fallible people, so crises are bound to occur,” he emphasised. “The results of this study will help companies to predict and understand how negative consumer reactions are likely to be, so they can craft a more appropriate response when that time inevitably arises.”

Find out more about the paper here.

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