Rising from the Ashes: How Brands and Categories Can Overcome Product-Harm Crises

Abstract

Product-harm crises are omnipresent in today's marketplace. Such crises can cause major revenue and market-share losses, lead to costly product recalls, and destroy carefully nurtured brand equity. Moreover, some of these effects may spill over to nonaffected competitors in the category when they are perceived to be guilty by association. The extant literature lacks generalizable knowledge on the effectiveness of different marketing adjustments that managers often consider to mitigate the consequences of such events. To fill this gap, the authors use large household-scanner panels to analyze 60 fast-moving consumer good product crises that occurred in the United Kingdom and the Netherlands and resulted in the full recall of an entire variety. The authors assess the effects of postcrisis advertising and price adjustments on the change in consumers’ brand share and category purchases. In addition, they consider the extent to which the effects are moderated by two key crisis characteristics: the extent of negative publicity surrounding the event and whether the affected brand had to publicly acknowledge blame. Using the empirical findings, the authors provide context-specific managerial recommendations on how to overcome a product-harm crisis.