Damage from Corrective Advertising: Causes and Cures

Abstract

Corrective advertising can be problematic because it undermines responses both to other products advertised by the corrected firm and to products advertised by second-party advertisers. However, a positive reputation insulates second-party firms from these carryover effects, provided that this reputation is based on an endorsement from an independent regulator. Furthermore, firm responses that include an explanation for the misleading claim prove to be effective in avoiding the negative side effects of correction. These findings add to the correction literature by (1) showing that this form of regulation can have much broader side effects than demonstrated previously, (2) identifying distrust as the mechanism by which these effects occur, and (3) suggesting strategies to protect firms from the negative side effects of correction. The findings also support the defensive consumer distrust model and help define the scope of this model.