PublishedVersion MarchesterSchool June2024 AllCorrect

2020

In this study, we use the announcement of the Volkswagen emissions scandalon September 18, 2015, as an exogenous shock to measure consumers’ willing-ness to pay (WTP) for brand reputation. Only Volkswagen diesel cars producedin2009-2015were announced as emissions violators. Using eBay car auction data,we estimate the impacts of the scandal on the prices of Volkswagen emissionsnon-violatingcars. Our difference-in-differences estimates show that final bid prices decreased by 14% and 9% in diesel and gasoline car markets, respectively, whichpurely reflected a decline in consumers’ WTP for Volkswagen’s brand reputation.Additionally, the difference in price-drops between the violating and non-violating diesel cars is statistically insignificant. This may be due to the fact that consumers rationally adjust their WTP by expecting compensation which will almost surely be provided by Volkswagen for violating models.

This paper examines the effect of scandalous news on corporate reputation of rival firms from the same industry and investigates the effects' differences in China and in Europe, providing evidence that scandalous news influences not only the target company itself, but also other companies from the industry. For this purpose, the paper uses the 2015 Volkswagen emissions scandal as a natural experiment. Volkswagen, BMW, Mercedes-Benz, Audi and Porsche were selected as sample companies. To measure reputational spillover effects, cumulative abnormal stock returns and sales growth of the sample companies are calculated and compared before and after the announcement of the scandal. The methodology adopted for estimating stock returns is the event study method, which measures the impact of a specific event on the value of a firm. Stock price data is collected from Bloomberg and used to calculate cumulative abnormal returns of the sample companies. Furthermore, difference-indifferences estimation is used to compare the sample companies' sales growth before and after the scandal. Volkswagen, Audi, BMW and Mercedes-Benz are included in the treatment group, whereas 29 non-German car manufacturers were selected as the control group. The results show that overall rival companies were affected by the scandal, cumulative abnormal returns declined by 6% and 10% for BMW and Mercedes-Benz respectively, showing the contagion effect. However, the sales growths of these two manufacturers greatly increased, specifically on the Chinese market for Mercedes-Benz and on the European market for BMW, proving dominance of the competitive effect and differences of the reputational spillover effects across countries.

Journal of Advertising Research, 2007

This study focuses on the effects of news and advertising expenditures on corporate reputation. Both advertisement expenditures and the tone (or tenor) of business news exert a positive influence on corporate reputation. In addition, advertising expenditures were found to magnify the effects of the tone of the news. In particular, moderately educated customers are susceptible to the tone of the news. These research results follow from a repeated yearly survey regarding the corporate reputation of 10 focal companies, and from advertising expenditures and a daily content analysis of the tone of the news in the media used by the respondents. Because advertisements magnify the effects of negative news, negative news renders advertisements unfit, especially for moderately informed consumers. The research results suggest that advertisers should wait for a storm of negative news to subside before advertising. They may monitor word of mouth to anticipate such a storm.

This article investigates how individual differences affect consumer responses to corporate advertising during a corporate crisis. Study 1, based on qualitative data, showed brand ownership, involvement with the crisis, and news media exposure were important factors in understanding consumer response toward the crisis and the company. Study 2, a survey, empirically demonstrated that prior attitude toward the company was the most critical factor affecting advertising-related behaviors. The study further suggested consumers of the brand were more likely to view the company favorably, to know more about the company, and to be more involved in their following of the crisis.

Journal of Marketing, 2015

Product recalls tend to damage the stock price of the recalling firm. This article proposes and empirically demonstrates that adjustments to prerecall advertising spending can be used as a tool to moderate this financial damage. Using data on automobile recalls and detailed advertising expenditures from 2005 to 2012, the authors show that adjustments to a firm's prerecall advertising expenditure can either mitigate or amplify the negative effect of the recall on stock market value, depending on the direction of advertising adjustment and the recall characteristics. Boosting ad spending before a recall announcement softens the stock price loss when the recall involves a newly introduced product with a minor hazard but sharpens the loss when the recalled product is an established model with a major hazard. Cutting prerecall advertising worsens the stock price loss when the recall involves a new product, regardless of the hazard. This research also reveals that in product-harm cris...

This book focuses on the impact of media coverage and advertising on the reputation of companies and sectors. Seeing that this type of research is still in its infancy, a scientific journey has been undertaken across the different fields of political communication, corporate reputation, marketing, and advertising. The empirical part of this book is based on analysis of the news and the reputation of eight large Dutch companies and two sectors. The results reveal how different types of news and advertising intensity influence a companys reputation. In this book scholars will find an exciting extension of agenda-setting theory that opens new research frontiers. Business professionals will find important insights and evidence about the role of mass communication in the world of commerce and finance. For both audiences, Does success breed success? is the opening gambit for new perspectives on the powerful role of mass communication in the world of business.

International Journal of Marketing Studies

This case study focuses on effective marketing communication activities in a post-crisis period. The phenomenon underpinning the investigation is image repair theory which provides effective communication strategies to overcome these events. The case in point was the emission scandal faced by Volkswagen (VW) in 2015. By implementing a qualitative approach to data collection and analysis, the results showed some correlations between effective public relation activities and the company’s share price. Nevertheless, sales figures showed a negative attribute due to the unstable position of the company in the post scandal period. Results also showed a positive pattern when VW responded to the emission scandal in the early days, providing some strategies to stakeholders such as, mortification, reducing offensiveness and corrective action. However, it can be said that this study is an initial step which provides some indications for future research concerning the effective implementat...

Business Horizons, 2006

Journal of Marketing, 2013

Product-harm crises are omnipresent in today's marketplace. Such crises can cause major revenue and marketshare 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.