Using advertising and price to mitigate losses in a product-harm crisis

Product-harm crises are common in today's marketplace and are expected to occur with escalating frequency as products become increasingly complex, product-safety legislation evolves, and always-demanding customers continue to press for more. A product-harm crisis may cause major revenue losses, lead to costly recalls, and destroy carefully nurtured brand equity. Moreover, the crisis may not only be devastating for the affected brand, but also influence the entire category when other brands are perceived as guilty by association. Despite these enormous stakes, marketing managers are often unprepared to react appropriately to product-harm crises. Managers frequently increase advertising support or decrease price in the wake of a product-harm crisis in an attempt to regain lost consumers. Competitors in the same category may also boost advertising expenditures or lower their prices to benefit from the misfortune of the affected brand (s). This article provides insights regarding the effectiveness of these strategies in the wake of a product-harm crisis. The extant literature has shown that the effectiveness of these strategies depends largely on the role of the brand in the crisis affected or not and the characteristics of the crisis. (C) 2014 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.