The Impact of a Product-Harm Crisis on Marketing Effectiveness

Authors:
Harald Van Heerde;Kristiaan Helsen;Marnik G. Dekimpe
Affiliations:
Waikato Management School, University of Waikato, Private Bag 3105, Hamilton 3240, New Zealand;Department of Marketing, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong;Tilburg University, Waarandelaan 2 (P.O. Box 90153), 5000 LE Tilburg, The Netherlands
Venue:
Marketing Science
Year:
2007

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Abstract

Product-harm crises are among a firm's worst nightmares. A firm may experience (i) a loss in baseline sales, (ii) a reduced own effectiveness for its marketing instruments, (iii) an increased cross sensitivity to rival firms' marketing-mix activities, and (iv) a decreased cross impact of its marketing-mix instruments on the sales of competing, unaffected brands. We find that this quadruple jeopardy materialized in a case study of an Australian product-harm crisis faced by Kraft peanut butter. We arrive at this conclusion by using a time-varying error-correction model that quantifies the consequences of this crisis on base sales, and on own-and cross-brand short-and long-term effectiveness. The proposed modeling approach allows managers to make more informed decisions on how to regain the brands' pre-crisis performance levels.