Something Good Comes out of Crises: An Empirical Study on Responding Strategies to Business Misdeeds: An Abstract

Abstract

While no firm wants a corporate misdeed scandal, firms pay a high price immediately in order to repair the damages. The current study aims to address the following research questions: (1) how consumers react to three major crisis management approaches: the prompt acknowledgement of the misdeed, the response plan to address the misdeed, and the correction plan for the misdeed; and (2) how these approaches impact on current and potential consumers. Particularly, this research examines the influences of these approaches on different types of misdeeds: either product/service performance related (PPR) or business ethics related (BER).

The results from 440 participants suggest that a promptness apology is important for current consumers but not for potential consumers. More importantly, the response plan has less impact on the current consumers when a misdeed is business ethics related than product performance related while the correction plan is more important when a misdeed is product performance related compared with business ethics related misdeeds; for the potential consumer, on the contrary, the response plan has less impact when a misdeed is product performance related than business ethics related.

This research provides a framework for brand managers to craft just-right, just-in-time responses and remedy strategies. It offers brand managers a systematic way to gauge what they should say and do during that hard time. As various response strategies have their own advantages and disadvantages, the findings in the current study suggests that the relative efficacy of remedy strategies depends on the type of business misdeed as well as the status of the consumers in the market. Managers should evaluate the situation to determine which remedy action(s) is the most effective for the situation and then tailor their responses according to the crisis situation.