Academic journal article Global Journal of Business Research

The Impact of Significant Negative News on Consumer Behavior towards Favorite Brands

Academic journal article Global Journal of Business Research

The Impact of Significant Negative News on Consumer Behavior towards Favorite Brands

Article excerpt

ABSTRACT

This research examines how negative corporate news in the form of a significant product related crisis impacts consumer behavior towards the company's brand. This study analyzed changes in consumer behavior towards favorite brands after a significant product related news event happened to the makers of those brands. The research found that negative corporate news had some adverse impact on aspects of consumer affinity towards favorite brands, as well as other consumer behavior variables including, brand perception, price levels willing to pay, and willingness to purchase..

JEL: M31, M300

KEYWORDS: Brand Equity, Brand Attachment, Brand Image, Consumer Behavior, Negative Corporate News

INTRODUCTION

Brands are comprised of more than a product's name logo, symbol, or slogan. Branding also has an intangible nature that serves as a set of promises to consumers regarding trust, consistency, expectations (Davis, 2002) and performance (Kotier, 1999) of a product or service. So key in consumer behavior, brands are considered the second most important asset of a company - only behind customers (Ambler, 2000; Doyle, 2001; Jones, 2005). Brands can also protect consumers by serving as identifiers of the producers of the products (Bhakar, Bhakar & Bhakar, 2013). A brand's strength has been found to be influenced by consumer perceptions and understanding about what they have learned, observed, understood, and heard about the brand (Keller, 2003). Keller and Lehmann (2006) found that "for customers, brands can simplify choice, promise a particular quality level, reduce risk, and/or engender trust" (p. 74).

However, news about brands and businesses is not always positive. Consumers receive a consistent flow of news about businesses that is less than flattering. Various studies have indicated that negative news about a company can affect consumer perceptions and behavior (Griffin, Babin & Attaway, 1991; Menon, Jewel & Unnava, 1999; Ahluwalia, Burnkrant & Unnava, 2000; Ahluwalia, 2002).

This study focuses on the impact of negative corporate news on consumers whose favorite brands are produced by the businesses that are the focus of the negative publicity. This article includes relevant literature on branding before outlining the research sample and methodology, analyzing the survey results, and finally discussing the findings, research limitations and opportunities for future research.

LITERATURE REVIEW

Brands serve as reminders of a customer's overall past experience with a product (Keller & Lehmann, 2006). As such, past brand experience can serve as an influence on consumer willingness to pay for brands (Bronnenbrg, Dube & Gentzkow, 2012). However, research has found that favorable brand experiences that have developed into brand preference do not always increase a customer's purchase intention of that brand (Mishra & Datta, 2011).

Marketing literature defines the relationship between customers and brands as "brand equity" (Wood, 2000). Silk (2006) defines brand equity as "the positive effect that the brand has on a potential customer of a product - it reflects how much more consumers are willing to pay for a particular brand compared with a competing brand (or with a generic product)" (p. 100). Farquhar (1998) identified that an increase in brand equity also increased the value of the product to the brand holder/maker. From the consumer perspective, the strength of brand equity is determined by the level of consumer reaction to the brand name (Shocker & Weitz, 1994; Keller, 1993). Brand equity is significantly influenced by the level of consumer brand loyalty held towards a product (Khan & Mahmmod, 2012), affects consumer purchase behaviors (Aaker, 1991), and has a positive relationship with brand purchase intention (Aaker, 1991; Chen, Chen & Huang, 2012).

However, levels of brand equity held by consumers towards products and services can and do change. …

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