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A moderation of business misdeeds on corporate remedy strategies

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Abstract

Firms take various approaches to mitigate the negative impacts from different misdeeds and repair the subsequent damages. By adopting an empirical study, this study examines the moderation role of business ethics related (BER) and product performance related (PPR) misdeeds on the relationship between three crisis remedy strategies and the purchase intentions of both current and potential consumers. The results from 440 participants suggest that a prompt apology is more important for current than potential consumers. However, a response plan has less impact on the current consumers for BER than PPR misdeeds while a correction plan is more effective for PPR than BER misdeeds; for the potential consumer, on the contrary, a response plan has less impact for PPR than BER misdeeds. These findings extend the crisis management literature to the domain of existing and potential consumers in the context of business misdeeds. This research also provides a framework for brand managers to craft just-right and just-in-time remedy strategies.

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Authors and Affiliations

  1. Department of Business Administration, School of Business, The State University of New York (SUNY) at Fredonia, E358 Thompson Hall, 280 Central Avenue, Fredonia, NY, 14063, USA

    Lei Huang

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  1. Lei Huang
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Correspondence to Lei Huang.

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This paper was submitted to The Journal of Marketing Analytics in August 2021 and revised in November & December 2021.

Appendices

Appendix 1: Corporate misdeeds

Product performance related (PPR) misdeeds

While driving his Tesla Model S in Autopilot mode, a Florida driver was killed after a semi-truck made a left turn in front of the vehicle. The crash was the first known self-driving car death and occurred when the Autopilot system failed to notice the white side of the tractor-trailer against a bright sky. The Tesla drove under the trailer, which cut off its roof, then crashed into two fences and a pole. The car's airbags did not deploy. The accident is under investigation by the Florida Highway Patrol, and Autopilot's performance is being evaluated by the National Highway Traffic Safety Administration (NHTSA).

In September 2015, the Environmental Protection Agency (EPA) caught Volkswagen in a scandal that reportedly could cost the company as much as $87 billion. The EPA uncovered that diesel-engine VW models sold in the United States had software installed allowing the cars to falsely pass emissions tests. Since then, VW has admitted to cheating the tests deliberately and revealed that 11 million cars worldwide were fitted with the so-called "defeat device."

Business ethics related (BER) misdeeds

In August 2016, scattered reports of exploding Galaxy Note 7 phones began surfacing on the Internet. Soon after, Samsung delayed shipment of the phones for "quality testing" and later recalled all phones sold before September 15, affecting about 1 million phones. But replacement phones were no better — at least five cases of those phones also exploding were reported at the time. In October, the company announced it would end production of the Note 7 and halt all global sales. It also became illegal to take the phone on airplanes. In December, Samsung says it is issuing a software update to any remaining Galaxy Note 7 phones, which will cause the devices to stop working.

On Feb. 19, 2017 a former Uber employee outed the company for widespread, severe sexual harassment in the workplace, and #DeleteUber started trending on Twitter. Ultimately, at least half a million users deleted their existing Uber accounts and swore off using the service. As a result, Uber suffered a string of high-profile resignations. Vice president for product and growth Ed Baker, company president Jeff Jones, and head of communications policy Rachel Whetstone all resigned in the space of a month.

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Huang, L. A moderation of business misdeeds on corporate remedy strategies. J Market Anal 11, 21–31 (2023). https://doi.org/10.1057/s41270-021-00153-4

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