Research Article
The Effects of Brand Scandal Types and Consumer Thinking Styles on Scandal Spillover Effects for Firms and Competitors
1 Hongik University, 2 Virginia State University
Published: January 2013 · Vol. 42, No. 4 · pp. 875-897
Full Text
Abstract
Product-harm crises, or brand scandals, significantly decrease consumer preferences and purchases for the scandalized brands and their families as well as their competing brands. Given the devastating effects of product-harm crises and the increasing number of product recalls recently, research has demonstrated that consumers engaged in different systems of thought are more or less susceptible to negative brand publicity (Monga and John 2008). Extending prior work, we investigate how the specific content of a brand scandal moderates the effect that thinking style has on the scandal’s spillover. We propose that whether the nature of the brand scandal is extrinsic or intrinsic to the product’s performance and quality determines the degree to which analytic and holistic thinkers get affected by the negative information. Extrinsic content is a case where the issues pertinent to a brand scandal are more social and values-related in nature, whereas in the case of intrinsic content, the issues are primarily related to product defects. We argue that whether the contents of negative brand publicity are intrinsic or extrinsic to the product itself determines the degree to which individuals process the negative information as a focal point versus a context and that this relative difference in attention subsequently affects the type of judgment bias they make. Holistic thinkers tend to focus more on relationships among objects and events and analytic thinkers attend more to a discrete focal point away from its context (Nisbett et al. 2001). These distinct differences between holistic versus analytic Thinking Styles lead us to predict that when negative publicity is directly associated with issues intrinsic to the product itself (for example, poor product quality or risks of injury threatening consumer safety), the focal components of negative publicity become more salient, and thus analytic thinkers might make more biased judgments for the scandalized brand than holistic thinkers might. Monga and John(2008) confirmed this argument by showing that when participants were presented with negative publicity about a new car with manufacturing problems, analytic thinkers were prone to more biases than holistic thinkers. We argue that if the brand scandal’s content is extrinsic, it should lead to the opposite results. When negative publicity is not directly associated with the product itself, but related with issues extrinsic to the product (for example, manufacturing process causing a water pollution or recent Tiger Woods’ multiple mistress scandal linked with brands using him in their ads), consumers would attend more to the contexts of the brand scandals than the focal points of the scandalized brand itself, thus it leads to more biased judgments of holistic thinkers. We begin our hypothesis testing by demonstrating the effects of holistic versus analytic Thinking Styles on brand scandal spillover in a fictitious situation where a brand scandal is extrinsic to the brand itself (Study 1a). Next, we investigate the moderating role of thinking modes on the effects of scandal spillover involved with the negative publicity intrinsic (Study 1b) to the brand. Finally, we consider the content of the scandal as a factor and test the effect of the interaction between the content of the scandal and consumers’ thinking style on scandal spillover (Study 2) Across the two lab experiments, we demonstrate that holistic thinkers are more susceptible to brand scandal spillover when the nature of the brand scandal is extrinsic to the scandalized brand, whereas analytic thinkers become more susceptible when it is intrinsic. In Study 3, we confirmed the effect of thinking style moderated by the content of brand scandal on scandal spillover using stock prices of the scandalized brands. We collected intrinsic and extrinsic brand scandal news in Korea, Japan, and the United States and investigated the stock price changes before and after the brand scandals. The event study results confirmed that in holistic culture such as Korea and Japan, scandalized firms’ stock prices get affected when the content of the scandal is extrinsic, whereas in analytic culture such as the United States intrinsic brand scandals affect the stock prices of scandalized firms. The results support our findings on the scandal contents’ moderating role on the effect of thinking style on scandal spillover from Study 1a, 1b and 2.
