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The impact of value-related crises on price and product-performance elasticities

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Abstract

Previous research on the impact of corporate crises on customers’ elasticity has largely focused on performance-related crises (e.g., product recalls) and found an increasing price elasticity under these conditions. We investigate whether this result differs for value-related crises that are due to ethical violations, such as the use of child labor or environmental pollution. In line with moral foundation theory (MFT), we propose that value-related crises lead to stronger moral outrage and increased boycott intentions, thereby decreasing price and product-performance elasticities. We first analyze more than 360,000 Facebook user comments in relation to four value-related and four performance-related crises and show that the different outcomes for value- and performance-related crises can be explained according to MFT. Then, through discrete choice experiments, we demonstrate that, in contrast to performance-related crises, price elasticity decreases substantially for a value-related crisis that affects both violating and nonviolating companies. We also show for the first time the impact on product-performance elasticities with similar negative effects as for price. The results are stable even for different product categories, causes of ethical violations, and measurement conditions. As a result, it is more difficult for companies to recover from value- than performance-related crises.

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Notes

  1. https://en.wikipedia.org/wiki/Brent_Spar

  2. https://www.ravenpack.com/data/

  3. https://www.dell.com/learn/us/en/uscorp1/videos~en/documents~dell-social-media-command-center.aspx

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Authors and Affiliations

  1. Assistant Professor of Marketing, Marketing Center Münster, Am Stadtgraben 13-15, D-48143, Münster, Germany

    Raoul V. Kübler

  2. Research Associate, Kühne Logistics University, Großer Grasbrook 17, 20457, Hamburg, Germany

    Michael Langmaack

  3. Professor of Marketing and Innovation, Kühne Logistics University, Großer Grasbrook 17, 20457, Hamburg, Germany

    Sönke Albers

  4. James L. Bayless/William S. Farish Fund Chair for Free Enterprise, McCombs School of Business, The University of Texas at Austin, 2110 Speedway Stop, B6700, Austin, TX, 78712, USA

    Wayne D. Hoyer

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  1. Raoul V. Kübler
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Correspondence to Sönke Albers.

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Kübler, R.V., Langmaack, M., Albers, S. et al. The impact of value-related crises on price and product-performance elasticities. J. of the Acad. Mark. Sci. 48, 776–794 (2020). https://doi.org/10.1007/s11747-019-00702-5

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