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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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
- Value-related crisis
- Performance-related crisis
- Product-harm crisis
- Corporate unethical behavior
- Moral foundation theory
- Price elasticity
- Product-performance elasticity