Though the impact of product-harm events on brands has widely been documented, several interesting questions concerning the impact’s heterogeneity still remain: (1) What is behind the difference of the impact of a product-harm event on different brands? (2) What explains the difference of the impact of a product-harm event on different products under the same umbrella brand? (3) How does the impact of a product-harm event on consumers vary along with the extent to which the focal category is necessary to them? (4) If there is any difference between the impact of product-harm events of different natures (an officially confirmed crisis vs. an unverified rumor), what would it be and what explains it? We use a quasi-experimental approach and design three quantitative studies based on a Niel...[ Read more ]

Though the impact of product-harm events on brands has widely been documented, several interesting questions concerning the impact’s heterogeneity still remain: (1) What is behind the difference of the impact of a product-harm event on different brands? (2) What explains the difference of the impact of a product-harm event on different products under the same umbrella brand? (3) How does the impact of a product-harm event on consumers vary along with the extent to which the focal category is necessary to them? (4) If there is any difference between the impact of product-harm events of different natures (an officially confirmed crisis vs. an unverified rumor), what would it be and what explains it? We use a quasi-experimental approach and design three quantitative studies based on a Nielsen dataset on the Infant Milk Formula category covering sales on all hypermarkets in Shanghai, China between 2008 and 2009 when a product-harm crisis and a product-harm rumor happened successively. We address these questions and propose that those differences can be explained by consumers’ high product-quality uncertainty and their reliance on different information to infer products’ quality after a product-harm crisis or a product-harm rumor. We obtain several findings: (1) The differential impact of a product-harm event on different brands can be explained by several kinds of information that effectively signal brands’ quality; (2) Price-Quality cue largely explains the differential impact on products under the same umbrella brand but not the differential impact on brands; (3) The degree of consumers’ reliance on product quality signals is moderated by the extent to which the focal category is necessary to them; (4) A product-harm crisis and a product-harm rumor can differ not only in terms of the degree of impact, but what is more important, in terms of different product quality signals that consumers would rely on.