When brand commitment no longer protect the brand against the effects of negative publicity

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When brand commitment no longer protect the brand against

the effects of negative publicity

Executive Programme in Management Studies – Marketing track

Student:

Irma de Koning (10475478)

Date:

31-05-2015

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Statement of Originality

This document is written by student Irma de Koning who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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List of tables

Table 1: Result pre-test brand choice ... 24

Table 2: Total sample of participants main experiment and control group ... 32

Table 3: Desciptives of 8 different experimental groups of the sample ... 33

Table 4: Cronbach's Alpha ... 35

Table 5: Mean & std. deviation ... 36

Table 6: Skewness and kurtosis ... 37

Table 7: Correlation matrix... 37

Table 8: Group statistics for performance-related negative publicity and no publicity ... 38

Table 9: Independent Samples Test: impact performance-related negative publicity vs no publicity . 38 Table 10: Group statistics for values-related negative publicity and no publicity ... 39

Table 11: Independent Samples Test: impact values-related negative publicity vs no publicity ... 39

Table 12: Group statistics for performance- and values-related negative publicity ... 40

Table 13: Independent Samples Test: impact performance vs values related negative publicity ... 40

Table 14: Group statistic: variance ratio ... 41

Table 15: Levene's Test of Equality or Error Variances ... 42

Table 17: Two-way analysis of Variance (ANOVA) ... 42

Table 18: Levene's Test of Equality of Error Variances ... 44

Table 20: Two-way Analysis of Variance (ANOVA) ... 45

Table 21: Means type negative publicity vs commitment ... 45

Table 22: Levene's Test of Equality of Error Variances ... 47

Table 23: Two-way Analysis of Variance (ANOVA) ... 47

Table 24: Tests of Between-Subjects Effects: ANOVA ... 49

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Abstract

The research question of this study is to find out when brand commitment no longer protects the brand against the effects of negative publicity. We distinguish between two types of negative publicity: values-related (about company values, e.g. discrimination or environmental pollution) and performance-related (about functional benefits, e.g. product defects). Previous work already investigated the moderating role of brand commitment on performance-related negative publicity and this research extents this previous research by investigating whether brand commitment still protects when the negative publicity is values-related. Further, CSR support is incorporated into this research because we propose that the destructive power of values-related negative publicity is also depending on the way consumers think about values and about social responsibility. We expect that the impact of values-related negative publicity on consumers’ attitude will be higher when consumers’ CSR support is strong, and as a result of this, will decrease the shielding effect of brand commitment. The findings demonstrate that the shielding effect of brand commitment is also present for values-related negative publicity. The results show that consumers with strong CSR support have lower attitude after reading negative publicity than consumers with weak CSR support. It will also be demonstrated that the moderating effect of consumers’ CSR support for the impact of the type of negative publicity on the consumers’ attitude is not significant. In order to search for the limits of brand commitment the effect of brand commitment is also tested for the very challenging combination of values-related negative publicity in combination with consumers with a high level of CSR support. For such a situation, which has not yet been described in literature, the shielding effect of brand commitment is still working.

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1.

Introduction

In 2014 General Motors recalled at least 13.5 million vehicles for various issues this year, 2.6 million of which because of ignition switch problems. The recalls came after the company was put under intense pressure from Congress and federal authorities for its failures to fix the switch issues for more than a decade (Published: Time.com, Juni 5, 2014).

In January 2013 child labour was uncovered in Apple’s suppliers and published in the Sydney Morning Herald (January 27, 2013). Multiple cases of child labour were discovered by an internal audit, including one Chinese company that employed 74 children under the age of 16. It was the latest controversy over the technology giant’s manufacturing methods.

These examples of negative publicity and many others can be devastating for a company, resulting in losses of revenue and market share (Ahluwalia, Burnkant and Unnava, 2000). By means of mass media, negative publicity can reach and influence the attitudes and behavior of numerous consumers. Negative publicity and how companies handle it are among the most important factors influencing consumers’ buying decisions (Ahluwalia et al., 2000).

We have seen numerous examples in the past of brands that were hurt very hard by some kind of negative publicity. A many years record of positive performance apparently can be destroyed very easily and rapidly by negative publicity. One of the reasons why negative publicity carries so much power with it is due to the fact that it is a relatively credible source of information according to the consumer (Bond and Kirshenbaum, 1998). Compared to market driven types of communication, like advertising and promotional campaigns, it appears relatively unbiased (Bond and Kirshenbaum, 1998). Another explanation is given by several authors and is called the “negativity effect” (e.g. Henard, 2002). This is explained by the fact that the vast majority of the information that consumers receive is either positive or neutral in nature and therefore such information lacks diagnostic power and may not actively grasp the attention of consumers. Negative information is relatively unique and usually unexpected. Given this relative uniqueness of negative information, consumers may consider

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7 it to be more informative and diagnostic than the comparable more ordinary positive or neutral information. So, in relation to positive information consumers pay relatively more attention to negative information and negative information tends to remain longer.

The effects of negative publicity on the consumers are not uniform. Nike was hurt seriously by the publication of child labour but despite of recent publications of child labour the sales for Apple reach record levels. General Motors was hurt seriously by a recent recall of cars with faulty ignition switches but certainly not for all car brands sales are hit by recalls. Probably the way consumers process the negative publicity and give weight to it differ. A few studies were dealing with the moderators of the process of absorbing negative publicity. Pullig et al. (2006) described the effects of the brand positioning and the brand attitude certainty in relation with a case of values-related and performance-related negative publicity. Other moderators investigated are thinking type, holistic against analytic (Monga and John, 2008) and source credibility (Griffin, Babin and Attaway , 1991). In a paper of Ahluwalia et al. (2000) consumer commitment has been signaled to have a shielding effect in relation with negative publicity. It was demonstrated in a case study on product related negative news. However, given the negative examples mentioned previously we expect that the negative publicity can be so seriously or effective that the shielding effect of brand commitment will not work anymore. Skowronski and Carlston (1987) found that the perceived diagnosticity of negative information is likely to be higher in the morality domain (e.g. company values) than the ability domain (e.g. product attributes), which leads to greater weighting of negative information in the former domain. So, the findings obtained in the research of Ahluwalia et al. (2000) (in the ability domain) may not be generalizable to negative publicity about company’s values (morality domain). In this research we investigate both types of negative publicity to fill this gap. We expect that the shielding effect of brand commitment will be lower for values-related negative publicity than for performance-related negative publicity because of the proposed greater diagnosticity of the values-related negative publicity.

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8 Another factor that cannot be ignored when dealing with the impact of negative publicity is the receiver of the information, the consumer. The destructive power of values-related negative publicity is certainly depending on the way the consumer think about values and about social responsibility. We expect that the impact of values-related negative publicity on the consumers attitude will be higher for consumers with strong support for Corporate Social Responsibility (CSR) because it strikes them in the heart. It is a violation of the values they consider as very important. In this case they are touched emotionally and even brand commitment will not shield the effect anymore. When they are touched emotionally the counter argumentation mechanism of brand commitment will not work anymore.

Research question

This study will attempt to answer the following research question:

When does brand commitment no longer protect the brand against the effects of negative

publicity? Does it still protect when the negative publicity is values-related and the consumers’ CSR support is strong?

In order to answer this research question, the literature review will answer the following sub questions:

 What is negative publicity and what are the different types of negative publicity?

 What do we know about the effect of negative publicity on the consumers attitude?

 How do consumers process negative publicity?

 What is brand commitment and how does it protect brands against the effects of negative publicity?

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2. Theoretical framework and hypothesis

2.1. Negative publicity

Negative publicity can be defined as: “Noncompensated dissemination of potentially damaging information by providing disparaging news about a product, service, business unit, or person via print, broadcast media or by word of mouth” (Sherrel, Reidenbach, Moore, Wagle and Spratlin, 1985). Such publicity is not under control of the company and is unexpected. Via social media like Facebook, Twitter, blogs and online discussion fora the spread of negative publicity goes very fast. In no time the negative publicity can reach a lot of people and therefore the impact for a brand or company can be enormous. Negative publicity can hurt a company’s reputation and decreases sales (Chevalier and Mayzlin, 2006). Ahluwalia et al. (2000) state that negative publicity can be devastating, resulting in major losses of revenue and market share, it has the potency to damage the corporate image. Therefore it is important to know what the impact is of negative publicity on attitude and which circumstances influences this impact. A few studies were dealing with the moderators of the process of absorbing negative publicity. Almost all of these studies found out that negative publicity affects consumers attitude but not directly. The effect on consumers attitude is always moderated by other variables. In this research the impact of two moderators will be investigated; brand commitment and CSR support. In prior research other moderators have been investigated. Griffin, Babin and Attaway (1991) found that source credibility, firm responsibility and firm history are important factors that influence the attitude of consumers. Higher source credibility leads to a higher change in attitude than a less credible source. Further, they found that when a company was involved in previous negative events, the attitude change was larger. Einwiller, Fedorikhin, Johnson and Kamins (2006) examines the impact of consumer-company identification on the reactions to negative publicity. They found that negative publicity has less impact on consumers who strongly identify with a company than consumers who weakly identify with a company. This effect was only found when the negative publicity was moderate, when the negative publicity was extreme this effect was not found. Pullig,

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10 Netemeyer and Biswas (2006) investigated the effect of prior attitude certainty of the effect of negative publicity on attitude towards the brand. They define attitude certainty as “the reflection of a person’s subjective sense of conviction in his or her attitude, or the extent to which a person believes that his or hers attitude is correct”. They found that consumers with a high prior brand attitude certainty are less affected by negative publicity than consumers with a low prior brand attitude certainty. They explained this effect by how motivated consumers are to get into biased processing. A consumer who has a low prior attitude certainty is less motivated to engage in biased processing and is likely to process the negative publicity in an objective way. A consumer who has a high prior attitude certainty is more likely to perceive the negative publicity as challenging and will engage in biased processing.

Two types of negative publicity: performance-related and values-related

By Pullig et al. (2006) two types of negative publicity are described: performance-related negative publicity and values-related negative publicity. According to Pullig et al. (2006) the performance related negative publicity primarily calls into question the brand’s ability to provide functional benefits (functional = solving consumption problems). For example a product defect or the failure of an automobile part that prompts a recall of that model. Values-related negative publicity does not involve specific attributes that affect functional use but involves social or ethical issues, such as (racial) discrimination, child labour, environmental pollution etc. This kind of negative publicity will have an effect on a brand’s ability to deliver symbolic benefits.

The processing of negative publicity

There is little literature on theoretical insights about consumers reactions to negative publicity. The most famous literature is the investigation of the impression formation literature by Skowronski and Carlston (1987) and Fiske (1980). They investigated how people deal with positive and negative information, especially they investigated the influence of the negative or positive content of a message on the persons’ perception. A common result of these studies is the ‘negativity effect’ in

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11 which greater importance is given to negative than to positive information in the general evaluation of a given object. So, people give more weight to negative than positive information. According to Herr, Kardes and Kim (1991) this aspect has been found in person perceptions as well as in product evaluation context. One reason for the negativity effect is that negative information is considered to be more diagnostic or informative than positive information (Maheswaran and Meyers-Levy, 1990; Skowronski and Carlston,1987). According to Herr, Kardes and Kim (1991) negative information is perceived as diagnostic when a consumer could assign a product only in one category (i.e low quality). When the information has multiple interpretations and could be assigned in multiple categorizations (i.e. high, average and low quality) the information is nondiagnostic. For the first hypothesis we assume that consumers receiving values-related or performance-related negative publicity will have lower attitudes if compared to those receiving no publicity.

Hypothesis 1a: Consumers receiving negative publicity (both values-related and performance-related) will have lower attitudes if compared to those receiving no publicity.

Values-related against performance-related negative publicity

Skowronski and Carlston (1987) found that the perceived diagnosticity of negative information is likely to be higher in the morality domain (e.g. company values) than the ability domain (e.g. product attributes), which leads to greater weighting of negative information if the negative publicity is values-related. According to Skowronski and Carlston (1987) negative publicity in the moral domain (values-related) is seen as more diagnostic because immoral behavior ( - in figure 1 below) is characteristic for immoral companies whereas moral behavior ( + in figure 1 below) can be related to both moral and immoral companies. A company seen as immoral does not act immoral in all situations whereas a moral company cannot be accused for immoral practices. For example a company always acting morally can be degraded to an immoral company in the eyes of customers due to a single case of child labour.

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Figure 1: values-related publicity

In the case of performance-related publicity (the ability domain) it works the other way around, a few positive performances can classify a company as excellent performing. For example an athlete obtaining a few titles during the year amongst several underperformances can still be seen as a champion ( + in figure 2 below).

Figure 2: performance-related publicity

Thus, negative publicity is more diagnostic for values-related publicity than for performance-related publicity. Therefore we expect that the impact on attitude for values-related publicity is larger than performance-related negative publicity which leads us to the following hypothesis:

Hypothesis 1b: Values-related negative publicity has a larger impact on attitude than performance-related negative publicity.

2.2. Brand commitment

In the relationship marketing literature commitment is viewed as a critical characteristic because it is a key psychological force that links the consumer to the selling organization (Fullerton, 2005). Moorman, Zaltman and Deshpande (1992) defined commitment as “an enduring desire to maintain a valued relationship”. Morgan and Hunt (1994) endorsed this definition, they believed that “a committed partner wants the relationship to endure indefinitely and is willing to work at maintaining it.” Hess and Story (2005) define commitment as the consumers’ ultimate relationship disposition

Immoral company Moral company + - + - + + + + + +

Bad Performance Good Performance - - - - - + - + - +

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13 which derives from functional and personal characteristics. The functional characteristic is based on satisfaction which is formed on quality, utility and reliability. The personal characteristic is based on trust which is formed by altruism and integrity. Most of the consumer-brand relationships are based on functional characteristics. For the consumer this relationships provide benefits such as reduced search costs and lower perceived costs. This type of commitment may form first, to develop a personal relationship generally takes longer but is more enduring and usually accompanied by emotional investment and personal attachment to the brand (Burnham, Frels and Mahajan, 2003). When consumers have a personal relationship with a brand, they identify themselves with attributes they recognize in the brand and which are self-defining for themselves (Hess and Story, 2005). This form of commitment is called in literature affective commitment. Shared values, identification and attachment are rooted in affective commitment. Consumers trust and enjoy doing business with a company when they are affectively committed to that company. Commitment can also be rooted in scarcity of alternatives, side-bets and switching costs, in literature this is called continuance commitment or calculative commitment. When consumers experience continuance commitment they are bound to their relational partner because it is difficult to get out of the relationship or they perceive few alternatives. In this research we focus on affective commitment because consumers are free to choose another brand, consumers experience no boundaries to change to another brand. Because of this freedom we belief that affective commitment lies at the heart of a consumer-brand relationship.

Strong consumer-brand relationships are important for companies because high commitment consumers are willing to pay a higher price, recommend the products or services to others, are more forgiving to for example product failures (Story and Hess, 2006), have stronger brand beliefs, more-frequent purchase intentions and greater brand trust (Walsh, 2011). Brand commitment represents a positive attitude towards the brand and is closely related to brand loyalty. Brand loyalty refers mainly to the behavioral perspective while brand commitment refers mainly to the attitudinal perspective. In the absence of a preferred brand, loyal consumers are likely to switch to an alternative brand

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14 while committed consumers will not (Warrington and Shim, 2000). Thus, there are a lot of advantages of strong consumer-brand relationships and therefore companies endeavor great effort to build and contain strong consumer-brand relationships.

Stronger attitudes are known to exhibit greater resistance to negative information that attacks them (Ahluwalia et al., 2000). A primary mechanism to defend someone’s attitude when receiving counter attitudinal information is to counterargue. Ahluwalia et al. (2000) found that high commitment consumers tend to generate more counterarguments than low commitment consumers. Because brand commitment enhances the link between the self and the brand, high commitment consumers alter in biased counter argumentation. They see unfavorable information about their committed brand as a threat to their attitudinal position and are motivated to defend their attitudinal position via a biased response, which will eliminate or diminish the threat (Raju, 2008). Raju (2008) found that this mechanism also occurs when high commitment consumers are faced with competitive advertisement. A high commitment consumer perceives a treat to his or her attitude and is motivated to undermine the position advocated in the advertisement. Thus, consumers who have a positive attitude toward a brand should counterargue the negative publicity related to it and therefore we state in hypothesis 2a that both performance- and values-related negative publicity has less impact on high commitment consumers than on low commitment consumers. This effect is called a shielding effect and is defined in this research as the positive difference in the consumers’ attitude between high and low commitment consumers. This additional positive attitude protects the consumers against the damaging power of negative publicity. It can be regarded as the additional fat of the attitude that protects the brand during bad times.

Hypothesis 2a: Negative publicity (both performance- and values-related) has less impact on high commitment consumers than on low commitment consumers, in other words: brand commitment has a shielding effect on negative publicity.

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15 Alhuwalia et al. (2000) investigated the moderating effect of brand commitment for the change in attitude as a result of negative publicity. They found that low commitment consumers give more weight to negative than positive information because they perceive it to be more diagnostic but they counterargue it any less than the positive information. High commitment consumers extensively counterargue the negative information while supporting the positive information. The high commitment consumers perceived positive information to be more diagnostic than negative information. However, given the negative examples mentioned in the introduction we expect that the negative publicity can be so serious or effective that the shielding effect of brand commitment will not work anymore. Skowronski and Carlston (1987) found that the perceived diagnosticity of negative information is likely to be higher in the morality domain (e.g. company values) than the ability (e.g. product attributes) domain, which leads to greater weighting of negative information in the former domain. The findings obtained in the research of Ahluwalia et al. (2000) (in the ability domain) may not be generalizable to negative publicity about company’s values (morality domain). We expect that the shielding effect of brand commitment will be lower for value-related negative publicity than for performance-related negative publicity because of the proposed greater diagnositicity of values-related negative publicity. Besides this, values-related negative publicity deals with emotions and values and in this way strikes in the heart of commitment that is also an emotional binding with the brand. Because of this, brand committed consumers feel betrayed and counterargue the values-related negative publicity less so that the shielding effect of brand commitment will be lower compared to performance-related negative publicity. This brings us to hypothesis 2b:

Hypothesis 2b: The shielding effect of brand commitment on negative publicity is lower for values-related negative publicity than for performance-values-related negative publicity.

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2.3. Corporate Social Responsibility

Every day the media reports about environmental pollution, the need for environmental protection, the use of animals for testing consumer products, child labour or the conditions in which factory workers in some countries live and work. Ethical and social issues like these force companies to pay attention to this when selling and producing products. Corporate Social Responsibility (CSR) has become a major topic on the agenda of today’s companies. In literature a lot of definitions of CSR are available. For this study the definition of Brown and Dacin (1997) is used: ”the extent to which a firm benefits and contributes to society in positive ways”. Literature showed that CSR initiatives improve a company’s reputation (Brammer and Pavelin, 2006; Turban and Greening, 1997). For example, Sen and Battacharya (2001) showed that consumers respond to CSR through favourable evaluations of the company and its products. Maignan, Ferrel and Hult (1999) demonstrated an increased loyalty of consumers towards the company. Turban and Greening (1997) found that CSR increases company’s attractiveness to prospective employees. Working for socially responsible companies leads to increased organizational identification (Carmeli, Gilat and Waldman, 2007). Orlitsky, Schmidt and Rynes (2003) analysed 52 studies about the relationship between CSR and financial performance and found a positive relationship between CSR and financial outcomes. In other words CSR initiatives leads to more profit and thus are important for companies.

In the previous paragraph it is described that CSR is an important subject in the media and doing CSR may offer a lot of advantages for companies. Of course all this attention and advantages start with the changing behaviour of the consumers over time. Current consumers want to be informed about how products are made and who benefit from their purchases (Bird and Hudghes, 1997). Consumer may boycott companies like Shell (e.g. Niger delta scandal) and Nestlé and this will result in financial losses for the company and confirms the impact of the force of consumers’ social responsibility. Consumers have developed favourable attitudes towards products and companies with socially responsible initiatives (D’Astous and Legendre, 2008). Consumers exposed to be more loyal and have

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17 more positive evaluations of companies who engage in CSR activities (Marin, Ruiz and Rubio, 2008; Sen and Bhattacharya, 2001). In some situations consumers are willing to pay a price premium in order to buy ethical products (Blend and Van Ravenswaay, 1999; Loureiro et al. 2002). Lichtenstein, Drumwright and Braig (2004) found that consumers not only care about their own consumption experience but also consider the general well-being of others. They see themselves as members of a wider community. Consumers avoid buying products from companies that harm society, they actively seek out products from companies that help society (Creyer and Ross, 1997). According to Joyner and Payne (2002) consumers expect companies to behave ethically and are prepared to punish those companies when they do not meet this expectations. According to Basil and Weber (2006) consumers’ CSR support is motivated by altruism, egoism or a combination of the two. Consumers who are motivated by altruism support CSR because of the concern they have for others. Consumers who are motivated by egoism support CSR because of the concern what others think about them. In this research we use the following definition for CSR support: CSR support is the consumers’ personal support for CSR activities and behaviour.

Corporate Social Responsibility and negative publicity

There are two points of view to investigate the relationship between CSR and negative publicity: from the company and from the consumer.

The first is that companies that care about the community may create a kind of brand commitment. Consumers have stronger positive attitudes towards companies that care about the community and engage in CSR activities and build stronger relationships with such companies (Berens, Van Riel and Van Bruggen, 2005). According to Luo and Battacharya (2006) company’s CSR activities protect companies against negative publicity because of greater goodwill with consumers and various stakeholders. CSR stresses a company’s good intensions and in that way protects the company from scrutiny when things go wrong and negative publicity occurs (Peloza, 2006). Klein and Dawar (2004) found that consumers are less likely to blame companies engaged in CSR activities for a product

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18 failure. Maignan, Ferell and Ferell (2005) argue that consumers not only care about their own consumption experience but also take into account the general well-being of other members of the community. Therefore, consumers have stronger positive attitudes towards companies that care about the community and act in a socially responsible way (Luo and Bhattacharya, 2006).

In this research we take the consumers’ point of view and stay neutral about the activities of the company. It is logic to assume that the processing of negative publicity is also strongly depending on the consumers opinion about the subject of the news. We propose that the strength of consumers CSR support can influence the impact of negative publicity on the consumers’ attitude. When taken into account both types of negative publicity we propose that for consumers with strong CSR support, values-related negative publicity has more impact on attitude than performance-related negative publicity because values-related negative publicity deals with subjects and values the consumer finds important thus the impact will be higher. Thus, for hypothesis 3a we propose:

Hypothesis 3a: As stated in hypothesis 1b, values-related negative publicity has a larger impact on attitude than performance-related negative publicity. This difference is larger for consumers with strong CSR support than for consumers with weak CSR support.

Shielding effect of Brand Commitment in case of negative publicity

Taken into account the previous hypotheses, the largest impact of negative publicity is expected for values-related publicity in combination with consumers with a strong CSR support. The question is whether companies with high commitment consumers are still protected in such situations. Will processes like counter argumentation still work when the news deals with subjects that the consumer finds very important, like CSR for consumers with a strong level of CSR support. We will test the impact of brand commitment for this situation by formulating and testing hypothesis 3b. Hypothesis 3b: The level of CSR support has an influence on the shielding effect of brand commitment for different types of negative publicity. When consumers with strong CSR support are confronted with values-related negative publicity the shielding effect of brand commitment will be lower than for consumers with weak CSR support.

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2.4. Conceptual model

The conceptual model of the proposed study is given below:

Summary of hypothesis:

The impact of negative publicity on attitude:

Hypothesis 1a: Consumers receiving negative publicity (both values-related and performance-related) will have lower attitudes if compared to those receiving no publicity.

Hypothesis 1b: Values-related negative publicity has a larger impact on attitude than performance-related negative publicity.

Brand commitment as moderator incorporated:

Hypothesis 2a: Negative publicity (both performance- and values-related) has less impact on high commitment consumers than on low commitment consumers, in other words: brand commitment has a shielding effect on negative publicity.

Hypothesis 2b: The shielding effect of brand commitment on negative publicity is lower for values-related negative publicity than for performance-values-related negative publicity.

Negative publicity Performance-related Values-related Attitude Brand Commitment High/Low H 1 H 2 CSR support Strong/Weak H 3

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20 Consumers CSR Support incorporated:

Hypothesis 3a: As stated in hypothesis 1b, values-related negative publicity has a larger impact on attitude than performance-related negative publicity. This difference is larger for consumers with strong CSR support than for consumers with weak CSR support.

Hypothesis 3b: The level of CSR support has an influence on the shielding effect of brand commitment for different types of negative publicity. When consumers with strong CSR support are confronted with values-related negative publicity the shielding effect of brand commitment will be lower than for consumers with weak CSR support.

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3. Methodology

Empirical research was conducted to test the hypothesis. It is an explanatory research aiming to explain the relationships between variables and moderators. A deductive approach was used, deriving hypothesis from the literature and testing them afterwards.

In this chapter the way the research was executed will be described. Before the start of the main experiment there were a few pre-steps. Firstly, a pre-test was conducted to choose a brand for the main experiment. Secondly, another pre-test was conducted to test which two negative publicities were used in the main experiment. These two steps will be described in the first two paragraphs including the procedure, sample, measurements and results of the pre-tests. After that, the main experiment will be described, including procedure and measurements.

Two experimental groups and one control group

Three different groups were used in this research: two experimental groups and one control group. The sample of the first pre-test was used as control group, the participants did not receive a negative publicity. The sample of the main experiment was used for the two experimental groups. The participants received a values-related or performance-related negative publicity.

Control group No publicity Participants first pre-test Experimental group Values-related publicity Participants main experiment Experimental group Performance-related publicity Participants main experiment

Translation and back-translation

For both the pre-tests and the main experiment the items used in the questionnaire were derived from English papers. Since all participants were Dutch, the original items were translated into Dutch. In order to assure that the contents of the items were unchanged, the translated Dutch items were back translated into English by a second person. A few discrepancies between back translated and

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22 the original items were corrected in the final Dutch version of the questionnaire. After this a few respondents were asked to participate in a pilot to test the questionnaire to make sure that the instructions were clear and the questions are relevant and clear. For example they were asked the following questions: “how long took the questionnaire to complete?”, “How much clear were the instructions?”, “Which questions were unclear?”, Which questions they felt uneasy about answering? ”Was the layout clear/attractive?”.

3.1. First pre-test: Brand choice

3.1.1. Procedure, sample and measurement

In the first pre-test four brands were tested on five criteria. These five criteria were derived from the conceptual framework. The brand chosen for the main experiment should meet these criteria best. The criteria were participants: awareness, commitment, corporate associations, CSR associations and knowledge of negative publicities. Awareness was tested because it is important that the brand tested in the main experiment was well known to most of the participants. Consumer commitment was tested to select a brand with both high and low committed consumers. The chosen brand should have neutral or a little positive corporate associations and neutral or a little positive CSR associations. This neutral or little positive position is needed for the reason that the chosen brand should not have a distinct positioning on both performance or CSR because this will influence the participants opinion in advance. The participants should not have negative publicity associations with the selected brand because otherwise it could be possible that this negative publicity already had influenced the participants opinion. Besides these five criteria attitude was measured in order to have a reference value to measure the effects of negative publicity on attitude within the main experiment. After a brainstorm session four brands were chosen for the pre-test: HEMA, Nespresso, Audi and Ray-Ban. The pre-test was executed with a questionnaire to an independent group of participants. After the introduction to one of the four brands, participants were asked to answer a few questions about that brand according to the five criteria. Besides this, attitude towards that

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23 brand was measured. From the 57 participants who started filling out the questionnaire, 54 participants fully completed the questionnaire (95% response rate). 51% of the participants were man and 49% of the participants were woman. The mean age was between 36 and 45.

To measure awareness two questions from Yoo and Donthu (1999) were asked: “I can recognize X among other competing brands” and “I am aware of X.” This item was measured on a 5-point likert scale (strongly disagree to strongly agree). To measure commitment the 7-point likert scale (strongly disagree to strongly agree) of Fullerton (2005) was used. Three questions were asked: “I feel emotionally attached to X”, “X has a great deal of personal meaning for me” and “I feel a strong sense of identification with X”. To measure Corporate Associations and CSR Association seven questions were asked derived from Berens, Van Riel, and Van Bruggen (2005) which were measured on a 7-point likert scale (strongly disagree to strongly agree). The questions were: “Do you think that X develops innovative products and services?”, “Do you think that X offers high-quality products?”, “Do you think that X offers products with a good price-quality ratio? “, “Do you think X is well managed?”, “Do you think that X employs talented people in comparison with competitors?”, “Do you think that X supports good causes?” and “Do you think that X behaves responsibly regarding the environment?”. The participants were asked if they know negative publicity of the brand (no or yes), and if answered ‘yes’ they were asked to describe the negative publicity. Attitude towards the brand was measured with a scale of Ahluwalia et al. (2000). The participants were asked: “What are your feelings towards X?”. This was measured using four 11-point semantic differential scales (good/bad, beneficial/harmful, desirable/undesirable, nice/awful).

3.1.2. Results

Awareness was tested because it is important that the brand tested is well known to most of the participant. The results demonstrate that all brands have a high score on awareness, so all brands are well known. Audi gives the highest score in this pre-test. A very important parameter is consumer commitment. The selected brand needs to have both high and low committed consumers. This

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24 means that a large standard deviations is needed for the selected brand. The mean should be close to the middle value of the scores (3,5), indicating that both groups are equally present. The results indicate that both Audi and Nespresso meet the selected criteria. In de most optimal situation the value of Corporate Associations is neutral or slightly positive. However, in case of a strong brand this parameter will always be positive. The results confirm these expectations, all brands have a high score with low standard deviation. The HEMA brand is closest to the neutral value of 3,5. In this research the CSR association is more important in comparison with Corporate Associations because the CSR Support of consumers is tested as a moderator. A brand with a neutral CSR association is needed to obtain the most reliable results. Both Audi and Ray-Ban have neutral scores on CSR Associations. For the main research it is needed that there are no negative publicity associations with the selected brand. The results show that only for the HEMA brand 20% of the respondents are familiar with negative publicity. The other brands have a good score on this question.

Taken all these considerations into account Audi has the best scores for the most important parameters. A high standard deviation round the mean for commitment, neutral on CSR, well known to the consumers and no known history on negative publicity. Therefore the Audi brand is selected for the main research (see table 1).

N = 54 Aw aren ess Com mitm ent CA A ss CSR Ass Neg pub licity kno wled ge Nespresso mean 4,36 3,25 5,05 4,07 4% standard deviation 0,88 1,96 1,06 1,24 HEMA mean 4,41 3,33 4,56 4,12 20% standard deviation 0,98 1,78 1,21 0,98 Audi mean 4,56 3,54 5,40 3,70 2% standard deviation 0,67 1,84 1,02 1,09 Ray-Ban mean 4,26 3,15 4,69 3,75 0% standard deviation 0,81 1,68 0,99 0,91

Scale: 5-point 7-point 7-point 7-point

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3.2. Second pre-test: Negative Publicity

3.2.1. Procedure, sample and measurement

A second pre-test was done to test four different negative publicities. The perceived negativity, the perceived upsetting, the type (values-related or performance-related) and the believability of the four negative publicities were measured. For both the values-related as performance-related negative publicity the perceived negativity must be almost the same to control for this difference in the main experiment. This pre-test was executed with a questionnaire to an independent group of participants. The participants were asked to read two negative publicity items from both types about Audi. The participants were asked to determine for each negative publicity item their perceived negativity of that item. Further they were asked to give their opinion of the type of negative publicity, how upsetting the negative publicity was for them and how believable they found the negative publicity. From the 25 participants who started filling out the questionnaire, 23 participants fully completed the questionnaire (92% response rate). 52% of the participants were man and 48% of the participants were woman. The mean age was 35.

To measure the perceived negativity the participants were asked to rate "how favourable or unfavourable was the presented article towards the target brand?". This was measured in an 11-point scale (-5 tot 5) derived from Ahluwalia et al. (2000). To measure how the participants explained the type of negative publicity, the participants were asked three questions derived from Matos and Veiga (2005) who followed the recommendation of Perdue and Summers (1986). The first question was a dichotomous question: “Referred the information to a product defect or to the conduct of the company?” The following two questions were : “Referred the negative publicity to a specific defect in the company’s product?” and “Referred the negative publicity to the company in general and not to a product defect?” To measure if the negative publicities were upsetting and believable four questions were asked derived from Eisingerich et al. ( 2011): “The negative publicity about Audi upsets me”, “I find the negative publicity about Audi upsetting”, “The negative publicity about Audi is believable”

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26 and”I believe the negative publicity about Audi”. These last six questions were measured on a 7-point likert scale.

The participants were given the following four negative publicities: Values-related negative publicity:

News item 1: Onafhankelijk onderzoek heeft aangetoond dat Audi testresultaten over het brandstof

gebruik en CO2 emissie heeft gemanipuleerd waardoor diverse modellen ten onrechte een zuiniger energielabel hebben gekregen. Consumenten worden op deze manier misleid. Een auto met een energielabel A verbruikt zeker 20% minder brandstof dan een auto met een C/D label. Ook de overheid loopt inkomsten mis door de lagere bijtelling die geldt voor schonere auto’s. De auto’s blijken dus minder zuinig en meer milieuvervuilend te zijn dan in officiële publicaties wordt vermeld. Audi wordt voor deze fraude voor de rechter gedaagd.

News item 2: Het Duitse automerk Audi is in verlegenheid gebracht doordat bekend is geworden dat bij

enkele Chinese toeleveranciers van onderdelen de arbeiders onder erbarmelijke omstandigheden moeten werken. De in de VS gevestigde mensenrechtenwaakhond China Labour Watch (CLW) beschuldigt het bedrijf in kwestie van de tewerkstelling van minderjarig personeel en discrimineren van werknemers ouder dan 35 of van bepaalde etnische minderheden. Daarnaast is het gemiddelde uurloon van de werknemers niet meer dan € 0,79 per uur.

Performance-related negative publicity:

News item 3: Ieder jaar onderzoekt de consumentenbond de betrouwbaarheid en

prijs/kwaliteit-verhouding van automerken. De consumentenbond inventariseert het aantal en de ernst van opgetreden automankementen middels een enquête. De Duitse degelijkheid van de Audi gaat lang niet altijd op. Veel modellen van Audi zetten benedengemiddelde betrouwbaarheidsscores neer. Zo heeft Audi opvallend vaak last van problemen met elektronica waardoor Audi rijders een groter risico lopen langs de weg te blijven staan. Aangezien de aanschafprijs van Audi’s relatief hoog is, verwacht men niet dat deze problemen voorkomen bij dit merk.

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News item 4: In een uitgebreide test van het Britse televisieprogramma Top Gear zijn de drie Duitse

topmerken Audi, Mercedes en BMW met elkaar vergeleken voor modellen in diverse prijsklassen. Hieruit blijkt dat het merk Audi het moest afleggen op verschillende fronten ten opzichte van zijn Duitse collega’s die beiden opvallend goed scoorden. De Audi’s hadden met name last van een nerveuze wegligging, een mindere acceleratie en een hoog geluidsniveau. Ook de afwerking van het interieur werd als minder goed beoordeeld ten opzichte van de concurrerende merken Mercedes en BMW. Juist op de kenmerken waarop Audi in het verleden uitblok, scoort Audi nu minder goed.

At the end of the questionnaire participants were thanked for their participation and the participants were informed that the negative publicity was developed for study purposes only and was fictitious.

3.2.2. Results

The participants experienced the values-related negative publicity item 1 as negative and upsetting as the performance-related negative publicities item 3 and 4. The participants considered this publicity as values-related and believable. The participants experienced values related negative publicity item 2 as extremely negative and upsetting. Every participant considers this publicity as values-related. The participants found the negative publicity believable. Values-related item 1: (Mnegative = -2.91 , Mvalues = 6,22, Mupsetting = 4,33 , Mbelievable = 5,22).

Values-related item 2: (Mnegative = -3,43 , Mvalues = 6,48, Mupsetting = 4,80 , Mbelievable = 5,09).

For the performance-related negative publicity item 3 the participants experienced the degree of negativity slightly higher than for performance-related negative publicity item 4 and therefore more comparable with values-related news item 1. The believability and upsetting figures for both items were comparable. Both items were considered as performance-related. . Performance-related 3: (Mnegative = -2,43 , Mperformance = 5,50, Mupsetting = 3,40 , Mbelievable = 5,34).

Performance-related 4: (Mnegative = -2,17 , Mperformance = 5,87, Mupsetting = 3,48 , Mbelievable = 5,07).

For the main experiment performance-related negative publicity item 3 was chosen because the participants experienced this item slightly more negative that item 4. For the values-related negative

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28 publicity item 1 was chosen. Values-related negative publicity item 2 was rejected because it was experienced as too negative in comparison with the performance related news items. For

performance-related negative publicity item 3 and values-related negative publicity item 1 the perceived negativity were mostly in accordance with each other and thus the best choice for the main experiment.

3.3. Main experiment

The main experiment was performed by setting up a 2x2x2 experimental design with two types of negative publicity (values-related/performance-related), two levels of commitment (high/low) and two levels of CSR support (stong/weak). The dependent variable attitude was measured only after the stimulus.

3.3.1. Procedure

The questionnaire was sent by email to the participants and the participants were asked to send the questionnaire to friends, colleagues and family. The questionnaire started with a short introduction about why this survey was executed and the purpose of the research. The participants were told that the research was about their commitment to the brand Audi and their interest in Corporate Social Responsibility. Participation was anonymously and this research involved the personal opinion of the participants. Using the link to start the questionnaire the participants were asked about their commitment to the brand through asking three questions about commitment. After that, they were asked about their opinion about Corporate Social Responsibility. They had to answer five questions about this topic. To avoid interaction between two subsequent questions a few neutral questions were asked between the commitment and CSR questions and the negative publicity. The participants were asked “Do you have experience with different car brands?” and “Do you consider to buy a new car in the next two years?” (yes/no). And two statements; “I am interested in current events about cars” and “Usually I buy a second hand car” (strongly disagree to strongly agree). After that, the participants were randomly assigned to one of the two types of negative publicities: values-related or

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29 performance-related. They read the negative publicity and were asked what their feelings were towards the target brand. They could answer on a 11-point semantic differential scale (good/bad, beneficial/harmful desirable/undesirable, nice/awful). Finally they answered a few control questions about their age, gender, level of education and income. At the end the participants were thanked for their participation and the participants were informed that the negative publicity was developed for study purposes only and was fictitious. Further they were informed that the real purpose of this study was to investigate the impact of negative publicities on their attitude towards a brand. The questionnaire can be found in appendix 1.

3.3.2. Measurements

Independent variable: Commitment

To measure brand commitment Fullerton (2005) used a measure adapted from the Allen and Meyer (1990) organizational commitment scale. Fullerton used a three-item measure for brand commitment “I feel emotionally attached to X”, “X has a great deal of personal meaning for me” and “I feel a strong sense of identification with X”. Participants could express their agreement with the statements on a 7-point likert scale ranging by ‘strongly disagree’ to ‘strongly agree’.

Independent variable: CSR support

To measure CSR support Ramasamy, Yeung and Au (2010) used a five item measure proposed and tested by Maignan (2001). The participants were asked to answer five questions about their socially responsible behaviour on an 7-point likert scale ranging from ‘strongly disagree’ to ‘strongly agree’. The participants had to rate the following statements: 1. “I would pay more to buy products from a socially responsible company”, 2. “I consider the ethical reputation of businesses when I shop”, 3. I avoid buying products from companies that have engaged in immoral actions, 4. “I would pay more to buy the products of a company that shows caring for the well-being of our society” and 5. If the

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30 price and quality of two products are the same, I would buy from the firm that has a socially responsible reputation”.

Dependent variable: Attitude

To measure attitude towards the brand a scale of Ahluwalia et al (2000) was used. The participants were asked: “What are your feelings towards X?”. This was measured using four 11-point semantic differential scales (good/bad, beneficial/harmful, desirable/undesirable, nice/awful). Using these measures, a mean attitude score was computed.

Control variables

As control variables questions were asked about the participants age, gender, income and level of education.

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4. Results main experiment

Before testing the hypotheses, the data obtained was analysed. Descriptions are given of the two groups of the main experiment (participants receiving values-related or performance-related negative publicity) and the control group of the first pre-test (no publicity). For these groups the control variables were used to check for group differences. There will also be a check for the homogeneity of the different subgroups within the main experiment. Additionally the reliability of the scales, descriptive of the mean and standard deviations, the normality of distribution and the correlation were checked for the dependent and independent variables.

4.1. Analysis of results

Sample

From the 376 participants who started filling out the questionnaire, 354 participants fully completed the questionnaire (94% response rate). Besides the control variable age, gender, level of education and income the participants could not skip questions in the questionnaire so there were no missing values than in these control variables. The reason that the frequencies in table 2 deviate from the total responses of 376 stems thus from the missing values in the control variables. 64% of the participants were man and 36% of the participants were woman. The mean age was between 36 and 45 years old. 79% of the participants were highly educated (50% HBO and 29% University). 79% of the participants had an income above 3,000 euro (gross salary). There were no large differences between the group of participants who read the performance-related negative publicity and the group of participants who read the values-related negative publicity. As can be seen in table 2 below equal parts of the respondents received values- and performance-related negative publicity items (177 and 176).

Additionally it is important to compare the composition of the control group with the composition of the experimental groups. In general the age distribution of the two experimental groups and the

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32 control group are comparable. Concerning the gender, the two experimental groups have slightly more male participants. However, it is not expected that this difference will influence the results.

Total group of participants Performance Values Total

Total control group No publicity Gender man 111 63% 115 65% 226 64% 27 51% woman 66 37% 61 35% 127 36% 26 49% total 177 176 353 53 Age 18-25 10 6% 11 6% 21 6% 6 12% 26-35 38 21% 42 24% 80 23% 13 25% 36-45 67 38% 54 31% 121 34% 19 37% 46-55 46 26% 40 23% 86 24% 9 17% 56-65 10 6% 15 9% 25 7% 4 8% 66 > 6 3% 13 7% 19 5% 1 2% total 177 175 352 52 Level of Basisschool 0 0 0

education Lbo, Mavo, Vmbo, Mbo1, 9 5% 6 3% 15 4%

eerste 3 jaar Havo of VWO 0

Havo, VWO, Mbo 2-4 33 19% 24 14% 57 16%

HBO 87 49% 88 51% 175 50% WO, universiteit 48 27% 54 31% 102 29% Anders 0 2 1% 2 1% total 177 172 349 Income < 500 4 3% 0 0% 4 1% (gross 501 - 1000 3 2% 1 1% 4 1% salary) 1001 - 2000 4 3% 7 4% 11 4% 2001 - 3000 26 17% 20 13% 46 15% 3001 - 4000 44 29% 51 32% 95 30% 4001 - 5000 41 27% 36 23% 77 25% > 5001 32 21% 44 28% 76 24% total 154 159 313

Table 2: Total sample of participants main experiment and control group

Group differences main experiment

The experiment was performed by setting up a 2x2x2 experimental design with two types of negative publicity (values-related/performance-related), two levels of commitment (high/low) and two levels of CSR support (stong/weak). Thus, eight different groups will be compared with each other. In order to avoid bias of the groups the characteristics of the groups should be rather similar. Therefore, the next step is to determine whether there are differences between the participants of the different groups in the control variables gender, age, level of education and income. In table 3 the characteristics of the different groups are presented. The reason that the frequencies in table 3 deviate from the total responses stems from the missing values in the control variables. Further, in

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33 the high/low commitment groups and in the strong/weak CSR support groups there are also less number of respondents than the total amount of respondents of 354. This is caused by the 25 neutral scores. Neutral means not a high or low commitment consumer or a consumer with no weak or strong CSR Support. The level of commitment was established as follows. Participants above four of the point scale were categorized as high commitment consumers and participants below 4 of the 7-point scale were categorized as low commitment consumers. Participants with 4 are neutral and were excluded of this research. There were fifteen participants with a neutral commitment score. The level of CSR support was established in the same way. Participants above four of the 7-point scale were categorized as strong CSR support consumers and participants below 4 of the 7-point scale were categorized as weak CSR support consumers. Participants with 4 are neutral and were excluded of this research. There were ten participants with a neutral CSR support score.

Performance (N=177) Values (N=177)

HIGH Commitment LOW Commitment HIGH Commitment LOW Commitment

(N=61) (N=109) (N=64) (N=105) Strong CSR Support (N=38) Weak CSR Support (N=23) Strong CSR Support (N=88) Weak CSR Support (N=19) Strong CSR Support (N=41) Weak CSR Support (N=20) Strong CSR Support (N=75) Weak CSR Support (N=25) Gender man 27 71% 11 48% 53 60% 13 68% 29 71% 8 40% 46 62% 29 74% woman 11 29% 12 52% 35 40% 6 32% 12 29% 12 60% 28 38% 10 26% total 38 23 88 19 41 20 74 39 Age 18-25 2 5% 6 26% 16 18% 2 11% 2 5% 3 15% 2 3% 6 13% 26-35 6 16% 6 26% 36 41% 7 37% 8 20% 8 40% 15 20% 15 33% 36-45 19 50% 5 22% 25 28% 3 16% 14 35% 4 20% 23 31% 11 24% 46-55 10 26% 5 22% 7 8% 5 26% 9 23% 4 20% 21 28% 8 18% 56-65 1 3% 1 4% 4 5% 2 11% 3 8% 1 5% 5 7% 5 11% 66 > 4 10% 8 11% total 38 23 88 19 40 20 74 45 Level of Basisschool education

Lbo, Mavo, Vmbo,

Mbo1, 1 3% 6 7% 1 5% 3 8% 2 3% 1 2%

eerste 3 jaar Havo of VWO

Havo, VWO, Mbo 2-4 3 8% 5 22% 20 23% 4 21% 4 10% 4 20% 13 18% 5 11% HBO 19 50% 14 61% 36 41% 12 63% 14 35% 10 50% 35 48% 31 69% WO, universiteit 15 39% 4 17% 26 30% 2 11% 18 45% 6 30% 22 30% 8 18% Anders 1 3% 1 1% total 38 23 88 19 40 20 73 45 Income < 500 1 3% 1 5% 2 3% (gross 501 - 1000 1 5% 1 1% 1 7% 4 6% salary) 1001 - 2000 2 9% 1 1% 1 7% 3 9% 6 9% 2001 - 3000 4 11% 5 23% 14 19% 3 20% 5 14% 6 30% 21 32% 9 20% 3001 - 4000 9 26% 5 23% 19 25% 6 40% 8 23% 8 40% 14 22% 17 39% 4001 - 5000 10 29% 5 23% 22 29% 3 20% 9 26% 2 10% 20 31% 8 18% > 5001 11 31% 3 14% 16 21% 1 7% 10 29% 4 20% 0% 10 23% total 35 22 75 15 35 20 65 44

When brand commitment no longer protect the brand against the effects of negative publicity