Public brand scandals & their effects on of consumers' brand loyalty

PUBLIC BRAND SCANDALS & THEIR EFFECTS ON

OF CONSUMERS’ BRAND LOYALTY

Case Study: 2017 Uber

June 23

₂₀₁₇

Master thesis author: Miguel Moscoso

Student Number: 11375434

Digital Business Track

Under the supervision of: Ruben de Bliek

Keywords: brand loyalty, corporate scandals, peer-to-peer transportation

Statement of originality

This document is written by Miguel Moscoso 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 creating it.

The Faculty of Economics and Business is responsible solely for the supervision of

completion of the work, not for the contents.

AKNOWLEDGMENTS

“Scandal: an occurrence in which people are

shocked and upset because of behavior that is

morally or legally wrong”

Table of Contents

Abstract

6

1. Introduction

7

2. Theoretical Framework

12

2.1 Corporate scandals and the consumer perspective

12

2.2 Corporative scandals effects on brand and brand loyalty

16

2.3 Oliver’s framework on brand loyalty

18

2.3.1 Cognitive loyalty

19

2.3.1.1 Brand axperience and satisfaction

20

2.3.2 Affective loyalty

22

2.3.3 Conative loyalty

25

2.3.4 Action loyalty

27

2.4 Satisfaction vs. Loyalty

28

2.5 Further expectations in the Uber case study

29

3. Research Design

33

3.1 Hypotheses and research questions

33

3.2 Methodology

40

3.2.1 Data collection

40

3.2.2 Interview design

42

3.2.3 Data analysis

43

4. Results

45

4.1 Group 1

48

4.1.1 Cognitive Loyalty

48

4.1.2 Affective loyalty

49

4.1.3 Conative loyalty

51

4.1.4 Action loyalty

52

4.2 Group 2

54

4.2.1 Cognitive Loyalty

54

4.2.2 Affective loyalty

55

4.2.3 Conative loyalty

57

4.2.4 Action loyalty

58

5. Discussion & Conclusions

60

5.1 Cognitive Loyalty

62

5.2 Affective loyalty

65

5.3 Conative loyalty

67

5.4 Action loyalty

69

6. Managerial Implications

72

7. Limitations & Further Research

73

References

76

Interview Protocols

79

Interviews Coding

81

ABSTRACT

This study provides evidence for the impact of current snowballing corporate

brand scandals on brand loyalty. In order to understand how consumers, react

on scandals, the four-stage framework of brand loyalty developed by Oliver

(1999) has been applied. Oliver’s framework consists of four layers of loyalty:

cognitive, affective, conative and action loyalty, the achievement of this four is

what Oliver described as ‘true loyalty’. The qualitative research obtained through

in-depth interviews presented by this work clearly indicates examples of different

combinations and interrelations of loyalty layers among different consumers when

they have been exposed to corporate scandals. It also displays the influence of

consumers’ ethical beliefs and the core importance of a satisfaction mix: price,

quality and convenience for customers to stay loyal to a service or product

regardless of their affective reaction towards a corporate brand.

1. INTRODUCTION

This thesis investigates the effects of public corporate scandals on consumer’s

brand loyalty. The relationship between brands and their consumers is very

complex and many different factors shape this relationship. These factors are

influential on consumer’s loyalty. By looking at current scandals affecting a

specific tech brand, I will analyze the key layers of brand loyalty proposed under

the Oliver’s framework (1999) and which includes cognitive, affective, conative

and action loyalty. It is important to understand how, when scandals occur,

various factors or drivers affect consumer’s perceptions, feelings, attitudes and

behavior towards one brand and ultimately affecting overall the brand loyalty.

When working on this research about the four stages of loyalty by Oliver (1999),

one of the core relationships that is part of the consumer-brand interaction is the

one between satisfaction and loyalty, I will explore this relationship in the following

chapters.

Throughout this paper, I focused on the consumer’s perspective as the primordial

standpoint to understand brand loyalty. On a theoretical level, this study digs into

the four stages of Oliver’s model that lead to ‘true brand loyalty’ (1999) towards

a brand. On a practical level, this research assesses the changes (if any) of

consumer’s perceptions, feelings, attitudes and behavior towards a

product/service as results of interplay of brand related scandals.

I will put emphasis on how public scandals affect pioneer contemporary leader

brands and how brand loyalty can be damaged or stay intact after scandals

occur with this type of brands. It is important for business managers to understand

how consumers are reacting when a top-of-mind brand in a product category is

damaged by corporate scandals. Through an in-depth qualitative analysis, I

explored the main factors that drive customers to take the decision to drop their

loyalty to a brand, or to remain loyal to the product and service despite public

scandals and the negative image that degrades the brand. I took into

consideration the different backgrounds of consumers and their reactions when

a brand that they actively (or formerly) use is facing these scandals.

This case study is inspired in the recent chain of events sparked with scandals

related to the

online transportation network company

Uber. The recentness of the

Uber scandals allowed me to ‘report-live’ on this case study. In the case of Uber,

Uber rides are still convenient and inexpensive; Uber itself, however, is no longer

quite as popular. It is a great contribution for marketers to study different reactions

among different consumers and the sublayers that can be explored when

measuring brand loyalty. These vary between the satisfaction/loyalty structure,

consumers’ ethical believes and furthermore, the lack of competitors that still

exists in that industry. From previous research, we know that scandals affect

consumer’s loyalty to different degrees, but the paradox of a snowball of

scandals recurring with a brand that disrupted an industry and still is considered

first-of–its-kind has not been studied yet. Uber seems to have a market dominant

association as the first brand to introduce a service (think Facebook, Airbnb or

even Kleenex) and still the only brand offering this service in various parts of the

world.

Some of the first questions that inspired me to work in the case of Uber were: does

loyalty need to rely in the brand as whole or in the quality of product and service?

If a brand is involved in an unethical public behavior, but the product and service

are satisfactory, do consumers stay loyal? Or even so, when a brand is still unique

in a certain market, can a scandal really disrupt consumers’ loyalty?

Uber scandals in 2017

A company founded in 2009, Uber is the pioneer transportation network that

disrupted the industry of public transportation in a sharing economy model. Since

its launch, Uber has experienced long-lasting resistance by taxi unions and the

public in general. This year, Uber entered its largest brand-related crisis with

corporate scandals that have uninterruptedly gotten constant first-page media

attention.

In January of 2017, a few days after a meeting between Uber’s CEO and founder

Travis Kalanick with President Donald Trump, thousands of demonstrators

gathered outside of John F. Kennedy airport in New York to protest President

Trump’s immigration ban (The Atlantic, 2017). Consequently, the New York Taxi

Workers Alliance also condemned the ban and responded with a strike ordering

its 19,000 dominantly Muslim members to stop taking rides. Uber strongly minimized

the effect of this strike by continuing operations and this action infuriated the

public which responded by creating the hashtag #DeleteUber (Fortune 2017).

One month later, a former Uber female engineer published an online blog making

public her disgraceful experience with sexual harassment during a year of work

at Uber (Fowler, 2017). She unmasked the lack of ethics of the company’s human

resources department at handling her formal complaints and the news went viral

worldwide. A third scandal surfaced when a video of Kalanick arguing and

swearing at an Uber driver was uploaded on YouTube (Bloomberg 2017) and also

went viral in a matter of hours. The Uber scandals have been snowballing into a

major brand crisis in which an in depth study could help achieve a better

understanding of the consequences on Uber’s business. These public scandals,

related to Uber, were widely exposed and caused different reactions by a large

portion of people, including its loyal clients. Uber has the urgent need of putting

its high executives to work full hands-on crisis management.

In order to study the Uber case, relevant concepts of branding and loyalty need

to be understood, relying on recent literature and evidence-based accounts. This

includes a multilayer conceptualization of brand loyalty. These theoretical

concepts, with strong practical implications, will serve as a basis for the analytical

framework of this thesis. The main research interest of this thesis is to assess what

really happens with the relationship between a brand and consumers (loyalty)

when a disruptor (scandal) or unethical conduct occur. This case study obtained

deep immersion on consumers’ reactions and other elements around such the

ethical beliefs of consumers and how these sometimes interplay around the

scandal.

The Uber scandals case can be compared to previous research and studies done

on corporate scandals among long-existing brands and emerging markets.

However, this master’s thesis will be the first to address the issue of corporate

scandals within a digital platform brand that was the very first to use this business

model based in a peer to peer formula, very popular in the digital era.

2. THEORETICAL FRAMEWORK

In this chapter, main concepts are introduced and defined and keeping brand

loyalty as the key concept; other sub-concepts will serve as supporting concepts.

Following this, the chapter explains how these relate to consumers’ behavior

when affected by scandals. Finally, I conclude by providing the rationale for

studying Uber as the main case study of this thesis, and how previously defined

analytical framework such as the Oliver framework will be tested on this specific

case, taking into account the role scandals play in relation to brand loyalty.

2.1. Corporative scandals and the consumer perspective

The relation between brands and their customers has been determined by many

factors and drivers. What also could disturb this relation, and impact the level of

customers’ perceptions and feelings of the brand, and generally the loyalty to

one’s brand, could be the chain of unexpected events and misconducts usually

labeled as 'scandals'. Not much research has been done related to the role of

scandals and their effects on brand loyalty taken from the consumer's

perspective, at least not in shape of a qualitative analysis and in the nuanced

way this thesis does. As literature indicates, the outcome of consumers and their

purchasing behavior after scandals have been often analyzed from the

company's perspective. Lohneiss and Hill (2013) study suggests that consumer's

behavior varies, and that negative information does not affect all consumers’

perceptions of a brand in the same way. They conclude that the effects of a

scandal might not be as harmful to a company as one might have thought.

Some available and relevant research on scandals that take the consumer’s

perspective, are related to the domain of sport, and more precisely to – celebrity

endorsement. These main researches deal with how scandals and misconduct

related to celebrities representing brands affect consumers’ perceptions and

their relationship with the brand itself after celebrity based scandals occur.

Generally speaking, when negative information about an endorser gets to

consumers, there is subsequent damage to the evaluation of a product or service

due to the associative correlation between the brand and the endorser (Till and

Shimp, 1998). Being a popular resource for marketer’s strategies, celebrity-athlete

endorsement could mislead the brand popularity and affect the brand loyalty

when scandals come to light. Using the scandal of Lance Armstrong in cycling,

following his admittance to cheating on his spouse, Jason et al. (2010)

investigated how scandals impact consumer behavior and loyalty in relation to

the corporate brand the sportsman represented. They concluded that

corporations and brands that have strong ties with their consumers are having

ability to retain equity and popularity on the market in spite of negative celebrity

association. The general findings of another study, conducted by Bowen and

Stumpf (2015), on consumer-purchasing behavior after a scandal indicate that

consumers perceive the criminal, non-sports related, scandals to have the most

effect on their purchasing behavior while sports related scandals are on the

second place. Regarding the termination of celebrity-athlete contracts, those

who commit themselves to purchase further the goods believed the brand should

not terminate the contract, and vice versa (pg. i).

Other existing literature focused on specific aspects of consumer’s behavior after

scandals, include the negative publicity related to the brand, the brand

misconduct and the buying behavior of consumers. Storm (2013) discusses the

effects of negative publicity, derived from scandals and corporate crisis, and the

way it influences customers’ loyalty. His theoretical model includes two

components of consumer loyalty: behavior loyalty and attitudinal loyalty. Direct

effect of negative publicity to one’s loyalty is intermediated by several consumer

related factors including: identification, ability to critically think, previous attitude

and commitment. On the other hand, company related factors play a protective

role against a negative publicity.

Hubert et al. (2010), researched the effects of brand misconduct, describe as

behavior that disappoints consumer expectation, on a consumer – brand

relation. According to their model, developed after analyzing the alleged use of

child labor in soccer ball factories contracted by Adidas, Nike and Puma, despite

misconduct the leading factors determining repurchase of their products include

functional congruence, actual and ideal self-congruence, partner quality and

brand relationship quality represent factors determining repurchase intention.

Their empirical study, related to jeans (denim), demonstrated the consequences

of brand misconduct, but the intention of their research impacted and was

directed to practitioners (marketers, managers, etc.), rather than to consumers

and the understanding of their attitudes and behavior

.

Another study by Sarah et al. (2006) from the California State University was

focused on consumer’s buying behavior affected by corporate scandals. As a

main case, they used the scandal related to the Martha Stewart - Living

Onmimedia in which the founder and name of the company Martha Stewart was

found guilty for lying to federal investigators and conspiracy about the sale of

non-company stock in March 5th, 2004. This news crucially affected the credibility

of the entire company, brought up ethical violations and affected the relationship

with its consumers. Authors of the study aimed to research the consumer view of

Martha Stewart’s credibility before and after her trial and if the level of credibility

has been affected. This investigation showed the difference in credibility before

and after the scandal, as well as among those persons who intend to purchase

company’s products vs. those who didn’t. The analysis showed how consumers

were able to decode negative information regarding the person involved in the

scandal and the quality of the product bearing her name. The consumers

identified credibility as a factor in purchase decisions by exhibiting a positive

relationship between credibility and purchase intentions.

2.2. Corporative scandals effects on brand and brand loyalty

Brand is usually conceptualized as “the totality of perceptions and feelings that

consumers have about any item identified by a brand name, including its identity,

quality and performance, familiarity, trust, perceptions about the emotions and

values the brand symbolizes, and user imagery” (Batra, Ahuvia, & Bagozzi, 2012:

1). At a symbolic level, brand stands for a name, term, sign, symbol or design, or

mix of all these elements, with an aim to identify a company, its services or

products, and to make a distinct value comparing it with the competition (Lau &

Lee, 2009). Perceived benefit leads us to another aspect of brand perception and

definition – its utility, mainly related to service brands that are typical for

companies moving from bare products to delivering entire package of solutions

and services. In this regard, we can differ classic service brands (hotels, banks),

pure service providers (member associations), professional service brands

(advisors, consultants), agents (travel or estate agents), and retails brands

(supermarkets, restaurants) (Boundless, 2016). Taking into account the role of a

brand in social cohesion, brands have the potential to gather an entire

community around it. According to Veloutsou (2009), brands are considered to

be important facilitators of relationship, or a central feature in relationship

marketing (see: Fournier, 1998), since they provide clients with symbolic meanings

and facilitate specific relation with the brand or company that brand stands for

(Schau and Gilly, 2003).

When it comes to brand and consumers’ relations, marketers and businesses have

recently witnessed an essential shift from transactions to relations between

companies and consumers, usually through the branding process. It is not enough

to convince consumers to buy certain products (Morrison and Crane, 2007), it is

also important to seduce them to become part of the family and engage with

the community. Customers’ positive feelings and attitudes towards a brand has

been considered as crucial to establish brand loyalty (Bowden 2011; Chaudhuri

and Holbrook 2001; Evanschitzky et al. 2006; Iglesias et al. 2011; Singh et al. 2012;

Yang 2012), which will be elaborated as a crucial relational concept in this thesis.

Brand loyalty has been conceptualized in order to explain a core attachment of

consumers to brands and their products and services. This attachment combines

affective, rational, and behavioral elements. These efforts result in nuanced

conceptualizations of loyalty. Brand loyalty has been the focus of a significant

body of literature in marketing for a long time (Copeland, 1923; Brown, 1952;

Cunningham, 1966; Frank, 1962; Farley, 1963). While Jacoby and Chestnut (1978)

have explored the psychological meaning of loyalty in order to distinguish it from

behavioral (i.e., repeat purchase) definitions, traditionally loyalty has been

understood to be reflected by repeat purchase behavior and/or the expression

of a favorable attitude toward such behavior (Jacoby and Chestnut, 1978). A

widely-accepted definition has been provided by Oliver (1980), and he defines

loyalty as “a deeply held intent to re-buy or re-patronize a preferred target of

identification in the future”. As main indicators of loyalty, Lane Keller (2001)

indicated that repeat purchases (or use of services) and the amount or share of

category volume attributed to the brand. Some of the strongest indication of

brand loyalty is demonstrated when consumers are willing to “invest time, energy,

money, or other resources into the brand beyond those expended during

purchase or consumption” (Lane Keller, 2001: 19).

2.3 Oliver’s framework on brand loyalty

Oliver's (1999) developed a framework that follows the cognition-affect-conation

pattern, and which includes cognitive, affective, conative, and action loyalty. In

this framework, Oliver added a new stage to the previous model – the stage of

action, and directed attitude oriented models toward action and use /

re-purchase behavior. Cognitive loyalty is at the first phase, and it is based on

primary information and initial experience with the brand, and indicates that one

brand is preferable to its alternatives. Affective loyalty represents a liking or

attitude toward the brand that was developed based on cumulatively satisfying

usage occasions. It reflects the pleasure dimension of the satisfaction and is

encoded in the consumer's mind as cognition and affect. Conative loyalty is

influenced by repeated episodes of positive affect toward the brand, and implies

a brand-specific commitment to repurchase. Finally, action loyalty, implies the

motivated intention in the previous loyalty state is transformed into readiness to

act. He refers often to these four step stages of loyalty as ‘true loyalty’.

There are several core relationship drivers which could lead to stable and durable

brand loyalty, and this thesis elaborate these drivers within the above-mentioned

Oliver’s framework (cognitive, affective, conative, and action). Most of sub-layers

discussed in this thesis do not exclusively belong to only one of the four loyalty

categories (for example, brand experience and satisfaction could be similarly

linked with more than one or all of these loyalty stages).

2.3.1 Cognitive loyalty

The cognitive stage relays on information on the brand offer and services,

including price and quality, and doesn’t necessarily create a strong bond for

consumers to remain loyal since they can easily switch one brand for another

once they perceive alternative offer based on the cost-benefit rationale. It

includes perception of brand and its competitors, as well as personal experience

with the brand. While different layers of brand perception (symbolic, utile and

social cohesive level) have been described above, brand experience as a

concept will be introduced here.

According to Brakus et al. (2009) brand

experiences grasp all four Oliver’s categories (sensations, feelings, cognitions and

behavioral responses) which occur when customers directly or indirectly interact

with a certain brand. Every brand experience is a subjective, internal response,

while behavioral responses are evoked by brand-related stimuli that are part of a

brand’s design: identity, packaging, communications, and environments. Based

on their experiences with the brand, consumers are able to formulate rationally

on the reasons why they are affiliated to one specific brand.

Expectations 1

It is expected that scandals will not essentially affect this stage, since scandals

mostly trigger the ethical or emotional part of consumers’ attachments to one’s

brand. Previous experience and judgments based on rational choice, including

quality of the services, price, as well as perception and comparison with main

competitors, is not the level that would be crucially affected after scandals.

2.3.2 Affective loyalty

The emotional / affective stage includes attitudes that favor a specific brand,

matching the experience with more subjective concepts of expectations and

satisfaction. High satisfaction with the brand and its services, combined with

ultimate identification can lead to brand love. Affective loyalty can be

challenged by an increased attractiveness by alternative or competitors offers,

usually highlighted through imagery and association used in competitive

communications (Oliver, 1999). Comparing to Brakus et al., who support a direct

relationship between brand experience and brand loyalty, recent researches

(Iglesias, Sing and Foguet, 2011) argue that developing brand experience

influences customer loyalty only through affective commitment. According to

Allen and Meyer (1990) affective commitment is defined as the customers’

emotional attachment to a particular brand or store based on their identification

with that store or brand. Authors generally agree that relationship between brand

experience and loyalty appears to be mediated by satisfaction.

Identification with the brand as a concept, derived from the field of social

psychology (Tajfel and Turner, 1985) and was defined as a “consumer’s

psychological state of perceiving, feeling, and valuing his or her belongingness

with an organization” (Lam et al., 2013). Following that people strive to identify

themselves goes in pair with their tendency to be distinctive from others in a social

context and therefore distinctiveness of the brand is key marker of consumers

desire to identify with the brand (Sauer, Rathneswar and Sen, 2012: 10). Sauer,

Rathneswar, Sen consider consumer brand identification is more than pure

emotional bond, and it is rather a cognitive representation (2012: 2). Some authors

(Homburg et al., 2009; Stokburger-Sauer et al., 2012) consider consumer’s

identification with brand as a key determinant of brand loyalty. Pop and

Woratshcek (2017) include customer satisfaction and consumer brand

identification as core relationship drivers as well as customer loyalty.

Brand experience & satisfaction, key roles

Satisfaction usually is defined as an "evaluation of the perceived discrepancy

between prior expectations and the actual performance of the product" (Tse and

Wilton 1988: 204), while Newman and Werbel (1973) defined loyal customers as

those who re-bought a brand, considered only that brand, and did no

brand-related information seeking. Oliver (1997) upgraded this definition, claiming it is

“the consumer's sense that consumption provides outcomes against a standard

of pleasure versus displeasure”, and for him, to affect loyalty satisfaction needs to

be repeated. Customer satisfaction, for a long time, has been studied as a central

feature of the customer – brand relationship, and one of the crucial determinants

of loyalty (Fornel et al., 1996). Satisfaction refers to “customer’s post-consumption

evaluation of a product or service” (Mittal and Frennea, 2010: 4). Authors, such as

Fournier (1988) and Oliver (1999) believe that satisfaction builds loyalty, and

developed a model where satisfaction plays an important role in repurchasing

and as well as can lead to the emergence of “ultimate loyalty” (Oliver, 1999: 42).

For a long time, some authors claimed that satisfaction is not enough (Reichheld,

1996; Stewart, 1997), and that relations between loyalty and satisfaction are

asymmetric. Furthermore, Oliver claims that satisfaction does not universally

translate into loyalty (1999: 33).

Positive experience and satisfaction with the brand set a ground for trust in a

brand. According to Lau and Lee (1999), trust is a key factor in the development

of brand loyalty and they propose three sets of factors affecting trust in a brand

-- the brand itself, the company behind the brand, and the consumer interacting

with the brand. According to them, key activities to assess the consumer’s trust in

a certain brand include brand liking, brand experience, brand satisfaction and

peer support. Brand liking denotes a kind of affection one party has toward the

other, due to its pleasantness and agreeability. Liking is just a first step that bounds

consumer to find more about certain brand, and to build a trusty relation. Brand

experience refers to a consumer’s previous experience with the brand, where

reciprocity in the process based trust is the key (Zucker, 1986). Brand satisfaction

could be observed as result of personal, or subjective, evaluation of one’s brand

(Bloemer and Kasper, 1995), while the peer support could be perceived as an

important determinant of an individual’s behavior under the influence of other

individuals (Bearden et al., 1989).

As the ultimate level of identification, authors such as Batra, Ahuvia and Bagozzi

(2012) found that brand love, as consumers experience it, is best represented as

a higher-order construct including multiple cognitions, emotions, and behaviors,

which consumers organize into a mental prototype. As for Lane Keller, to create

resonance, the brand must be perceived as something special in a broader

context: “customers with a great deal of attitudinal attachment to a brand may

state they ‘love’ it and describe it as one of their favorite possessions or view it as

a "little pleasure" they look forward to” (Keller, 2001: 19).

Expectations 2

The affective stage is much more contested by scandals than the cognitive

phase. It includes empathy level, personal values and ethical beliefs,

identification with the brand and its services. In the same way, satisfaction

includes not only the quality of services and price, but also the way the brand

performs and the consumer experience. Such a subjective and empathetic

attachment includes consumer expectation of the brand it this includes the way

the brand operates with respect to professional, human and ethical principles.

Consumers at this stage could feel part of a brand community. Therefore, results

will show how consumers with different levels of attachments, perceive scandals

related to brand under scrutiny. Those with the higher levels of expectation, and

personal attachment and identification might demonstrate a higher level of

disappointment and might consider dropping their loyalty. It is also probable that

trust towards the brand involved in scandals decreased, but loyalty to services

could remain the same. With the data collected and the analysis in the following

chapter, this thesis analyzes how affective loyalty and the brand/consumer

relationship changes when consumers are exposed to scandals. Different

nuances of change will be come up in this loyalty stage such as lose of trust,

identification and disappointment, but the distinction is made on whether there

is an increase or decrease of affective loyalty.

2.3.3 Conative loyalty

This stage refers to one’s desire to intend an action, which could be a re-purchase

one’s product or re-use of its services. On scale, this loyalty is stronger than in the

affective level, but could also result in repeated delivery failures, bad experiences

with brand services, ethical constraints of consumers, and the strength and

influence of brand community. If consumers experience failures in service

distributions, they may look for an alternative (Oliver, 199).

In this regard, brand communities play an important role in shaping consumer’s

identification with the brand, also determining one’s willingness or intention to act.

Muniz and O'Guinn (2001) define brand community as a “specialized,

non-geographically bound community, based on a structured set of social

relationships among admirers of a brand’ (p. 412). As stipulated by Lane Keller

(2001), identification with a brand community makes customers feel a kinship with

other people associated with the brand (Keller, 2001: 19). According to Marzocchi

et al. (2013), consumer identification with the brand and the community

represents an essential characteristic of every brand community. Brand

awareness is important, and there are two distinguishing dimensions - depth and

breadth. Depth explains how easily customers can recall or recognize the brand,

while breadth refers to the range of which consumers think of the brand when

facing purchase and consumption situations (Keller, 2001: 16). Apart of rational

choices and emotional ties with the brand, some consumers and certain

communities pay attention to the ethical side of a brand’s conduct. Vittel (1992)

and Vitell and Muncy (1992) developed a consumer ethics scale to examine

consumer ethical beliefs in relation to various disputed behaviors of the brand.

They identified three factors that affect consumers’ perceptions regarding the

ethical content: the locus of the fault, the presence of deception on the part of

the consumer, and the degree of harm, also indicates relation to consumer’s

demographic characteristics (Vitell and Muncy, 1992). These elements play an

important role in consumers’ intention to repurchase.

Expectation 3

In the next chapter analysis in relation to scandals, the effect on brand loyalty at

the conative level will demonstrate whether consumers are considering to remain

loyal or to drop their loyalty, this is a crucial stage to achieve the marketers and

firm’s desired loyalty. While examining this, it would be important to see what

drivers are the key to examine con consumer’s brand loyalty, including scandals

as the main external factor, the role of the media community peers on influencing

the choice (the perception of negative publicity on the brand and even social

media WOM such as #DeleteUber). Also, in this stage, the ethical principles of

each consumer take an important role in the way their intentions to rebuy and

their perspective of the brand post-scandal.

2.3.4 Action loyalty

The action / behavioral stage follows the premise that not all intentions are

transformed into action in practice. While all previous aspects (cognitive,

affective and conative) could result with one’s readiness to act (to buy, or to use

specific service) this is not what happen in all cases. In this stage, the intention

created within the conative stage turns into a highly potential readiness for

action. In this stage, as Oliver defined, the action is considered as the ultimate

outcome of a readiness to act and overcome obstacles, such as scandals that

keep growing or other factors.

Expectations 4

The analysis provided attempts to show whether scandals affect this last stage in

which consumers apply “true brand loyalty” (Oliver 1999). Some interviewees

might already cut the possibility of action and some might still consume the

product or service. The ideal outcome for firms and marketers are those

consumers that are willing to overcome the obstacle that scandals represent.

Stage

Features

Vulnerabilities

Cognitive Perception of qualities and

features that make advantage Superficial, lower loyalty

Affective Attachment and attitude

towards brand

Exposed to switching among competitors

Conative

Commitment or plan to (re)use

or not to use anymore Intention may not lead to action

Action High willingness to act May weaken performance

Table 1. Four stages of Brand Loyalty. Oliver (1999)

2.4 Satisfaction vs. Loyalty

Existing researches have demonstrated that scandals can affect brand loyalty

and managers take action by creating preventive strategies and preparing for

times of crisis. Furthermore, no research has been done related to the role of

scandals and their effects on brand loyalty from the consumer's perspective and

with the focus of distancing satisfaction from relationship its relationship with

brand loyalty.

In his 1997 research, Oliver defined loyalty as “a deeply held commitment to

rebuy or re-patronize a preferred product/service in the future by repetitive

purchasing” “who fervently desires” “against all odds and all costs” On the other

hand, he quotes the satisfaction concept by Tse and Wilton as “the evaluation of

the perceived discrepancy between prior expectations and the actual level of

performance of a product”. (Tse and Wilton, 1988). This relation between

satisfaction and loyalty is key to understand the consumer perception and

therefore speak of ‘true brand loyalty’. As Oliver quotes: “merely satisfying

customers that have the freedom to make choices is not enough to keep them

loyal” (Jones and Sasser, 1995). The roles of personal determinism (fortitude)and

personal bonding at institutional and personal level and including perceived

product superiority allow for ultimate loyalty to emerge (Oliver, 1999). Based on

the “satisfaction trap” by Reichheld (1996) we evaluate the impact of having a

loyal customer base versus just satisfied customers. It is crucial for this case study

to understand what are the nonsatisfaction determinants of loyalty and their

interrelationships with the scandals.

In illustration 1 from Oliver’s framework, we see the asymmetric relation of

satisfaction and loyalty. In figure 1, satisfaction and loyalty are separate

manifestations of the same concept, in much the same way that early total

quality management promoters assumed that quality and satisfaction were

identical pursuits. Figure 2 suggests that satisfaction is a core concept for loyalty,

without which loyalty cannot exist, and that it anchors loyalty. In figure 3, the

nucleonic role of satisfaction and suggests that it is an ingredient of loyalty but

only one of its components. In 4, the superordinate existence of ultimate loyalty

of which satisfaction and "simple" loyalty are components. Panel 5 is true to the

preceding statement that some fraction of satisfaction is found in loyalty and that

that fraction is part of, but not key to, the very essence of loyalty. Finally, figure 6

suggests that satisfaction is the beginning of a transitioning sequence that

culminates in a separate loyalty state. This situation also suggests that loyalty may

become independent of satisfaction so that reversals in the satisfaction

experience (i.e., dissatisfaction) will not influence the loyalty state (Oliver, 1999).

2.5 Further expectations in the Uber case study

The case of Uber is unique as Uber is the pioneer brand that invented this formula

of car services. Uber emerged and widespread globally in a short period of time,

disrupting its own industry. The brand provides to its customers (most especially for

those living in urban areas) an efficient transportation service for a reasonable

price. Due to its specific nature and organization, it would be interesting to

investigate the community of consumers that uses this tech brand and to analyze

the perceptions and emotional ties consumers have with the brand and how they

react when the brand goes into crisis. The four-stage loyalty model, developed

by Oliver (1999) perfectly served as a main analytical framework and in this thesis,

it was tested through in depth interviews in order to provide an empirical research.

At the level of cognitive loyalty, this thesis investigates how Uber users perceive

the brand, the features of its product and services in general, compared to its

competitors and how the scandals might have changed that. This level of

information-based loyalty is our first stage of research. On an affective level, this

thesis aims to find what kind of experience Uber consumers had while using brand

services and how this translates into impressions, emotional ties and personal

relationship that make consumers commit to this specific brand. At the conative

level, the study includes an analysis of consumer’s readiness to re-use the brand

services despite other factors that might disturb their use of its services and which

situations consumers are intending to use Uber. Also, it is at the conative stage of

the analysis that we can encounter that consumers are ready of have already

dropped their loyalty to the brand by deciding to stop using Uber services or

furthermore deleting the mobile application. Since this loyalty layer only assesses

consumers’ commitment but not the action / reaction, the last stage within this

four-stage framework seems to be conclusive for this research and the real factor

of true loyalty as Oliver mentions. While the conative stage includes the intention

and willingness to act, the action loyalty is what marketers and companies aim

for and the most profitable stage of loyalty, but action cannot exist without

conative loyalty, therefore the focus of this study on the conative level, action is

harder to measure through the interview process. Oliver (1999) defines action

loyalty as state of readiness to act but most importantly to overcoming any

obstacles and it is around this concept that this thesis will analyze action loyalty.

Scandals can represent big obstacles to achieve this process and can push

consumers to stay on a perpetual first stage of loyalty (knowledge on the quality

of a service) but not using the service and even by boycotting a brand.

3. RESEACH DESIGN

Following the theoretical framework and literature review presented in the

previous section, and in combination with my research intentions and

expectations, this section provides the operationalization of the theoretical

framework. These includes: a research overview, hypothesis and a set of research

questions, followed with an explanation of the data collection method and main

method of data analysis.

This thesis is an exploratory case study based on qualitative research. The data

was collected through interviews with open ended questions. The research was

conducted in the form of a single case study based on how the current Uber

brand scandals are affecting customers’ brand loyalty in the four different stages

explained by Oliver (1999). The interview protocol was built around Oliver’s

framework following an inductive study and focused on consumers as the main

unit of analysis.

3.1. Hypotheses and research questions

The overall motivation of this research is to study the relationship between brand

and its consumers and how this can be disrupted when facing brand scandals.

This complex relationship could be observed and assessed on various levels –

cognitive, affective, conative and action – as proposed by Oliver (1999) and

elaborated in the previous chapter. The analysis of these four layers is

conceptualized around the central and multilayer concept of brand loyalty. The

theoretical section of this thesis identified several potential drivers that could lead

to changes in brand loyalty, dropped loyalty or decreased loyalty defined as

negative outcomes and intact or increased loyalty as positive outcomes. I also

listed some internal drivers / factors such as: brand love, trust, and ethical values;

and external: experience and satisfaction, perception of the brand – at symbolic,

utility and social cohesive level, and the role of brand community and peer

customers.

The case study measures how the Uber scandals (main independent variable)

affect brand loyalty (dependent variable), and the role of internal and external

factors (intermediary, moderator variables) are playing in shaping the outcome

(stages of loyalty). General expected outcomes for brand loyalty and for each

layer were as follow:

1. Consumer’s brand loyalty is not affected by scandals,

2. Consumer’s brand loyalty is negatively affect due to scandals,

Relations between independent variable (scandals), intermediary variables

(external and internal) and final result affecting loyalty will constitute the main

research question formulated as follows:

When facing public brand scandals, what are the key drivers that affect

consumers’ brand loyalty and to which extend of the four stages of loyalty

scandals affect true loyalty?

Additionally, following theoretical framework operationalized for this research,

four sets of questions and research expectations were established, related to

each of four levels discussed in previous section.

Cognitive level

How previous knowledge and experience relying on satisfaction (convenience,

quality and price) are disrupted by scandals, driving consumer’s decision to react

and affect loyalty?

Expectation 1: It is expected that consumers that are highly satisfied with services,

(convenience, quality and price) and that have positive information about the

brand, will not be affected by scandals.

Affective

level

How the level of emotional attachment, identification and trust with the brand

gained through previous experiences and the previous stage (cognitive

information), are disrupted by scandals, driving consumer’s decision to react and

affect loyalty?

Expectation 2: It was expected that consumers emotionally and personally

attached to the brand, having a high level of trust, would be more affected

(disappointed) than those who purely perceive Uber as a service provider only.

Conative level

How external and internal factors disrupt consumer’s readiness to stay loyal

(re-purchase) or to drop brand loyalty when scandals occur?

Expectation 3: External pressures, by the media and community of peers, and

internal motivations, like ethical constrains, would lead consumers to re-think their

decision to stay loyalty to the brand.

Action level

For those who reacted to the scandals and decided to remain loyal or decrease

loyalty, research what were the main reasons and motivations for this action?

Expectation 4: Consumers with the high ethical principles, or who are identified

with the brand but not strongly enough to resist the influence of external factors

(for example peer reactions and negative publicity), will decrease or drop their

loyalty. On the other hand, consumers satisfied with product / service or that

additionally reached the four stages of loyalty might remain loyal.

Other secondary questions related to other variables appeared throughout this

study:

Q Are leader brands, that are pioneer and unique on a certain industry,

technology or business model, less vulnerable to corporate scandals?

Q Does the strength and type of consumers’ ethical believes ultimately

drive brand loyalty decisions and to which scandals loyalty is vulnerable to?

In order to explore these relationships in details, and provide plausible answers,

the following table will serve as basis to derive the most important questions, and

operationalize them in line with theoretical account:

Table 2: Analytical framework for brand loyalty

Type of loyalty

Sub-layers

Potential questions

Cognitive

Brand awareness Brand associations Knowledge about the brand

“Competitors”

§ What can you tell me about this logo?

• What is your first association related to Uber? What words come to mind?

• What other words come to your mind when I say Uber?

• What can you tell me about the Uber slogan?

• How often do you think of Uber when you need a taxi / car service? • What other car service brands do

you use? In which situations does this change?

• Which other services part of the Uber brand do you know?

• What other purposes do you think of Uber for?

• Which of your needs does Uber satisfy?

• What basic functions does the app help to satisfy these needs?

Emotional / affective

level

• What is your favorite brand? • What do you feel about Uber? • What makes Uber special? • Which emotion you relate to the

Uber brand?

• In what ways do you consider yourself a member of the Uber community?

• Do you follow Uber in social media? • How does Uber help you shape

your identity and way of living? • How often do you recommend

Uber to your friends / family?

• How do you feel about the hashtag #deleteUber?

Ethics:

• Do you consider yourself as having _______ believes

• What concerns you the most: unethical behavior that affects you directly or unethical behavior that affects others in a global level?

• What can you tell me about unethical behavior you have experienced in an Uber car?

Conative

• What makes Uber different?

• Would you recommend Uber services to your friends?

• How often do you use Uber services? • What motivate you to use them

again?

• What are the reasons you like Uber more than its competition?

• What is more important for you? Good service, price and quality, ethical conduct?

• Tell me about a negative experience you’ve had in an Uber car.

Action

Brand recall Current status or changes on brand use Reaction to scandals

• Do you have the Uber app? If not, have you had it before?

• Do you consider yourself to be an active Uber user?

• What are the main reasons / motivations for you to use Uber? • Has your use of the Uber app

increased or decreased in the last 3 months? Explain the reason.

• What do you think of Uber services? How do you would feel of the behavior of their staff?

• Do you think of Uber for other purposes?

• Have you ever deleted the Uber app?

On scandals:

• Have you ever stopped using a brand due to scandal? For what reasons?

• Are you aware of the current scandals Uber is facing?

• How do you feel about these scandals? How did you react to these?

• How did these scandals affect you? If scandals do not affect you directly, why?

• Do you still use Uber services? If you continue to use its services, provide us the reasons.

• Has your Uber use decreased or increased in the past 3 months?

3.2 METHODOLGY

A qualitative and exploratory method was selected to obtain a better

understanding and consumers insights on a brand currently facing reputation

challenges. This method allowed me with a more exploratory and personable

connection with participants. When little is known about a phenomenon,

qualitative methods are advocated for their ability to discover the underlying

nature of the phenomenon in question (Strauss & Corbin, 1990).

3.2.1 Data collection

Interviews were the main method for collecting qualitative data and

interpretations in order to test hypotheses and conduct this research. A sample of

interviewees was randomly picked for the interviews. A balance on age (from 20

to 69 years) and on gender (both males and females) were secured. The selection

method included snow-ball method, and most respondents were approached at

airports in urban areas and other central locations in New York City and

Amsterdam while consumers were waiting for their transport or hailing a cab to

the city center. The interviewees were asked preliminary questions in order to

understand if they were currently or formerly active users of the Uber app when in

need of a car service. This selection process prevented any kind of selection bias.

By interviewing some consumers that consider themselves former users of the

brand, it helped me understand why some of these customers have dropped the

brand and while other consumers who still actively use it provide other kind of

information. The sample was determined based on the pre-interviews, that

indicate whether the candidates were active, passive or former Uber clients, also

asking them if they had ethical beliefs about subjects such as: women rights,

immigration reforms and political views. The main objective was to have a

balanced mix of interviewees from different locations and with different status

and views and to apply their perspectives to the current scandals faced by Uber.

Participants

Age Gender Origin

Residence Uber use

Participant 01 - XO

41

M

Ecuador

Europe

Travel and Local

Participant 02 - DJ

25

F

Mexico

Europe

Local

Participant 03 - GB

45

M

USA

Europe

Travel and Local

Participant 04 - AP

44

M

Spain

USA

Travel and Local

Participant 05 - AA

26

F

Germany

Europe

Local

Participant 06 - FL

31

F

UK

USA

Travel and Local

Participant 07 - TF

29

M

USA

USA

Local

Participant 08 - FG

24

F

Netherlands Europe

Local

Participant 09 - DS

28

M

USA

USA

Local

Participant 10 - PJ

53

M

Canada

USA

Local

Participant 11 - LS

33

F

South Africa Europe

Local

Participant 12 - ME

69

F

USA

USA

Local

Participant 13 - VP

24

F

Bulgaria

Europe

Travel and Local

Participant 14 - SR

38

M

USA

USA

Local

Participant 15 - ER

33

F

UK

Europe

Local

Table 3. Participants and demographic information used later in the study

The interview protocol consisted of 39 questions, distributed in 4 sections. These

questions were developed in accordance to analytical framework derived from

theory and explained in the previous section (see Table 2 and the annexes for the

interview protocol). The questions were semi-structured and open-ended with

predetermined topics. Each interview took approximately 30-45 minutes and

participants were encouraged to talk openly and widely. They were conducted

and fully recorded in person, via Skype or on the phone and full transcripts were

made for each interview. All transcripts are included in the annexes of this thesis.

3.2.2 Interview Design

An interview protocol with 39 questions was prepared. Before each interview,

candidates were asked for consent and authorization of the use of the answers

provided for this thesis. Verbal authorization for recording the interviews and to

make transcripts were also provided by the candidates. I started by giving the

participants an explanation of the interview format and to encourage them to

feel open to share extensively their experiences. Also, basic information such as

name (that remains anonymous in this paper), age, place of origin and place of

residence were asked. Then, we started with the basic open question “please tell

me a little bit about yourself”.

The interview continued to its main body with questions divided in 4 groups: 1) an

introduction to the brand bringing up subjects such as brand awareness and

associations that induced participants to speak about their cognitive loyalty. 2)

the following set of questions was based on affective aspects of loyalty and these

were related to brand love, trust, identification, community among other

subcategories of the brand-consumer relationship. 3) Then questions about their

experience and satisfaction helped me gather information useful to understand

about consumer’s affective and conative loyalty and perceptions. 4) a final set

of questions was oriented to understand each participant’s relationship to the

Uber brand and other brands, brand scandals and their ethical beliefs when

facing these. See the interview protocol in the annex section.

3.2.3 Data analysis

Following the process of interviewing, full transcripts were made and annexed to

this paper. The data analysis software NVivo was used to analyze the interviews

and it served to code all the information according to the theoretical framework

of this thesis. The 15 interviews ‘sources’ were adapted in a method for the

software to only read the answers by the interviewees and not the interviewer.

In the first phase of coding the information, nodes were created in two groups:

1. Quotes that show participants loyalty being affected negatively

2. Quotes that show participants’ loyalty not being affected

At least one quotation per participant was found.

Later, 8 nodes related to the four layers of loyalty by Oliver (1999) were created:

- Cognitive Positive

- Cognitive Negative

- Affective Positive

- Affective Negative

- Conative Positive

- Conative Negative

- Action Positive

- Action Negative

All the quotes gathered from the 15 interviews were grouped to have a general

understanding of the conversation had during the interviews about Uber and its

brands scandals. Later those quotations were exported into files and tables were

built in groups that will be explained in the next section of this thesis.

The sources (interviews) were also categorized by three demographic nodes per

participant, age (see below three groups), sex (male or female) and place of

residence (USA or Europe). Age was divided in the following groups:

• Generation Y: 18-30 years

• Generation X: 31-52 years

• Baby Boomers: 53-70 years

Finally, participants of this study were coded as P1-P15 respectively in the order

they were interviewed by day and time, no other specific order corresponds to

the list of participants.

4. RESULTS

Based on answers provided by the 15 participants, and their content analysis, the

main findings will be presented within this chapter. In order to proceed with this, I

divided the respondents in two groups:

• Group 1: Respondents affected by scandals

• Group 2: Respondents not affected by scandals

The selection of these two groups was made after carefully interviewing the

participants, listening to the recordings and reading the transcripts. The two kinds

of participants were found and clearly showed to be or not to be affected by

scandals. Table 4 below shows the different quotes that helped me define these

two categories:

OUTCOME

QUOTES

GROUP 1

Participants

affected by

scandals

“My reaction was to share the blog with as many people as possible because I work in the field of diversity, gender, and human rights; and I think that the writer raised a lot of very valid points that are very common to other workplaces as well. So, I shared widely the story. That’s what I did.”

“every organization in the world has an obligation, especially if they have money and power, that enables you to impact people. You have an obligation to make the world a better place.”

“I did know there was quite a close affiliation with the Trump administration, I am fervently against that administration.”

“Well I actually stopped using the brand for quite a while, especially when there was the whole involvement with the Trump government”

I deleted Uber when they broke the taxi strike at JFK airport. And then I’ve not been a fan for a long time.”

“The reason I deleted Uber was because I learned that they were luring drivers into positions – they were luring people into becoming Uber employees by lending subprime car loans...” “And I just found that really disgusting. And I had talked to a few of the drivers about it and got their perspective, and that’s when

P10 P11

P12

P15

I decided to just switch over to Lyft.”

“…a very close relative urged me to get rid of Uber, and that’s when I got rid of Uber and switched to Lyft.” “It was directly related to the Trump thing”

“Honestly, I contemplated deleting the app as well, but it’s just too much of like – it’s impossible to get on without Uber. So, I didn’t delete it. But I did – the thought did cross my mind.”

“I do know about that and I do know there was a scandal. And because of the way I feel about Trump, I’d have to say that would make me very weary of using it again. Because those things are important to me.”

“If I was acting 100% ethically with the way I would want to live my life, then I wouldn’t use Uber at all.”

GROUP 2

Participants

NOT

affected by

scandals

“I remember I heard about it as a Mexican, I don’t feel really happy about it. But... That didn’t stop me from using Uber.”

“Sometimes the media also makes a big scene of something that is not that serious to stop buying a brand.”

“I’m more aware of it and I’ll try to keep that in mind. But it’s not that it’s changing my opinion to use Uber.”

“I’m thinking about it I’m not aware enough of the current scandals and troubles that the company is facing currently.” “I think it would very much affect me if it was in my neighborhood or my direct circle. So, it would happen in Amsterdam” “It’s reliable… You know that you’re going to get like a reasonable fare. And… It feels safe, which is funny, you know that since there were attacks in the news” “I mean these brands are pretty bad, and Nestle is pretty bad, and I still use both those brands.”

“but very vaguely, because I wasn’t very interested in them, because, like, I don’t know, they weren’t happening, right in my country or something? Right now, because in the Netherlands I think Uber is fine?”

“I think on the political landscape it’s just people being um… I don’t know what’s the word I’m looking for. Like kind of like jumping on the bandwagon, of “oh, do this, do that”, just like people boycotting Starbucks because they choose to support, you know, um immigrants and their college funding, or community, or something like that. Like it’s just bullshit.”

“At this point, he’s already the president, so I don’t know how much – how much good or bad that would be for them supporting”

“I could stop using, was Uber. It said not to use Uber if you want to boycott Trump. Which I think is a bit ridiculous, because Trump is everywhere and people are going to keep using Uber.