The consequences of screwing up - How components of your brand equity are affected by a corporate scandal

Abstract: The purpose of this study is to investigate in detail how brand equity is affected by a corporate scandal. This is done by running an experiment where two fictive brands, only separated by the amount of CSR activities they are involved with, are responsible for a corporate scandal. The study measure consumer evaluations of these brands before and after the scandal has occurred, which allows for analyzing how the brand equity is changed as a result of a corporate scandal. To support the explanation of the change in brand equity, the factors of emotions, gender and level of CSR are investigated for their mediating and moderating effects. The results suggest that brand equity metrics are impacted differently by a corporate scandal, with the element of liking seeing the largest decrease and perceived quality retaining much of its value when comparing the pre- and post-scandal evaluations. When integrating emotions into the experiment, our results suggest that negative emotions - anger, disappointment and disgust - act as mediators between the consumer evaluations of the brand that takes place before and after the scandal. This inclines that it is not the scandal per se that inflicts the damage on the brand, but rather the emotional reactions that it causes. The amount of CSR work that the companies are involved in was found to not have any effect on the consumer’s perception of the brand. However, distinct differences between the genders were found when comparing both emotional reactions and brand equity evaluations - females showed a larger increase of negative emotional response as well as a more negative post-scandal evaluation of brands than males. The study has theoretical and practical contributions by suggesting that brands are complex and they will not be impacted the same across their elements, therefore suggesting that efforts and resources should be allocated to certain areas if a scandal is caused. Further, being aware of the presented gender differences could be of importance for successful post-scandal communication for further damage control.