Brands in crisis: customer loyalty and corporate reputation

Purpose What happens to a firm after it experiences a reputational crisis? Marketing literature offers few answers. The primary objective of this paper is to present a framework for examining the relationships between corporate reputation, brand crisis (a value-related crisis) and customer loyalty. The second goal is to examine how attribution moderates the impact of a brand crisis in the marketplace. Design/methodology/approach The research involved an empirical study conducted in the state of Texas using a mixed-methods approach. First, a qualitative study involving unstructured face-to-face interviews with 18 executives was conducted to gauge their views on the relationship between corporate reputation, brand crisis and customer loyalty. This enhanced our understanding of the study and its context. The executive populations included brand and marketing managers, corporate communication specialists, chief executives and academic experts with a research focus in branding. Second, a self-completed survey was conducted among 321 members of the public. The data were analyzed using structural equation modeling. Findings Our results reveal statistically significant and positive relationships between brand crises, corporate reputation and customer loyalty. Notwithstanding the results, these findings are inconsistent with prior studies, which have shown that brand crises negatively affect customer loyalty. These differences are a result of the study’s generic nature and its exploration of complex relationships. The results also show that attribution moderates the positive impact of brand crisis on corporate reputation and that low attribution amplifies the positive relationship between brand crisis and corporate reputation. Our findings support the importance of managing an organization’s brand reputation to attain customer loyalty, which subsequently enhances success in the marketplace. Thus, in the event of a crisis for the brand, dissatisfaction emanating from an organization’s poor reputation is likely to have a strong carryover effect on consumers’ intention to stay loyal. Research limitations/implications The one-wave cross-sectional nature of the study is acknowledged. The study does not claim to represent the entire population of the state of Texas, and therefore, larger sample sizes are needed in future research. Future research may employ experiments in addition to qualitative face-to-face interviews and a self-completion survey to confirm our results. Originality/value This study addresses the need for ongoing understanding of how customer loyalty is influenced, either directly or indirectly, by brand crisis and corporate reputation. This is important because, despite the interest shown in corporate reputation literature, there have been contradictory findings about the role corporate reputation plays when a brand crisis occurs. This research examined the relationships between customer loyalty, corporate reputation and brand crisis, assessing how these marketing phenomena interact in the study setting. Our study reveals evidence of the moderating effect of attribution on the relationship between brand crisis and corporate reputation.