War Room 3

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  • Research Methods: Thesis Proposal Presentation Angelo De Blasio - Organisational Response to Crises: An Investigation of Australian Consumer’s Purchase Intentions
  • Research Methods: Thesis Proposal Presentation Angelo De Blasio - Organisational Response to Crises: An Investigation of Australian Consumer’s Purchase Intentions Corporate reputation is acknowledged as an important organizational asset linked positively with business performance, competitive advantage and community support. Essentially it is the overall assessment of an organization’s business and social performance (including adherence to expected business and social norms) in the eyes of all stakeholders, as compared the observed performance of other organizations.
  • Research Methods: Thesis Proposal Presentation Angelo De Blasio - Organisational Response to Crises: An Investigation of Australian Consumer’s Purchase Intentions Potential Damage to Reputation Literature shows crises can damage organisational reputation and impact subsequent purchase behaviour Damage to reputations impacts: Consumer trust Social expectations Future growth and revenue Subsequently, organizations must respond appropriately to a crisis to regain control and reduce damage
  • Research Methods: Thesis Proposal Presentation Angelo De Blasio - Organisational Response to Crises: An Investigation of Australian Consumer’s Purchase Intentions While a number of previously established findings were not confirmed, analysis clearly reinforces that Public Relations efforts are important and relevant to Australian consumers and the level at which their reputation of an organization can be altered, post-crisis. In providing a number of important contributions the results of this study challenge some accepted managerial assumptions regarding the most effective way to repair and enhance organizational reputation. This research has illustrated that, contrary to customary managerial beliefs, apologizing for a crisis is no more affective in reducing damage to an organization’s reputation than providing an excuse, or completely refusing to address the situation at all.
  • War Room 3

    1. 1. WHY SAY SORRY? Influencing consumers’ perception post organizational crisis CRISIS MANAGEMENT AND CORPORATE REPUTATION Angelo De Blasio and Roberta Veale
    2. 2. CORPORATE REPUTATION Corporate Reputation can be defined as the overall assessment of an organization’s business and social performance as compared to the observed performance of other organizations.
    3. 3. CORPORATE CRISES <ul><li>A Corporate Crisis… </li></ul><ul><li>Is unexpected </li></ul><ul><li>Offers little time to respond </li></ul><ul><li>Responses result in positive or negative outcomes </li></ul><ul><li>Damage to reputations impacts: </li></ul><ul><li>Consumer trust </li></ul><ul><ul><li>Social expectations </li></ul></ul><ul><ul><li>Future growth and revenue </li></ul></ul>“… any event with the potential to bring an organization into disrepute and jeopardise future profitability, growth and, survival” (Dean 2005)
    4. 4. POTENTIAL CRISIS TYPES <ul><li>Victim </li></ul><ul><li>Minimal attributions of crisis responsibility. </li></ul><ul><ul><li>The organisation itself is considered a ‘victim’ </li></ul></ul><ul><ul><li>e.g. product tampering, terrorism </li></ul></ul><ul><li>Accidental </li></ul><ul><li>Moderate attributions of crisis responsibility. </li></ul><ul><ul><li>The organisation still carries some blame </li></ul></ul><ul><ul><li>e.g. machinery failure </li></ul></ul><ul><li>Preventable </li></ul><ul><li>Strong attributions of crisis responsibility. </li></ul><ul><ul><li>The organisation carries the full brunt of blame </li></ul></ul><ul><ul><li>e.g. executive fraud, product failure </li></ul></ul>
    5. 5. “ PREVENTABLE” Vitamin C content in RIBENA <ul><li>March, 2007 </li></ul><ul><ul><li>GlaxoSmithKline (Ribena) found to have engaged in misleading and deceptive conduct. </li></ul></ul><ul><ul><li>Fined NZ$217,500 by Auckland District Court and ordered to run a series of corrective advertisements. </li></ul></ul>
    6. 6. CONITUUM OF DEFENSIVE AND ACCOMODATIVE RESPONSES CRISIS RESPONSE ACCOMODATIVE DEFENSIVE ATTACK DENIAL EXCUSE JUSTIFICATION INGRATITION APOLOGY CORRECTION Adapted from Coombs (1998)
    7. 7. APOLOGY/ CORRECTION
    8. 8. BACKGROUND TO THE STUDY <ul><li>Few studies have explored the impact of crises on consumer purchase intentions </li></ul><ul><li>Limited number of studies completed in the Australian context. </li></ul><ul><li>Most studies use student samples. </li></ul><ul><li>Limited range of crisis responses used in testing. </li></ul>
    9. 9. CONCEPTUAL FRAMEWORK Adapted from Lee (2005) CRISIS SERIOUSNESS Crisis Response Type Trust in the Organisation Impression of the Organisation Purchase Intention Judgments of Organisational Responsibility
    10. 10. RESEARCH DESIGN <ul><li>Stage 1 – Qualitative </li></ul><ul><li>Focus groups (x 2) </li></ul><ul><ul><li>To determine crisis response to test in stage 2 </li></ul></ul><ul><ul><li>To determine hypothetical crisis to test </li></ul></ul><ul><li>Stage 2 – Quantitative </li></ul><ul><li>Experimental design </li></ul><ul><ul><ul><li>Self Administered Questionnaire </li></ul></ul></ul><ul><ul><ul><li>Convenience Sample of 250 </li></ul></ul></ul><ul><ul><ul><li>5 cells of 50 each – rotated responses </li></ul></ul></ul><ul><ul><ul><li>Pre-test confirmed measures </li></ul></ul></ul>
    11. 11. FOCUS GROUP COMMENTS <ul><li>Determining Crisis Type </li></ul><ul><li>“ I am likely to become more involved in a crisis if I believe it could have been prevented.” </li></ul><ul><li>Determining Crisis Responses </li></ul><ul><li>“ An organisation would have a lot of trouble using justification as a crisis response for a preventable crisis.” </li></ul><ul><li>Determining Crisis Situation </li></ul><ul><li>“ We buy and consume food products on a daily basis. That’s why I always get worried every time I hear about a product recall in the supermarkets.” </li></ul>
    12. 12. CRISIS SITUATION Walker Family Pty Ltd is a large supplier of fresh produce. For many years they have supplied fresh fruit and vegetables to a number of supermarket and restaurant chains. In September 2006, an outbreak of illness caused by Escherichia coli (E. coli) bacteria was found in fresh lettuce supplied by Walker Family Pty Ltd. The strain of E. coli found in the lettuce causes bloody diarrhea and dehydration. By 6 October, 2006, 67 people were infected after eating lettuce supplied by the company, including 3 people who also suffered a form of severe kidney failure (Hemolytic Uremic Syndrome). Federal health officials stated that over 50% of those who reported being sick from eating the lettuce were hospitalised. The outbreak was eventually traced to one of the company’s farms located in a regional area, where many of the organisation’s products are sourced. Investigators with the Professional Society for Infectious Diseases confirmed that the dangerous strain of bacteria found in the lettuce originated from irrigation water contaminated with sheep feces and from grazing cattle. On September 27th, there was a recall of all goods distributed by Walker Family Pty Ltd and consumers were warned to be especially vigilant when preparing fresh fruit and vegetables. As a result of this, consumer analysts predict that Walker Family Pty Ltd will suffer dramatically as a business due to the fact that many consumers feel the organisation has engaged in unsafe practices.
    13. 13. Denial (Previously untested in this context) “ Until adequate testing has been conducted Walker Family Pty Ltd refuses to acknowledge that the recent outbreak of E. coli is linked to any of our products.” Excuse “ Upon distribution, our products are exposed to a number of possible sources of contamination not associated with our organization.” No Comment (Previously untested in this context) “ Despite the government issuing a recall of all goods supplied by Walker Family Pty Ltd., the organization is yet to make an announcement on the outbreak of E. coli linked to its products.” Apology “ Walker Family Pty Ltd is extremely sorry that the recent outbreak of E. coli was linked to our fresh produce. Our thoughts are with the victims.” Correction “ Walker Family Pty Ltd. yesterday announced that the source of the recent E. coli outbreak had been identified and corrected. New testing procedures have now been implemented and will ensure that a similar outbreak of E. coli does not occur in the future.” RESPONSES TESTED
    14. 14. RESULTS Crisis Response Type Trust in the Organization Impression of the Organization Purchase Intentions Judgments of Organizational Responsibility 0.06 0.45 0.32 0.06 NS No significant difference between means scores for No Comment, Denial and Apology Comparison of mean scores for Impression of the Organization Response Type Mean Score Std. Denial 9.60 5.28 No Comment 15.40 6.96 Excuse 14.00 5.95 Apology 15.37 5.79 Correction 18.02 5.59
    15. 15. LIMITATIONS <ul><li>Sample Error </li></ul><ul><ul><ul><li>Convenience Sample </li></ul></ul></ul><ul><ul><ul><li>Risk of demographic biases. </li></ul></ul></ul><ul><ul><ul><li>Relatively small sample size. </li></ul></ul></ul><ul><li>Only 1 type of crisis tested </li></ul><ul><ul><ul><li>1 level of seriousness. </li></ul></ul></ul><ul><ul><ul><li>1 level of organizational responsibility. </li></ul></ul></ul><ul><li>Hypothetical brand used for testing </li></ul><ul><ul><ul><li>No measure of influence of brand equity. </li></ul></ul></ul>
    16. 16. IMPLICATIONS FOR PRACTITIONERS <ul><li>Public Relations efforts are important and relevant to Australian consumers and the impact on organizational reputation, post-crisis. </li></ul><ul><li>Results challenge some widely accepted managerial assumptions regarding ways to repair and enhance organizational reputation. </li></ul><ul><li>Apologizing for a crisis may not be more affective in reducing damage to an organization’s reputation than providing an excuse, or completely refusing to address the situation at all. </li></ul>DIRECTIONS FOR FURTHER RESEARCH <ul><li>Constructs tested in this exploratory study can be investigated more comprehensively by: </li></ul><ul><li>testing a range of product types </li></ul><ul><li>Investigating alternate scenarios </li></ul><ul><li>employing larger, more representative samples </li></ul>
    17. 17. QUESTIONS?

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