There is little doubt that product harm crises can damage a brand, but they do not damage all brands equally. The impact can depend on the actions of the company and also consumer responses. A new model developed by Yi Zhao (former HKUST PhD student, now faculty member at Georgia State University), Ying Zhao and Kristiaan Helsen of HKUST finds a way to gauge that response so brand managers can devise better response strategies.

Traditional models assume that consumers are uncertain about product quality so they rely on information gathered through use of the product, price, advertising and other tools to update their expectations. Conventional wisdom suggests that the more information they gather, the more certain they become about quality, but this is highly unlikely to be the case during a product harm crisis.

"The idea that a consumer's perceived risk associated with a brand will be lower the more new information she receives about it, is generally true when the new information is congruent with prior knowledge. But when this new information is inconsistent with the consumer's prior beliefs, it could raise their perceived variance of brand quality. Hence, the standard learning model cannot be applied to the context of product harm," the authors say.

They therefore developed a new model that can allow consumers to be unsure not only about the brand, but also the precision of the information they received. Most importantly, their model allows consumers to update their beliefs about these two factors over time as more information comes in.

The model is tested on data gathered before, during and after a peanut butter contamination outbreak in Australia in 1996, involving the brand Eta which was a subsidiary of the market leader Kraft. Kraft pulled Eta and its core Kraft brands from the shelf during the crisis. The main competitor was Sanitarium and some stores were also selling their own-named brands.

The results show that consumer uncertainty about peanut butter varied over time. Consumers who perceived the Kraft brand to be of relatively high quality before the crisis experienced more variation in those perceptions during the crisis than those who did not have such a high opinion of the brand. This may be because the crisis confirmed the latter group's perceptions.

There was also a spillover effect for other brands. Kraft's rival Sanitarium was able to increase its market share, helped by advertising that emphasized the good quality of the brand. Sanitarium also had lower experience variability among consumer than store brands which, interestingly, saw market share drop during the crisis.

Nonetheless, lower experience variability pre-crisis for Kraft helped the brand to lure back many of its customers after the crisis passed. Eta had no such result.

"The differences observed for these two recalled brands underscores the critical role of brand equity as a buffer against negative publicity: brands with a strong reputation weather a crisis much more effectively than their weaker counterparts," the authors say.

This offered lessons for managers.

"For a strong high quality brand affected by a product-harm crisis, like Kraft, the key objective after re-introduction should be to stimulate short-term sales via marketing tactics such as price promotions and couponing. Having exposure to the brand will help boost consumer confidence and reduce uncertainties about product quality, and eventually benefit future sales and profits. But for a marginal brand with low quality reputation, the primary goal would be to increase product quality," the authors say.

They add that while rival brands can benefit from a product-harm crisis affecting their competitor through spillover effects, these can be short-lived and vary greatly across brands.