An Empirical Study of the Impact of Response Strategies and Reputation of the Company on Consumers' Purchase Intention and Negative Word of Mouth Communication at the Time of Product Failure

When crisis occurs, the nature of the person is such that he wants to know what happened and what the reason is for it. Due to the different perception toward an event between company and consumer, crisis should be viewed from the consumer's perspective. Crisis conditions may lead consumers to make new decisions. For example, when a product fails, they may decide not to re-purchase the company's products, or to advertise negatively about malfunction in the company or the failed product. Each of these decisions, in their turn, can cause damage to the company. The present study, focusing on the crisis of dairy product failure, addresses the importance of how the two factors of response strategies and reputation of the company affect the consumers' buying intention and negative WOM after the crisis. The research was conducted experimentally and with scenario design. The description of the crisis conditions was based on eight scenarios, taking into account two levels of reputation (reputed and unknown company) and four companies response strategies (denial, involuntary recall, voluntary recall, and super effort). For each scenario, 30 participants were considered. A total of 240 questionnaires (containing scenarios and questions) were distributed among the consumers in Najm and Ahmadi stores in Rasht. After collecting the questionnaires, they were analyzed. The research hypotheses were analyzed using ANOVA and SPSS software. The research findings in the conditions of dairy product failure showed that reputation of the company did not make any differences in buying intention and negative WOM among the consumers. Similarly, consumers did not differentiate between denial, involuntary recall, and voluntary recall strategies by showing similar buying intention and negative WOM but these two behavioral intentions differed significantly in the strategy of the super effort with each other. Therefore, super effort was chosen as the best and most appropriate strategy in comparison with the other three strategies due to having the highest average of purchase intention and the lowest mean of negative WOM. In addition to demonstrating the role of reputation, the research emphasizes on the importance and value of accepting responsibility and corrective actions. While the difference between the voluntary recall and the super effort is due to the company's additional efforts to compensate in the latter, research findings show that these actions have a determinative role in influencing consumers' buying intention and negative WOM.