How does corporate reputation affect customer loyalty in a corporate crisis?

Abstract

It is widely accepted that corporate reputation plays an important role in determining the impact of crises on firms. Crises may erode corporate reputation. However, reputation may also attenuate the negative effects of crises. This study investigates how corporate reputation moderates the relationship between crisis occurrence and customer loyalty which is expected to decrease given a crisis. Drawing on opposing theories, namely dissonance theory and expectancy-violation, we conduct a scenario experiment set in the airline industry. Results demonstrate that the moderating effect is weaker in the case of a favourable corporate reputation. This may indicate that a pre-existing favourable reputation does not shield the firm from the negative effects of the crisis, but may rather present a liability because customers have higher expectations with regard to well-reputed firms. Contrary to that, ill-reputed firms have less to lose in the case of a crisis and suffer comparatively smaller decreases in customer loyalty. Marketing management might take into account the role of crisis and reputation management for customer bonding strategies while crisis management should recognize the importance of reputation effects in crises given their impact on customer loyalty and firm profitability. © 2013 John Wiley & Sons Ltd.