Two Essays on the Effects of Product Recalls on Sales Dynamics and Consumer Loyalty
Byun, Kyung Ah
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As product recalls are increasing and often occur inevitably, it is critical to understand various effects of product recalls on the sales of different brands and on loyal consumers. Although the damage of product recalls to firm performance is evident in extant literature, the interplay between brand loyalty and sales performance is underexplored. Thus, this dissertation examines how product recalls influence sales dynamics across different types of brands (e.g., high-equity vs. store brands), and how to regain a regular purchase cycle of consumers whose loyalty became vulnerable after product recalls. The first essay identifies conditions for the dynamic changes in sales by comparing high-equity brands and store brands as well as the role of sales promotions in sales recovery. The second essay explores post-recall purchase behavior of loyal consumers and suggests that brand loyalty can be jeopardized under product recalls. It also examines the differences between switchers and stayers among loyal consumers as well as the purchase delay of loyal consumers. The result emphasizes that the purchase behaviors of loyal consumers will vary by characteristics of product recalls such as their seriousness (e.g., salmonella) and public announcements (e.g., FDA). Both essays focus on the role of sales promotions in not only sales recovery but also the restoration of delayed purchase cycles among loyal consumers. It also examines how the effects will differ depending on the type of sales promotions (e.g., short-term or long-term price cuts, and featured advertising). The dissertation extends the marketing literature on product recalls by investigating various effects of product recalls depending on brands and substitutability, and identifying the influencers on the purchase delay among loyal consumers after product recalls. It also emphasizes that a careful design of sales promotions will be required for post-recall sales recovery and loyal consumer management, because not all sales promotions will be effective in sales recovery and loyalty restoration.Embargo status: Restricted to TTU only. TTU community may view by logging in with their eRaider (top right). Others my request access by click on the PDF link to the left.