Skip to main content

Never waste a good crisis. Dealing with the impact of crisis situations on consumer behaviour and firm performance

Final Report Summary - CONCRISIS (Never waste a good crisis. Dealing with the impact of crisis situations on consumer behaviour and firm performance.)

The goal of this project, was to focus on the impact of crisis situations on consumer behaviour and firm performance. More in particular, it aimed at investigating how firms can suffer from changes in consumer behaviour as a consequence of crises at the macro-economic level – due to economic downturns, or at the firm/product/service level – due to service crises. However, it also aimed at shedding light on how firms can use these crises as opportunities for future growth, thus as well ensuring overall economic prosperity and general economic welfare as healthy economies are built on healthy firms that create value for societies.

In the original setup of the project, two studies would be carried out. The first study would investigate whether firms can use investments in innovation as a way to deal with or even benefit from economic downturns. The second study would investigate how service crises affect customers’ satisfaction with the firm, whether effects last over time, and how firms can best deal with such crisis situations. While the research for the second study proceeded in a smooth way and resulted in an accepted top scientific publication by the end of the first period, unavailability of appropriate data caused a postponement of the first study. However, in order to make the best possible use of the funding received, no less than five new studies, all related to the proposed first study, were added to the project. One of these additional studies was finished before the end of the project and has also resulted in an accepted top scientific publication.

The results of the first publication show that service crises can have long-lasting detrimental effects for firms. Such crises will lead to clear drops in consumer satisfaction with the firm, which will last over time. Equally-sized improvements, on the other hand, will have only smaller effects which, moreover, are not permanent but dissipate. This publication adds to the state-of-the-art knowledge in the field both on the methodological level (introducing the DASVAR econometric model) as on the substantive level (showing that losses not only loom larger but also longer than gains, thus both confirming and extending the findings of Nobel Prize winners Amos Tversky and Daniel Kahneman). Firms can learn from this research that 1) they should try to be as consistent as possible in their service performance to their customers, and do their utmost to avoid major service crises; 2) they cannot reach pre-service-crises levels without sustained better performance afterwards. Just improving once is not enough, and may even backfire, resulting in even lower consumer satisfaction; 3) sustained improvements in service performance are valued by customers, creating sustained higher customer satisfaction. The findings of this research are currently being used by the public transport service provider we cooperated with to improve their routines and mobilize their staff in order to provide a sustained high-level service to their customers. The side-benefit of a better performance and associated customer-satisfaction of this PT provider can be an increased attractiveness of PT as mode of transport, which would help reducing all kinds of negative consequences of transport congestion due to over-usage of cars.

The results of the second publication show that consumers’ reactions to firms’ advertising and pricing actions are not constant over the year, but depend on intrayear cycles in category demand: periods with higher demand following periods with lower demand. Firms, in addition, also adjust their advertising and pricing actions over the year, but often not in the direction that effectiveness evolutions would suggest. Firms can thus clearly benefit from a better understanding of the impact of intrayear cycles on their marketing effectiveness. This publication adds to the state-of-the-art knowledge in the field both on the methodological level (introducing asymmetries in VAR econometric models) as on the substantive level (impact of intrayear cycles on effectiveness of advertising differs from the impact on effectiveness of both price increases and decreases). Firms can learn from this research that a) the effectiveness of advertising and pricing actions is not constant over the year; b) as consumers are more advertising-sensitive in periods of high demand, brand-focused strategies that communicate the distinct features and advantages of the focal product over competitors’ products will be most effective in such periods; c) when the need for the product is relatively low, consumers may not care much about buying the right brand, as they already care less about the product as such. Price then becomes a more salient factor, increasing the importance of charging the right price. The findings of this research were already shared with practitioners from major fast-moving consumer goods oriented manufacturing firms.

The remaining and ongoing studies related to the project all focus on how firms can use investments in marketing and innovations in order to deal with and even benefit from external turbulence like economic crises or the rise of disruptive technologies. As such, these studies are all related to the original first study of the project. A first study investigates how design features determine the success or failure of innovations during periods of economic growth and decline. A second study investigates how innovative firms can become more successful when introducing innovations by means of a better communication of the innovation and its novelty to consumers. This is especially relevant during economic tight times when consumers are more risk-averse and consequently less likely to adopt new products, and when, on the other hand, introducing new products is even more risky for firms. A third study focusses on the fact that during economic tight times, firms are often forced to reduce advertising. Main question of this research is how consumers react to such decreases (do they react differently to increased vs decreased advertising), and how firms can best deal with these reactions in order to optimize their usage of scarce resources. A fourth study focusses on how retailers deal with the disruption caused by the advent and rise of the online sales channel, and how innovativeness of these retailers helps them in being successful (or not). A fifth and final study takes the original first study of the project to a higher level, by distinguishing between how firms’ investments in advertising and innovation can shelter them from crises, and subsequently help them to recover when the economy goes up again. Results from these studies are expected in the course of this and next year.

The findings emerging from all studies related to this project provide clear and directly implementable guidelines for firms on how to deal with and even benefit from different types of crises by means of investments in marketing and innovation. These findings are and will thus be highly relevant for firms in improving their long-term success, health and viability and thus in ensuring their role in the creation of value for society and overall welfare.

Any further inquiries related to this research can be addressed to:
Dr. Ir. Maarten Gijsenberg – Associate Professor of Marketing – Department of Marketing – Faculty of Economics and Business – University of Groningen – PO Box 800 – 9700 AV – Groningen – The Netherlands – +31(0)503638249 –