Research into how a crisis erodes brand trust
The Chinese milk contamination crisis of 2008 provided invaluable insight into how such events can damage consumer trust in brands, says Senior Lecturer Dr Hongzhi Gao.
SMIB Senior Lecturer Dr Hongzhi Gao
The Chinese milk contamination crisis of 2008 provided invaluable insight into how such events can damage consumer trust in brands, says Senior Lecturer Dr Hongzhi Gao.
"This food poisoning crisis provided a real-life context for understanding how consumers react to a betrayal of their trust in brands," says Dr Gao.
"Faced with the 2008 situation, it's natural that fearful and bewildered customers would express outrage and attribute blame."
He says it was also a useful example of how one brand can be made to take the lion's share of the blame. The scandal, which centred around 700 tonnes of infant formula contaminated by the industrial chemical melamine, involved Chinese company Sanlu which, at the time, was part-owned by New Zealand dairy giant Fonterra.
Two months after the crisis began, Dr Gao and colleagues at the University of Otago and Sydney’s Macquarie University partnered with Peking University in Beijing to ask 2156 Chinese locals in nine metropolitan centres to evaluate the crisis and rate their trust and blame towards a range of dairy brands, including foreign-owned, joint venture and local brands.
"We were particularly interested in what information about a brand could impact on consumers' trust and which factors could strengthen or weaken that trust."
Dr Gao says the results show Sanlu became the scapegoat for an industry-wide crisis.
"While the reputations of other companies were dented, they weren’t as badly affected as Sanlu, which became the 'face' of the scandal. Our research provided a great insight into how a food safety scandal can spill over and negatively affect attitudes and beliefs about the whole supply chain and about competing brands."
Another key finding was that a shared brand identity and investment or management links between a locally made brand and a foreign imported brand expose the foreign brand to guilt-by-association effects.
"Firms operating in foreign markets must evaluate potential risks to their brand equity due to consumers’ associations with local counterparts. They should jealously protect their brands by avoiding association with ‘risky’ local counterparts."
Dr Gao and his colleagues have now turned their attention to the impact of the crisis on non-contaminated brands and are hoping to determine "how this mistrust spilled over by association".