Volkswagen (VW) has been in crisis since September last year when the Environmental Protection Agency in USA discovered that the company had fitted some of its diesel car models with “defeat device” software that allowed them to pass pollution control tests, while in fact not meeting carbon dioxide emission standards. It is estimated that almost 11 million cars worldwide are affected across VW, Audi and Skoda brands and the company will stand to pay millions of dollars in litigation and compensation costs.
The deception has massive environmental and health implications in a long run. The scandal did negatively impacted VW sales worldwide from September to December, including in Australia.
However, by December the figure in Australia has lifted to 4458, which is just slightly lower than the same time the year before (4539).
Corporate crises like VW’s often leads to negative publicity, threatening to damage the company’s reputation.
Recent business literature refers to corporate reputation (CR) as an important intangible asset of any company. Carmeli and Tishler in their research in 2005 has claimed for CR to be a determinant in purchase decision making by signaling consistent quality and hence reducing uncertainty prior to buying a product or a service. So good reputation can be a serious competitive advantage and a bad one should be an obstacle to market access and acceptance. Researchers even tried to suggest a correlation between corporate reputation and level of customer satisfaction, however, could only substantiate that satisfaction causes positive impact on perceived reputation, but not any impact of reputation on the level of customer satisfaction.
So why is VW’s deliberate deception last year not reflected in VW’s recent sales figures?
The answer may lie within a nature of the crisis and customer priorities. One of the VW customers who bought Polo recently has left the comment on Facebook: “The issues have only been with diesel. If you are not purchasing a diesel there is nothing to worry about”. Another prospective VW customer commented that even though he was not impressed by the recent VW scandal, he would consider buying VW Golf if he was offered extended warranty.
The truth is that most of the customers cannot fully relate to the impact of the high emissions on the planet or human health in a long run. It falls within ‘corporate social responsibility’ box and a consumer attitude to corporate social responsibility (CSR) as a part of corporate reputation is complex.
This phenomenon has been summarized by Oberseder and his colleagues from the University of Vienna as follows: “There is an unresolved paradox concerning the role of CSR in consumer behavior. On the one hand, consumers demand more and more CSR information from corporations. On the other hand, research indicates a considerable gap between consumers’ apparent interest in CSR and the limited role of CSR in purchase behavior.”
It seems that consumers at the time of purchase are concerned primarily with pragmatic attributes of the purchase, like price, quality and a level of service. Importance of corporate social responsibility is minor.
CSR is only a consideration when there is a personal attachment involved. Schmalz and Roth (2012) have shown that presence of attachment prior to unethical behavior of the company acts as a moderator of the effects of negative publicity by contributing to emotional ambivalence, likelihood of forgiving attitude and impacts purchase intentions. That is, consumers with a favorable opinion of a corporation in crisis would discount negative information about it, whereas consumers without pre-existing positive attachment would easily believe negative publicity.
VW GROUP IS TOO BIG TO FAIL! WE KNOW IT, THEY KNOW IT.
Although VW’s complete disregard for the environment and human health and deliberate deception are undeniably outrageous, the latest diesel crisis is not going to kill VW brand. Most of the VW customers are either loyal customers from ‘baby-boomers’ era or price sensitive and will only turn their back on the company if the latest VW emission crisis will increase the cost of car ownership.
Check out new VW advertising campaign. Maybe just slightly arrogant in the light of the events last year.
Posted by Katerina King , ID: 214229162 (WordPress name: kkin108)