Capitalizing on our faults: Examining the Effectiveness of mea culpa Advertising

1. Capitalizing on our faults: Examining the Effectiveness of mea culpa Advertising Matt Shaner Nawar Chaker Anton Fenik

2. Introduction • The rate of marketing change is accelerating and marketers are employing an increasingly large arsenal of communication strategies and tactics (Day 2011; Kumar & Shah 2009) • Mea Culpa advertising – ads that include an implicit or explicit admission of guilt for the quality and performance of past products, coupled with a promise to improve in the future

3. Research Questions • What are the direct effects of mea culpa ads on consumer attitudes and behavior (attitude toward the brand, attitude toward the ad, and purchase intentions)? • What are the mechanisms that mediate the relationship between mea culpa ads and consumer outcomes (attitude toward the brand, attitude toward the ad, and purchase intentions)? • How do mea culpa ads differ from ads that simply communicate product improvements, without disparaging prior product quality or performance? • Does pre-existing loyalty to a product affect how a customer responds to mea culpa ads?

4. Overview of Variables • Direct Effects of Mea Culpa Ads • Mediation through Reference Framing • Mediation through Corporate Credibility (Trust) • Pre-Existing Loyalty as a Moderator

5. Mea Culpa Comparative Advertising • Only one study that we’re aware of has examined the effects of self-comparative ads (Olsen et al 2008) • Comparative Ads (competitor and self) have been shown to increase purchase intentions and attitude toward the brand, but leave consumers with a bad taste in their mouth (negative attitude toward the brand) (Grewal et al 1997; Choi and Miracle 2004; Meirick 2002; Olsen et al. 2008) • We propose that mea culpa ads can offer advertisers the best of both worlds – purchase intentions without the animosity generated through competitor-comparative ads

6. Mea Culpa Comparative Advertising H1: In relation to non-comparative ads, mea culpa ads will result in more a) positive attitude toward the brand, b) positive attitude toward the ad, and c) positive purchase intentions.

7. Hypothesis 1 • Outcomes: • Attitude toward the Brand • Attitude toward the Ad • Purchase Intention Mea Culpa Advertisements H1a, b, c (+)

8. Reference Point Framing • Changing the point of reference, or restricting comparisons to a smaller set of alternatives, against which the focal offer compares favorably • In economic exchanges, reference point framing has been studied from a variety of perspectives and business disciplines: • Consumer Behavior (Tversky & Kahneman 1986; Woodruff et al. 1983) • Advertising and Public Relations (Hallahan 1999; Keller 1991; Vakratas & Ambler 1999) • Negotiations(Malhotra & Bazerman 2008) • Personal Selling (Castleberry & Shepherd 1993)

9. Reference Point Framing H2: The positive relationship between mea culpa ads and consumer outcomes will be mediated by the degree to which the ads create a frame of reference that enhances the focal product compared to prior versions of itself.

10. Hypothesis 2 Reference Framing H2 (+) • Outcomes: • Attitude toward the Brand • Attitude toward the Ad • Purchase Intention Mea Culpa Advertisements H1a, b, c (+)

11. Corporate Credibility (Trust) • Corporate Credibility – the degree of belief that a consumer has in the firm’s ability to design and deliver products and services that satisfy consumer needs (Keller et al 2011) • Trustworthiness - associated with honesty and believability of the source (e.g. print advertisement) • Brand trust occurs when consumers have confidence that the brand, product or service firm is dependable and competent (Herbest et al. 2012) • Firms use cue-based trust signals to communicate with consumers (Wang et al. 2004) • Commitment-Trust Theory (Morgan and Hunt 1994)

12. Corporate Credibility (Trust) H3: The positive relationship between mea culpa ads and consumer outcomes will be mediated by the degree of corporate credibility, and subsequently, trust, that mea culpa ads engender among consumers.

13. Hypothesis 3 Reference Framing Trust/Corporate Credibility H2 (+) H3 (+) • Outcomes: • Attitude toward the Brand • Attitude toward the Ad • Purchase Intention Mea Culpa Advertisements H1a, b, c (+)

14. Pre-Existing Loyalty • Prior research has linked customer loyalty with: • Satisfaction (Bloemer et. al 1999; Oliver 1999; Yi 1990) • Perceived value (Yang and Peterson 2004; Woodruff 1997) • Brand attitudes (Chaudhuri and Holbrook 2001; Keller 2003; Suh and Yi 2006) • Repeat purchase frequency (Neal 1999; Jacoby and Chestnut 1978; Tellis 1988; Oliver 1999) • The strength of the relationship between an individual’s relative attitude and repeat patronage (Dick and Basu 1994) • Increasing clarity and confidence of a relative attitude toward an offering will result in enhanced loyalty for that offering

15. Pre-Existing Loyalty H4: A consumer’s level of pre-existing loyalty to the focal product will negatively moderate the (a) direct effect of mea culpa ads on consumer attitudes and intentions, (b) the mediating effect of reference point effects, and (c) the mediating effect of corporate credibility.

16. Hypothesis 4 Reference Framing Trust/Corporate Credibility H2 (+) H4b (-) H3 (+) • Outcomes: • Attitude toward the Brand • Attitude toward the Ad • Purchase Intention H4c (-) Mea Culpa Advertisements H1a, b, c (+) H4a (-) Pre-Existing Loyalty

17. Discussion • Validate all propositions through empirical tests • Mea culpa ad effectiveness depends on pre-existing loyalty • Research Implications • Impact of other apology advertising • Other mediators • Comparison/competitor advertising (mea culpa) • Practitioner Implications • Great impact and customer support when product changes occur • Not isolating loyal customers

18. Questions and Answers