How brand concept affects consumer response to product recalls: A longitudinal study in the U.S. auto industry

This paper investigates the effect of recall announcements on product sales and how brand concept moderates this relationship. We argue that severe recalls adversely impact product sales, and that in the event of such recalls, products with a functional brand concept are more adversely impacted than products with a luxury brand concept because functional brand-choice risk expectations are violated. Data from the United States auto industry during the period from 2003 to 2014 support our hypotheses. Our findings provide insights into the product recall literature by highlighting the effect of brand concept on consumers' behavioral outcomes following undesirable events. Furthermore, our post-hoc analysis suggests that, among the car models with a functional brand concept, those with higher reliability ratings lose more sales following severe recall announcements. We discuss the theoretical and managerial implications based on our findings.