The emergence of scandals related to products and morals

Complex, multi-faceted social relationships and consumer interactions are important in helping consumers form opinions and decisions (Dahl, 2013). In addition, emotions such as empathy may interact with persuasion and social influence in shaping the consumer response (Zollo, 2020), particularly the way consumers make attributions (Lange & Washburn, 2012).

1.3.2 Moral-based scandals

Making business decisions that are both ethically and strategically sound has always been incredibly tricky. Leaders are called upon to act in a manner that is consistent with their personal values, builds solidarity and trust among diverse stakeholders, enhances their company's reputation, and prevents scandals, while also being mindful of the bottom line.

This leadership challenge is getting ever more complex. Investors are measuring companies against environmental, social, and corporate governance (ESG) indexes. Employees are demanding extensive diversity, equity, and inclusion (DEI) commitments. And customers want to buy brands that are tied to strong corporate social performance (CSP).

Corporate life is rife with scandals, from crazy CEOs who dance naked in front of employees to companies faking sustainability. Scandals can tarnish reputations beyond repair and have a negative impact on everyone involved in the company, causing the company's stocks to plummet and customers to lose trust. Moreover, executives or employees may struggle to secure future employment opportunities. All of this is to say that no company really wants to be caught up in scandals.

As counterintuitive as it might seem in the burgeoning ethical complexity of ESG, DEI, and CSP, a few companies have found that when it comes to ethics, simpler is better. They meet the demands listed above by rejecting the notion that ethics are necessarily complex. They refuse to abdicate their ethical responsibilities; they craft value propositions that do not lean on social value initiatives to obscure or distract from how the company creates financial value; and they are transparent about how they do business with all stakeholders.

It isn't surprising that today's complex ethical demands have spawned equally complex products and services from companies such as Ethisphere and RobecoSAM, and major consultancies like Deloitte. It is also easy to see why well-meaning leaders looking at the myriad variables behind ESG, DEI, and CSP calculations would throw up their hands and call in a consultant. But outsourced solutions to ethics don't build employee solidarity or earn customer goodwill. Nor do they prevent scandals or help leaders sleep at night.

For example, Starbucks has been a longtime client of Ethisphere, but this partnership has not protected the company from ethical scandals. In 2018, Starbucks outlets nationwide were forced to shut down for a day of sensitivity training - an event whose design was also outsourced - after a store manager in Philadelphia called police to remove two Black men who were waiting for a colleague to arrive before placing their orders. Then, it seems that the sensitivity training Starbucks paid for had unexpected consequences: A year later, a barista in Arizona asked a group of police officers to leave the store after a customer complained of not feeling safe.

Ethical scandals are not uncommon and thus have been the subject of considerable research in marketing and related disciplines. An ethical scandal is the publicization of a transgression of an ethical norm that produces substantial outrage (Piazza & Jourdan, 2018).

A transgression of an ethical norm occurs when behavior is inconsistent with widely-shared expectations of responsibility to perform or not perform behavior based on moral virtues and principles. Well-known examples of such scandals include Wells Fargo opening millions of fraudulent accounts without consumers' consent, BMW using devices to erroneously pass regulatory emissions test, and Facebook sharing users' personal data without their consent, primarily for political advertising.

Researchers have examined aspects such as consumer evaluations of companies following an ethical transgression, companies' responses, and their reactions to company responses. In the latter category, a central question is often about the extent to which companies should accept or deny blame.

Researchers have examined multiple aspects that can influence the effectiveness of different responses, such as the type of accusation, strength of evidence, prior trust and the feelings that the accusation evokes. Particularly relevant to our investigation, research has found that consumers react more favorably when companies (as well as individuals) deny or shift blame when accused of an ethical transgression.

1.4 Identification of research gap

Customers are no longer passive recipients of innovation, but have skills and expertise that enable them to play an active role in co-creation. Therefore, informed, networked, empowered and engaged consumers in today's environment seek to ideally participate in every step of the co-creation process, from creation to execution. This movement of openness to the participation of consumers and larger organizations has contributed to the recent development of open innovation and open business models and strategies.

Today, branding defines new ways of integrating and attracting customers. They began to listen to the opinion of the brand community and invited customers to test and review their products. Instead of trying to figure out what consumers might like by analyzing market research data or observing consumers in focus groups, managers can now actively and directly involve them in the co-creation process. This type of customer interaction has potential benefits for both the customer and the branding process itself.

On the one hand, clients want to participate in co-creation for various reasons of self-development, society and hedonism. In a branding community, customers can interact with others like them, share their interests, and interact with the brand to develop new ideas, which is an engaging experience. Through participation, consumers often feel that they are growing creatively and developing new vision and understanding. Clients also believe that when they learn to trust colleagues and develop ideas together, they can increase their creativity. In fact, when customers engage in collaboration, their closeness to the brand grows, so they begin to act and think like employees of the brand. Finally, while some clients are concerned about the economic return of their participation in co-creation, most appear not to be. In contrast, most participating clients are intrinsically motivated and maintain their interest and commitment throughout the co-creation process.

On the other hand, co-creation is in the interests of both the brand and the branding process, as it can bring them certain advantages, such as higher productivity, more relevant ideas, stronger customer connections, cost-effectiveness, speed to market and reduced risk and competitive advantages. Given these potential benefits of co-creation, a large number of professional consultancies have emerged, some brands have begun using customer-immersive labs, many research institutions are offering collaborative methods, and various scholars are researching and theorizing about the practice.

Because it can be mutually beneficial, previous research in the field of co-creation has mainly studied the interactions and relationships between customers and brands. The researchers conducted this study primarily from the consumer's perspective, focusing on three key areas.

First, they explored factors that motivate consumers to engage in co-creation.

Second, they explored the resources that clients must possess, combine, and integrate to effectively facilitate collaboration.

Third, they studied the distinct, personalized experience customers receive from participating in co-creation. However, it is not surprising that scholars have done very little research on co-creation from the perspective of managing such branding. This is a significant research gap because, while understanding consumer motivations, resources, and experiences is valuable, managers also need to know how best to manage collaboration to realize its potential. To address this research gap, co-creation should be explored from a branding management perspective to find out how to realize its potential.

In addition to the empowerment of branding, the continuous improvement of relationships between stakeholders and brands has also made ethics more apparent, but not a new aspect for brands. In fact, the origins of ethical research can be traced back several centuries. Ancient Greek philosophers considered ethics as the science of "good" and considered such questions as "what is the purpose of a good life?". And "How can I live well?". Recently, however, ethics has gained attention in the business world, mainly due to the global impact of various economic and corporate scandals.

In an increasingly interconnected and transparent business world, customers are more informed than ever, and ethical consumption is spreading rapidly. Therefore, consumers increasingly expect brands to embrace ethical values and reflect their ethical commitments in the branding process, preferably in each brand's interactions with consumers. This highlights the challenges branding faces in creating an ethical image. Therefore, many brands have begun to consider ethics as a strategic dimension that can help them improve their image. The reason is that brands are increasingly aware that in today's highly networked environment, brands with an unethical image are likely to be punished not only by customers but also by other stakeholders.

In recent years, the number of brand strategies has increased due to successful brand models, industry integration and increased competition from customers. However, the value of a brand ultimately depends on the value of the company behind the brand and its commitment to healthy brands and corporate strategy. External brands can only play a role if they accurately reflect the company's internal values and priorities. If they contradict each other, then this relationship will not last over time. Successful brand creation requires strict adherence to the principles of branding, its formation, unwavering commitment and belief in the value of the brand.

With the intention to address our research question we conceptually examine the phenomenon of scandals in brands by integrating research on scandals and on firm branding. In so doing, we consider that, when brands are protagonists of scandals, they are generally considered responsible and thus blamed for them.

The heterogeneity of misbehaviors and wrongdoings at the core of the scandal may refer to the broken social norms in the business (locus). Moreover, scandals may vary based on the reason of their emergence (focus). It is important to underline that such categorization refers to the moment of scandal break when the misbehavior becomes public. The temporal frame of our categorization is therefore crucial as scandals may spur spillovers and contagion on other actors that are associated to the suspect after some time (Adut, 2005).

By combining these two dimensions, we develop a typology that allows to disentangle the complex landscape of business scandals. Typologies are developed by using theoretical rationale to classify groups of brands that share common features and are mutually exclusive. With this goal, we create a classification of business scandals, which will act as a springboard to explore the implications that scandals have on brands and the redressive strategies adopted by brands to cope with them.



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