The impact of corporate behavior on perceived product value

Abstract

This research examines how ethical and unethical corporate behavior influence the perceived value of a firm's products, operationalized as the price consumers are willing to pay for that product relative to the competition. We propose that if consumers expect companies to conduct business ethically, then ethical behavior will not be rewarded but unethical behavior will be punished. The results of the first study confirm this expectation. The second study explored ways a firm can improve the perceived value of its products after an unethical act has been committed. Our results indicate that after a firm has committed an unethical act, consumer's perceptions of that company and its products were positively influenced by ethical behavior, corporate philanthropy, and cause-related marketing. However, our analyses revealed that these different strategies varied in their effectiveness. The third study used a choice task, rather than a judgment task, to confirm the finding that corporate behavior does influence perceived product value and is therefore likely to influence market choices. The implications of these findings are discussed.